Here's our summary of key economic events overnight that affect New Zealand, with news our meat exports to China face tough conditions, and not just from competition from excess Aussie lamb supply.
But first, US mortgage applications rose +3.3% last week even as benchmark mortgage interest rates rose to 7.13% plus points and a four month high. (A month ago it was at 6.84%.) But to be fair, the recent shift higher in application levels is still -10% lower than the same weak week a year ago,so last week's rise is hardly significant.
Today's UST 20yr bond auction was another success with the usual excess demand. But just like the mortgage market, the median yield rose again to 4.77%, up from the prior equivalent event a month ago at 4.50%. It seems investors are prepared to accept a lesser rise than they want from home loan rates.
Despite these rising interest rate levels, the Fed's Beige Book survey paints a picture of a moderate and broad expansion in recent activity in the country, consistent with other recent data. They said overall economic activity expanded slightly since late February. Ten out of twelve Districts experienced either slight or modest economic growth, up from eight in the previous report, while the other two reported no changes in activity. They still found an expanding labour market, and the economic outlook among contacts was cautiously optimistic, they reported.
While most blue-chip professional economists think the US economy is expanding at about a +2% rate, the Atlanta Fed's GDPNow model ingesting current rate thinks it is much faster than that, near +3%. It is an expansion that is driving the global economy, including that of its rivals like China.
And Japan is on a roll, despite their currency issue angst (in USD terms). Their exports rose by +7.3% in March, following a +7.8% rise in February. It was the fourth straight month of increase for them.
In China, meat prices - especially pork prices - are in an extended slump. Pork accounts for almost two thirds of Chinese meat sales and you will recall prices hit a peak in October 2022. But it has been all downhill since, dropping -40% and putting producers at increased bankruptcy risk. It is a crisis that has national attention, even international attention because feed grain imports are falling. Soybean prices are down -23% from a year ago. It is tough for beef and sheepmeats to compete with pork in China at present.
The British released their March inflation rate overnight and it eased to 3.2% from 3.4% in February. But remained slightly above the market expectation of 3.1%. It was their lowest rate since September 2021, primarily driven by a slowdown in food prices.
The UST 10yr yield is now at 4.59% and down -7 bps from yesterday. The key 2-10 yield curve inversion is still at -34 bps. But their 1-5 curve inversion is more at -56 bps. Their 3 mth-10yr curve inversion out to -81 bps. The Australian 10 year bond yield is now at 4.37% and down -3 bps. The China 10 year bond rate is unchanged at 2.28% and still its lowest level since at least 2002. The NZ Government 10 year bond rate is now at 5.03% and up another +7 bps from yesterday.
Wall Street is lower on the S&P500 in their Wednesday trade by -0.5%. Overnight European markets were firmer bookended by Paris's +0.6% and Frankfurt's +0.1%. Yesterday Tokyo ended up +1.3%. Hong Kong was unchanged at the end. But Shanghai rose a strong +2.1%. Singapore ended +0.2% firmer. The ASX200 ended its Wednesday session down -0.1% while the NZX50 actually rose +0.6%.
The price of gold will start today lower by -US$22 from this time yesterday at US$2372/oz.
Despite continuing Middle East tensions and uncertainties, oil prices have dropped a sharpish -US$2.50 to just on US$82.50/bbl in the US while the international Brent price is down at US$87/bbl. Rising US crude stocks as their economy gains energy efficiency is behind the shift lower for oil.
The Kiwi dollar starts today at just over 59.1 USc and back up +30 bps from yesterday. Against the Aussie we are firmish at 91.9 AUc. Against the euro we are also firmish at 55.5 euro cents. That all means our TWI-5 starts today just on 69 and back up +20 bps.
The bitcoin price starts today lower at US$61,348 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been very high at just under +/- 4.0%.
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84 Comments
Despite these rising interest rate levels, the Fed's Beige Book survey paints a picture of a moderate and broad expansion in recent activity in the country, consistent with other recent data.
Beige Book Reveals Economy In Far Worse Shape Than White House Claims
You are missing the main point, Yes its just a number in the system and really it can do anything it wants but if at some point it spirals out of control and everyone loses confidence in the worth of the USD and at that point it all implodes. Basically the US is broke.
I'm guessing it's combining the loss in value from inflation and how much it's gone down in value compared to the US dollar in 2014, which the NZD was at $0.85 rather than the $0.59 it is now which is about a 36% difference, which isn't exactly fair as the USD has lost about the same amount of value compared to the NZD in the same time span.
This is the smarter strategy by Germany. You don't compete with superior technology by isolating yourself away from it, you compete by engaging with and learning from it. Which is exactly what China has done to develop by the way. They didn't accelerate their technological advancement by rejecting Western tech but the exact contrary: by welcoming it and learning from it. If you ban it, you entrench your backwardness.
Quote Paul Triolo @pstAsiatech 23h
Huge...Germany and China sign a joint declaration of intent on dialogue and cooperation in the area of automated and connected driving https://bmwk.de/Redaktion/DE/P Link
This is a rather extraordinary speech by Mario Draghi, former head of the EU Central Bank and currently tasked with producing a report on EU competitiveness. If I were to summarize it: "we f*cked up big time and need radical change". https://geopolitique.eu/en/2024/04/16/radical-change-is-what-is-needed/ Link
Brilliant! Does this quote sound familiar?;"Most importantly, other regions are no longer playing by the rules and are actively devising policies to enhance their competitive position. At best, these policies are designed to re-direct investment towards their own economies at the expense of ours; and at worst, they are designed to make us permanently dependent on them."
While the worst player seems obvious the the CPTPP (or whatever it is called these days) has a big arrow pointing at a so called friend.
Interesting item on RNZ a couple of days ago - how class, not politics is dividing America. The author claims from her research travelling America, that what the working class wants is autonomy, not handouts; security, not wealth. The educated elite from either major party no longer understands the working class, and has betrayed them through high immigration putting downward pressure on wages and putting home ownership out of reach. Does that sound familiar?
Listening to a spokesperson from Corrections on RNZ yesterday and Mark Mitchell this morning on the Police rejecting the latest pay offer and I had the thought that I am utterly sick and tired of hearing people on huge pay packets essentially justifying the mess at the operational ends of their organisations and implying if not directly saying that the front line workers should just accept what they are offered and be happy with it.
Mark Mitchell talked from a Government perspective, and likes to say, to some degree accurately, that he has been there. But that does not mean he is not out of touch with the conditions workers face on the front lines. And the spokesperson from Corrections ignoring the fact that people are resigning faster than they can be recruited because experienced staff are sick of being treated like idiots and cannon fodder and new recruits finding out that the pay provided does not compensate for the threats, abuse, and real violence most face every day when working in prisons.
Here, here. Corrections seem absolutely determined to suppress pay at $60k - $70k and launch yet another 'guaranteed to fail' recruitment drive. I would also say that though that you need good, really well-trained people working with offenders. Salaries in northern European countries are $90,000 - $100,000. Obviously they're $10k higher over the ditch too.
I've been trying to find police vacancy rates but I'm struggling - do we struggle to fill rolls? When the nurses are negotiating, we hear about huge vacancy rates and I certainly see huge vacancy rates throughout the Healthcare system. But by comparison, joining the police seems to have very few requirements and a short training period.
I do appreciate a new recruit is not the same as an experienced Detective, but why am I not seeing vacancy rates shouted from the rooftops?
I heard experienced police officers are being lured across the ditch by better working conditions and pay grades. There are no numbers publicly available: the gov obviously doesn't want to quantify our brain drain, or as they like to call it, Kiwis heading abroad to gain OE.
One measure is the Australian Police doing background checks and as part of that asking the New Zealand police if an applicant has a criminal record. They do that for any NZ applicant, not just police.
It seems the requests for NZ police applying for Australian Police jobs is actually quite low.
I don't buy it.
The offer is more generous than that being offered to many Healthcare workers - Police are trying to coat-tail onto pay equity settlements which clearly don't apply to them. Nurses got a bump to reflect historic underpayment relative to male-dominated groups like the Police. It makes no sense to claim Police need the same bump.
The obvious counter argument would be to point at huge, growing vacancies and make a case for higher pay to attract and retain. The fact that this data isn't presented makes me suspicious that there isn't a widespread problem.
This is precisely my point - all the arguments on Police pay are emotional and not rational, so I am struggling to know what to think. Where are the numbers?
It's always difficult comparing different careers - Police work comes with unique stresses and risks, but has low barriers to entry in terms of training and education compared to most public sector roles. The easiest way to tell is "do they struggle to maintain a workforce at these pay rates?" And then, is this worse than other public sector groups?
Yes. the public servant group take turns with a publicity campaign about how tough it is at pay negotiation time. Nurses, Police, Teachers etc.
Frankly it looks all cookie cutter same same, but I am surprised how many folk fall for it.
Remember at pay negotiation time the issues of stressed nurses, including those siting on the floor having a cry. Boring, but it works. We are not seeing those images currently. There is no pay negotiation going on.
Public servants in these groups are getting paid much more than in private commercial employment.
I've been trying to find police vacancy rates but I'm struggling - do we struggle to fill rolls?
To answer this I would look to the rate of churn at the police college near Porirua. they will only take a new applicant when a space is available for them to move into after the initial training is completed, hence the greater the churn, the greater the turnover rate around the country id staff are to be held constant.
You can't have full autonomy and security. One is your right to be fully accountable for your own outcomes, while the other is the existence societal blanket to always provide for you.
"Don't tell me what to do, how to think, what I should drive, where I should live, or what I should do, but you mofos had better have a factory up and running so I can collect a weekly paycheck. I don't want no part of sales, design or any of that IT nonsense either. It's someone else's role to make sure that whatever tasks I am given have value in the world."
My read was that they wanted a basic home of their own, rather than government policy affecting their employment prospects, lifetime renting and a subsistence level safety net. Remember, 'working class' means they're actually workers who want to work and likely resent those who take advantage of the safety net and choose not to work. I know which I'd choose too.
Soil maps looking better today - meanwhile lots of under water Rolls Royces hitting the market soon
Dubai flooding hobbles major airport's operations as "historic weather event" brings torrential rains to UAE. Dubai, United Arab Emirates — The desert nation of the United Arab Emirates attempted to dry out Wednesday from the heaviest rain ever recorded there after a deluge flooded out Dubai International Airport, disrupting travel through the world's busiest airfield for international travel. The state-run WAM news agency called the rain Tuesday "a historic weather event" that surpassed "anything documented since the start of data collection in 1949."
If you want a fun watch on how people are actually doing just that then check out this guy's videos. https://youtu.be/-8nqnOcoLqE?si=zgYB7LLg2oprnMMV
This is a great project but completely different context. The area the projects is based in has only recently desertified (something like 40 years) the soil isn't completely depleted and it's on the boundary of desert and no desert.
Look up when Dubai became a desert. You can still create mini pockets of vegetation if you import the soil but that also has huge energy costs. Plus the point about climate change is that it creates increasingly erratic events, you couldn't count on the flooding in Dubai occuring every year...
Yes, its the scale of it, hidden via massive arrivals that may well open eyes.
Many will be leaving behind parents, and a house that has not sold... trust me, these guys will be motivated to sell so they can buy in Aussie and get there new life underway.... Think of it as Divorcing NZ
Losing tens of thousands of locally trained young folks each year is also detrimental to our productivity outcomes.
Not saying all incoming migrants lack skill and talent, but a sizeable portion fits that description as reported by MBIE and Productivity Commission over the years.
Our reputation is evidently that of an easy location to permanently migrate for those without much to offer in productivity terms.
Maybe ask the people leaving why they are leaving. The last 4 who left my work (young and highly skilled) decided to leave based on the fact they could NACT was getting in/got in. They saw no prospect of the country getting better. They have moved to Netherlands, Germany, Spain and Canada.
Not saying that everyone is in this bucket but it would be an interesting exercise.
Rising US crude stocks as their economy gains energy efficiency is behind the shift lower for oil.
US Prepares To Reimpose Venezuela Oil Ban As Biden Seeks Scapegoat To Resume Draining SPR
Governing by feels and vibes, hardly competent economic management ...
https://www.stuff.co.nz/politics/350249131/what-finance-minister-asked-…
agnostium missed this. Or is in denial. Or is determinedly one eyed.
" .........Finance Minister Nicola Willis has asked the Public Service Commission for advice on how many people are employed in senior management positions as the Government’s cost-savings exercise gets into full swing.
Today Willis said she wanted to ensure the service was not “top heavy”, and had asked for details on the number of tier two and three management roles in the service. Senior leaders in the public service are considered in the top three tiers, with chief executives being tier one.
“What I have said to the Public Service Commission is, give me some advice on how many tier two and three managers we have, so I can have a look at whether it looks like there are any issues and then let’s have a think about where we go next, in terms of making sure the public service is the right size,” Willis said.
“If I just focused on head count, what I worried about was that agencies would just cull a lot of lowly paid staff when actually, sometimes, it’s more effective to get rid of highly paid staff.
“It’s not just about head count, it’s about cost. And what I’m really happy about is that we are getting that cost out.............."
No, I've seen that.
She hasn't given any direction on who gets cut, asking for information is not the same as setting direction.
They have to keep the managers on anyway to manage the consultants that get hired back in to do the work the workers they just cut used to do.
agnostium. Her "asking" is the right thing for a minister to do. There are roles of who does what. And respectful ways of dealing with staff. What do you want, minister going over there, strolling about and pointing at the people to sack?
As for your paragraph two. Really? If you think that behaviour is good management, it underlines the real problem.
Her asking is bollocks and trying to cover herself because she's starting to get heat as people get sacked.
I don't understand your second point. I'm not commenting on whether it is good or bad management, I'm just saying that is what happens.
There is a narrative that has been peddled by neoliberals that all government employees are useless and do nothing. It's not true. Government employees are like any other massive organisation, there is dead weight and star performers.
A cack-handed direction from a minister to cut headcount does nothing to improve efficiency or productivity. I've been through lots of these, never once has it resulted in a better more productive agency.
https://www.nzherald.co.nz/nz/tauranga-city-council-revaluations-woman-…
Excerpt: A 77-year-old Tauranga woman whose council property valuation has plummeted by $90,000 says she feels “stuck” because selling her home will not raise enough money to allow her move into a retirement village.
Glitch in the Matrix, this would have to be the odd one out. Honestly the RV is just random numbers spat out by a bit of software without anyone actually looking at the place. The council is now quick to point out that it is in no way a market valuation for the sale of the property. I can guarantee the RV will go down but the rates will still go up. No doubt you can lodge a request for the council to put up the RV if it makes you feel better but in return I'm sure they will smack you with an even higher rates bill. She will just have to go into a retirement home not a retirement village.
There'll be more and more of these stories. On one hand the thought comes that retirement villages are going to need to drop their equity requirement to get a space, but on the other, it will realistically wind up being a privilege only available to those well off from the age group that can afford it.
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