Here's our summary of key economic events overnight that affect New Zealand, with news the world's factories are getting busier, especially in India.
But first, the strong run of American retail sales is continuing. Sales at bricks & mortar stores on a same-store basis were +5.3% higher last week than the same week a year ago. This extends the +5% expansion to four consecutive weeks, and the above-inflation streak to eight consecutive weeks.
There were American PMI's out for April, the internationally-benchmarked set, but they revealed growth slowing amid signs of demand weakness. The factory PMI slipped to a minor contraction, and the services expansion slowed marginally.
However, sales of new-built houses soared +8.8% in March from February, the highest level in six months, and rebounding from a -5.1% drop in February. Demand seems to be returning despite elevated mortgage rates. Meanwhile, building consents and housing starts eased back in the month. This will have the effect of tightening inventories of unsold new-builds.
The latest US Treasury bond tender brough rising support, and rising yields. But the push higher seems to be rising. Almost US$184 bln was bid for the US$69 bln on offer. The median yield on these two year Notes was 4.85%, up +31 bps from the prior equivalent event. A year ago the equivalent auction went for 3.92%.
In fact investors are now starting to price in the chance of a US Fed rate hike, rather than a cut, in 2024.
In Japan, their factory PMI made big gains in April, meaning the sector is now stabilised and no longer contracting. Their services PMI rose at a good rate too, expanding faster. Both are now at 11 month highs.
Taiwan industrial production rose +4.0% in March from the same month a year ago, confirming the strong recent export order data we have previously reported. But the retail sales growth impetus is slowing, up only +0.7% in the month.
The severe flooding in the Pearl River basin in southern China continues and is predicted to get worse before it eases.
Led by its factory sector, Indian PMIs revealed economic growth continued to strengthen in April. Positive demand trends fuelled new order intakes and output. In both cases, rates of expansion were the fastest in close to 14 years. India is in a significant expansion. In fact, it is now enough to topple Japan from being the fourth largest economy globally on a gross basis sooner than expected (although nowhere near on a per capita basis of course). That switch is expected to happen in 2025, a year earlier than previously forecast.
The Eurozone recovery is building momentum in April according to the overnight release of their PMIs, but price pressures are also revived.
In Australia, their 'flash' PMI rose at a good clip too, expanding for a third consecutive month and at the quickest pace since April 2022. Although most of the rise was from the services sector, like Japan, their factory sector improved sharply too to a 'stable' level.
The UST 10yr yield is now at 4.60% and down -2 bps from this time yesterday. The key 2-10 yield curve inversion is unchanged at -34 bps. And their 1-5 curve inversion is marginally deeper at -53 bps. Their 3 mth-10yr curve inversion is now at -81 bps and also slightly deeper. The Australian 10 year bond yield is now at 4.33% and down -2 bps. The China 10 year bond rate is now just under at 2.24%, down -2 bps to a new all-time low. The NZ Government 10 year bond rate is now at 4.96% and down -4 bps from yesterday.
Wall Street is still roaring today with the S&P500 up another +1.2%. The expected good earnings are being delivered in this reporting period. Tesla and Visa are both set to release quarterly results after today's closing bell. Overnight European markets all rose, led by Frankfurt's +1.6% and trailed by London's +0.3%. Yesterday, Tokyo ended its Tuesday session up +0.3%. Hong Kong ended up +1.9%. But Shanghai fell a further -0.7%. Singapore ended up +1.5%. The ASX200 finished up +0.5% but the NZX50 closed down -0.4%.
The price of gold will start today marginally lower, down -US$4 from this time yesterday at US$2326/oz.
Oil prices have risen +US$2 to just under US$83.50/bbl in the US while the international Brent price is up a bit less at just over US$87.50/bbl.
The Kiwi dollar starts today up nearly +¼c at just over 59.4 USc. Against the Aussie we are softer at 91.6 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today just on 69.1 and little-changed from yesterday.
The bitcoin price starts today virtually unchanged at US$66,766. Volatility over the past 24 hours has been modest at just on +/- 1.0%.
Tomorrow, Thursday, April 25 is ANZAC Day in New Zealand, a public holiday. We will not be publishing that day, but will be back to normal on Friday.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
79 Comments
But first, the strong run of American retail sales is continuing
Hmmmmm....
While FOMC has shifted back hawkish (flipflop is a better description), their very own Beige Book is full of warnings about the real state of the economy. Looking at the economy from the ground up, they aren't picking anything like a booming economy. https://youtu.be/JT7zT9H94dM Link
The smart will just get gensets and make sure they have water tanks, I think many farmers will think about diesel tanks now. Rural will be better prepared, we also have an emergency management system not-fit for purpose. New ideas that you need 7 days food/meds etc in cities and perhaps 2 weeks in rural.
All while sitting on the ring of fire with the main fault line due to go any year now.
Given the lawlessness seen in Hawkes bay, can you imagine Auckland with no power for 14 days.
Not sure if you're being sarcastic but there was a decent amount of looting post-flooding, especially south of Napier and areas like Fernhill. Daylight looting was especially prevalent over the first 2-3 days.
Rural properties further out generally went untouched because the Army and Police were out and about, intercepting those who had no reason to be in the area. At one point our supply convoy was stopped by Police in Puketitiri, thankfully we had a retired officer with us who could vouch for our intentions.
The Puketapu community set up barricades to stop anyone trying to enter the area, to cut down on burglaries there.
Generators and solar panels were being stolen from stores and closer-in properties. When SH2 reopened I drove to Palmerston North to buy a generator and offered to buy them for others as well. I went to Farmlands there and bought as much dog food as I could fit in the wagon, then drove it back to Hastings where a helicopter dropped it off to remote farms along with other items. My Wellington office organised a truck to bring up more supplies.
Meanwhile gangs were charging people $5 to enter Pak N Save.
We met a number of rural people who had lost loved ones to suicide after the flooding because they couldn't see a way back. Many tried to remain pragmatic but hard men were in tears everywhere. We've never hugged so many strangers who were so grateful we'd brought out packages of food and staples like toilet paper, nappies and other hygiene products.
A whole lot went on that never made the media.
I have colleagues who live in the area and were impacted by the floods, and they too have talked about the gang activities in the aftermath. Despite disclaimers to the contrary the gangs were not doing good for most if any people.There were other opportunists too, but they suspected that while gangs were not overt in some activities they were likely behind them.
I seem to remember news reports of guns getting pointed at people and all you are worried about is your $5. Safe to say you will be one of the first to go when it all turns to shit while you stand there repeating over and over, this can never happen in New Zealand. Society as you know it is a thin veneer, it takes very little before it shatters.
Congestion charging is a pretty blunt tool to try and rationalise who is most worthy/allowed to be using the roads at any one time.
An barely noticeable amount of $ for some, pretty significant for others.
I mean we all chipped in to build them didn't we? But now lets arbitrarily get rid of a few from using them.
The bright-line property rule looks at whether the property was acquired:
- on or after 27 March 2021 and sold within 5 years for qualifying new builds or within 10 years for all other properties
- between 29 March 2018 and 26 March 2021 and sold within 5 years
This tax has been in place since 2018.
Wall Street is still roaring today with the S&P500 up another +1.2%.
BREAKING: Fed’s Financial Stability Report Just Dropped (What You Need To Know)
The Fed's latest semi-annual report on financial risks contains a couple of important updates. First, we get a sense of where the systemic attempt to deal with the downside to the commercial real estate bubble stands. That also feeds into the most recent updates on US banks and the deteriorating credit environment. Plus, we also take a look at why the Fed's report singled-out the stock market and what that means.
The latest US Treasury bond tender brough rising support, and rising yields.
China will most probably be a diminishing participant going forward.
The US is drafting sanctions that threatened to cut some Chinese banks or from the global financial systems, which some US officials said will help stop China's commercial support of Russia's military production, the Wall Street Journal reported on Tuesday.
"We strongly oppose the hypocritical behavior of the US, which fans the flames itself yet shifts the blame onto China," Wang said.
the USD is last weapon US has, but it's a glass hammer. Look at Russia, US, EU cut Russia out of USD and Euro system, banned Russia using SWIFT. so what? Russian's economy suffered for about a year, then started to grow again. in fact Russian's economy is growing faster than UK.
Equities up all over except for here. Hmmm.
- "Microsoft's New Zealand business has clocked $1.17 billion in revenue for the year to 30 June, 2023, up from $1.06 billion in 2022."
- "Google's New Zealand business made a $20.5 million post-tax profit last year, paying a mammoth $870m service fee to its US parent. "
- "Amazon cloud pays barely $1m tax on $391m revenues"
- "Pfizer - The US-based multinational saw its New Zealand revenue rise from $395.3 million to $424.9m for the 12 months to November 30, 2022"
- "ANZ New Zealand is boasting a $2.26 billion cash profit for the last 12 months to September 30, 2023 – but is warning of potential tough times ahead for some customers. The news comes after last week BNZ posted a net annual record of more than $1.5 billion, and Westpac $963m."
No, 15% GST does not make up all the difference in the price of food. (Aus as no GST on food but it's WAAAYY to complex to implement here).
- "New Zealanders pay 25% more than Australians for the same food. We can see that the vast majority of items are more expensive in New Zealand. A head of broccoli, which will set you back $3.99 in New Zealand, costs NZ$1.37 in Australia. Eggs are half the price, and 500g of tasty cheese is almost NZ$5 cheaper.
- A few items cost slightly more in Australia, once the exchange rate is accounted for. Butter and Sealord frozen hoki fillets, which are both products of New Zealand, are 30c and 7c more expensive here respectively. "
A heavy serving of deception anyone? Consolidated statements... aka small print
- "Foodstuffs North Island earned $44.9 million net profit, a fall from $45.3m in the previous financial year, while Foodstuffs South Island reported a $6.9m net profit after reporting losses in the two previous years."
- "The North Island annual report noted that its consolidated statements “cover the perimeter of the Foodstuffs North Island Group only, and do not cover the financial results of our members”."
We should create a government department to look at global corporate remittances etc, something like a commerce commission.
The FS companies are co-ops. Not co-ops for the people (their customers) - but for the FS stores which are privately owned. Thus the FS companies (soon to be company?) shouldn't really be making 'profits' at all as all 'profits' are 'retained' by the privately owned stores.
A very different setup to Woolworths (rip Countdown) which is a traditional structure that filters profits up to their Australian owners. (The Australian compulsory Superannuation scheme - remember voters in NZ canned ours under the Muldoon government - has provided so much finance that Australia has been able to buy up much of NZ's businesses. Kiwi's aren't that bright, ay?)
Depends on which staff are deemed necessary for which services.
https://www.newshub.co.nz/home/politics/2024/04/christopher-luxon-has-s…
Edit:
https://www.rnz.co.nz/news/political/497724/ctu-claims-national-s-tax-p…
Some touchy quotes in this one;
...to be made without any cuts to frontline services."
"There is funding being caught in the backroom bureaucracy that is not making it to the frontline. We will be tasking chief executives across the agencies we've identified with the task of finding 6.5 percent in reductions. That is actually quite a small reduction."
"The sorts of things we expect them to identify - things like advertising, work programmes on policies that are no longer necessary, refurbishment, farewell parties - these are things that we think there should be a ruler run over."
He fronts a System which will sacrifice every other System to maintain itself. Ultimately, it throws the life-supporting capabilities of the planet, under the bus.
The word-plays, the spin, the changing of message with a blank no-conscience face, are all part of it now. That is the paper-over between fact and narrative. Johnson in the UK was a classic example - and it's no coincidence that the end of the tug-of-war team (the extreme Right) are often religions zealots. We are no exception to that - covered-up or not. It explains why our PMs lack of empathy; lack of nuance.
The problem for the future, is that our social narrative (GROWTH IS GOO AND FOREVER - note DC's growth-is-good vernacular, most mornings) is diverging from the factual one. Papering-over only goes so far - gets found out as the gap widens.
On that stage, in front of that painted scene, he makes a surveyed-click-potential comment. Then 'pivots' - buzz word for completely changes his message, usually due to the next survey. These folk are therefore followers - click-driven opinions driven by a kept-ignorant populace. What could go wrong?
What will go wrong, is that we don't have enough folk to do the jobs we need as a society. Nor will we have enough folk paid to look-ahead - because those who did, were counter to the temporary narrative and were silenced, 'but answer there was none' - to quote the poem...
I think you've slipped off the rail there PDK. Luxon and most other politicians primary problem is that their thinking is constrained to within an established system. He understands that system, and he can see the problems. What he doesn't see and is ideologically blind to is that it is largely the system which has created the problem. The politicians created this system, usually guided by vested interests, but the politicians were not smart enough to explore unintended consequences. Perhaps they were talked out of that?
What is really needed is a vision that is prepared to break the system down. Rework it to the degree required to create the required results of serving all the people.
6.5% is a lot to save, in business, government and personal (otherwise why isn't everyone doing).
6.5% savings, when you've declared ~50% of your spend as sacred (frontline) is huge.
To say thats small is interesting. To think farewell parties etc will do heavy lifting there is childlike.
Improvement in service !!!!!! I present to you Immigration, Crime, Child Poverty, Cost of Housing. All of them off the scale worse after the Labour debacle.
6.5% is hopefully just this year's target, in fairness it will take some time to cut this much chaff out over the term of this government. Government head-count: sticky on the way in slippery on the way out.
What's the support for the Child Poverty claim, out of interest?
Re immigration, little change there so far, so that'll be an interesting one to watch. Hopefully the govt will put some meaningful changes in there, so one suspects there may be too many links of influence from hospitality and other industries that clamour for cheap labour.
Some of which would have been making up for the ball-dropping of the Key government.
Every time, the problem is folk truncating the time-frame to suit their narrative.
So boring.
And you didn't allow for GROWTH - presumably a nation of 5 million requires about 20% more administration than one of 4 million. Maybe not 25%, but 20 seems reasonable.
Thinking is always good
And so the private sector will prevail? Productivity is dropping, exports dropping, income dropping. We've been struggling for 10-15 years conveniently hidden by bolstering our income against our debt pile by dropping interest rates to the floor.
Where do they go beyond 0.25% in any meaningful way?
We can either have an honest conversation about using fiscal policy to enable a stable economy, or throw x% immigration at the problem to do the shit jobs and pretend we're getting 2% "growth" out of it. Every day we're looking more and more like we will and should follow Japan, 1.5x the OECD average for public sector. Because we have nothing left to grow in the private sector to expand and pay those debts.
What your generation has learned to consider normal in terms of growth and efficiencies improvements is no longer realistic nor is it currently possible. There is no oil 2.0 coming to exponentially improve production output.
The problem is with issuing a blanket request to find $ savings in a Dept. The managers who are in charge of finding those savings are not going to sack themselves, but will sack all the people who are actually needed in the ultimate display of passive aggressiveness. Especially after Labour have stacked these Depts with their highly paid pets. This is the problem with allowing Govt Depts to make the cuts - they should be conducted by an external group, or the Minister themselves.
Same crap goes on in companies - new CEO takes over, existing management would rather sabotage the business than comply with the new direction the CEO wants the company to go in. This is why corporate turnarounds seldom work.
Listen to you all. Having a mass debate about politicians not doing what they said they’ll do? WTF? Have you all only just arrived on this planet? PDK is the only one making any sense. Big picture is what you want to be assessing. Not all this he said, she said BS. Abolish Central Government. Compulsory euthanasia at 70. End of story.
Probably depends on how many years you have 1./ Been alive and able to consume resources (e.g take advantage when they were cheaper) and 2./ how many years you estimate you have left.
Those who benefit from the status quo will always push to keep it, and until the voting power shifts more to be with a majority that demands change, then I can’t see drastic changes occurring.
In other interesting news, it appears that the NACTNZ Govt rental housing policy changes are already having an effect. Rental housing inventory has dramatically lifted since mid February. Hope the naysayers are man enough to admit they were wrong.
https://johnbutt.substack.com/p/inventory-charts
Its not like there has been a sudden enormous completion of housing in the last few months - they have been building lots of house for years now, yet all of last year rental inventory was declining, now it has suddenly jumped up. The number of houses being completed didnt suddenly double or quadruple in a couple of months. Try again.
Interestingly, a bunch of newly finished stock that was for sale near us recently has been rented out still owned by the developer, and the for sale signs taken down. Hard time selling stuff at the moment, from the looks of it, while the cost of finance has been high.
Could well be more folk putting rentals on the market to try to cover costs, rather than holding them empty in the face of disappearing capital gains.
Be happy to look at whatever evidence people have of causal factors.
Christchurch and Dunedin/Otago looking the same as normal, and Wellington down on 2023. If one is going to declare that one's personal policy preferences are causal, might have to factor in the huge variation in different areas.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.