Here's our summary of key economic events overnight that affect New Zealand, with news from the major economic powers.
US existing home sales fell more than the -3% month-on-month than was expected for the shorter February month. In fact they fell a rather sharp -6.6% which is being blamed on rising mortgage interest rates, cold weather and tight supply. However, it is more likely that higher prices (and decreased affordability) are playing an even larger role in the February hesitation. And we should remember they are still +9% higher than a year ago, but that was just before the pandemic started to bite. The median sales price is now up to US$313,000 (NZ$436,000) and +16% higher than a year ago.
The Chicago Fed's National Activity Index also slipped more than was expected and in stark contrast to the rise in January. The retreats by the production, personal consumption and housing categories suggests the US economy may have been in contraction in February.
All the pandemic turmoil hasn't hurt the US central bank's 'earnings'. It has reported that it sent US$87 bln to the US Treasury in 2020, up from US$55 bln in 2019. (Interestingly, this US$87 bln transfer is NZ$121 bln and about the same as the New Zealand Government's spending budget for 2020.)
We should also note that the US Fed's balance sheet took an unusually large jump last week, now at US$7.7 tln, and up +$114 bln in one week to a new record high. Still, it is "only" 36% of annual American economic activity. Putting that into perspective, the Chinese central bank balance sheet is currently 41% of the annual economic output. In New Zealand, the ratio is 24%.
China has announced it has ratified its RCEP trade deal 'baby', along with Thailand, the first of the 15 countries (a list that includes New Zealand) to do so. The RCEP is expected to come into force at the start of 2022.
And staying in China, steel prices are rising and this isn't because of rising iron ore prices. It is more because of production cutbacks for air quality and climate emission restrictions, coming at a time of rising demand. It will be inflationary.
The monetary policy turmoil in Turkey over the weekend has resulted in an -15% devaluation of their currency, a sudden pressure on their tradeable inflation and the very thing they said they wanted to avoid. (Autocratic) politicians make extremely poor central bankers.
Perhaps we need to keep an eye on Indonesia a bit more than we do. Certainly 'stability' there is strategically important to Australia. But their economy is wobbling. Motorbike sales were down -17% year-on-year in January. Now for February they are down -31% year-on-year. COVID is undoubtedly the reason, but this is a stat for Indonesia that tells you a lot about how they are faring.
Later this morning, we will get the latest signal on how the New Zealand government plans to rein in the housing market and deal with its severe affordability problem. Moves addressing the same issue are also expected in Australia, although that is likely to be just a central bank action.
On Wall Street, their Monday session has started out with a +0.9% gain in early afternoon trade. Overnight, European markets were mixed with Frankfurt up +0.3% and Paris down -0.5%. Yesterday, Tokyo ended with a heavy -2.1% loss, Hong Kong with a -0.4% retreat, and Shanghai ended with a +1.1% gain. The ASX200 rose +0.7% but the NZX50 Capital Index fell a sharp -1.5%.
The latest global compilation of COVID-19 data is here. The global tally is still rising and at a fast pace, now at 123,349,000 and up +341,000 in one day. Global deaths reported now exceed 2,717,000 and +5,000 in one day. Vaccinations in the world are rising fast however, now up to 440 mln and in the US a third (123.4 mln) have now had this protection (+3.0) and they are achieving a very fast rollout. The number of active cases there fell yesterday to 7,216,000 (-32,000 in one day), resuming the reducing trend and taking the number currently infected down to under 2.2% of their population.
The UST 10yr yield is lower by -4 bps at just on 1.69%. The US 2-10 rate curve is flatter at 153 bps. Their 1-5 curve is also flatter at +79 bps, while their 3m-10 year curve is flatter at +165 bps. The Australian Govt 10 year yield is also down -5 bps at 1.79%. The China Govt 10 year yield is down -1 bp at 3.26%. And the New Zealand Govt 10 year yield is down -7 bps at 1.76%.
The price of gold starts today down -US$4 in New York at US$1741/oz.
Oil prices are softish at just over US$61/bbl in the US, while the international price is now just over US$64/bbl.
The Kiwi dollar opens today at under 71.8 USc and marginally firmer, and still in the long term 71c-73c range it has been in all year. Against the Australian dollar we are holding at 92.6 AUc. Against the euro we are also little-changed at 60.1 euro cents. That means our TWI-5 opens today unchanged at 73.8.
The bitcoin price will start today at US$56,689 and down -1.1% from this time yesterday. Volatility in the past 24 hours has been moderate at +/- 1.9%. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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38 Comments
Why are many panicking with governments decession to put restriction on speculative demand to tackle housing crisis (for once not hiding behind supply issue)
https://www.newshub.co.nz/home/money/2021/03/housing-crisis-call-for-co…
Trying to justify speculators as providing rental accomodations to many.
How many so called investors are buying for rental yield specially in Auckland ?
Hardly as most are buying for Capital gain (fast and easy tax free money) and while idle may give for rent to cover little.
Many are trying spin a web to potray that speculators are actually doing social work...really.
https://www.newshub.co.nz/home/politics/2021/03/housing-government-to-u…
Headline : First-home buyers and industry professionals are asking the Government to throw every tool they have in the box at fixing the housing crisis.
Do they mean RE industry ....surprised.......
Government first announcement will be extension of BLT, which is not going to change anything as already have for five years and next in the name of helping FHB will give slightly more FHB Grant but that instead of helping will boost house price and also in today's market few thousand dollars here and there does not help.
What may actually change - as a result may not be touched or as under pressure and forced may pass it to RBNZ to look into it and advise/ decide - another way to avoid and if cannot avoid delay AND that is putting a full stop on INTEREST ONLY LOAN ( Government has got heavy resistance and lobbying to not touch it) along with DTI for investors just like LVR.
More important if Jacinda Arden government show guts and want to take bold step and take all measures than when passing / authorizing RBBZ with gaining interest only loan and DTO, should also instruct to impliment as soon as - maximum from 1st April otherwise RBNZ will postpone to study ( number of other ways to delay) .
My launch is that government will do exactly as above introduce more Grant to FHB (which is not much of use in today's scenario, in fact may be counter productive) and extend BLT for affect as hype has been created BUT on interest only loan and DTI, will pass the buck to RBNZ, being fully aware will do to delay and if possible avoid imp,indentation of one or both.
Now is not the time to wait for information (already out in public domain) nor advise nor another date for further announcement but action.
Agree but I too think interest only loan and DTI can have some affect out of all specially if going to just extend BLT and more Grant to FHB.
If want to try, should try all and now, while thinking and implementing new measures but right now to douse the fire, this are best try and not to hide behind supply excuse.
The very fact that controlling interest only loan along with DTI has more possibility of controlling the speculative demand and used many, will not be touched ( not that they do not have knowledge but is for they have knowledge and knows that it may douse the fire. So the question is do they actually want to puncture the housing ponzi pyramid- will know shortly).
They will go Extension of BLT and more Grant to show empathy towards FHB but actually screwing them.
I have a feeling we will start to see more headlines like this
https://www.cnbc.com/2021/03/18/hawaiian-couples-advice-to-anyone-movin…
which will lead to many longterm costs that will outweigh any property price gains.
Very interesting the price action here in NZ is similar to Hawaii.
At least he got one bit right: "I don't know why the likes of the Commerce Commission haven't been unleashed. Give them $10 million and say 'it's a free-for-all, go for your life'. Look at the sector and see if we can drive some more competitive pressures into that industry, because we need it."
When most of our building products cost 30-70% more than in Australia, something ain't right...
US existing home sales fell more than the -3% month-on-month than was expected for the shorter February month.
Gross Profits For House Flippers Hits Record As Fed Turbocharges Real Estate Bubble
Owned: A Tale of Two Americas
Owned is a incisive look into the dark history behind the US housing economy. Tracking its overtly racist beginnings to its unbridled commoditization, the doc exposes a foundational story few Americans understand as their own
"Home ownership to me means freedom—strictly. The more and more I evaluate this world, the more and more I understand: when you don't own anything, you are nothing." That's how Greg Butler, a young black house flipper, sums up his view of the American dream.
If you look at tech stocks in the NDXT it took around 10 years for many of them to do between 2000% and 200000%. Then apply that paradigm to the web 3.0 wave that's currently occurring with blockchain where none of the products have unseated any incumbents just yet and it's just phenomenal. By the adoption numbers blockchain is around about where the web was in 1997. Here's Bill Gates talking to David Letterman about the internet in 1995.
Sister Bertrille will mount the Peoples Podium & announce to the huddled masses : " we have seen the promised land .. ( waffle waffle another 5 to 12 minutes ) ... and will build 100 000 homes , affordable homes within the next 10 years ! " ...
... " ... oh ... ooops , that was 2017's announcement ... ahhhhhh... " ..
Jacinda !... the future isn't what it used to be , the future is today ... and we're waiting .... waiting ....
Perfect opportunity for Jacinda Arden to impliment what she and Labour government always wanted to do - preach as has majority in parliament along with support from all to contain the the housing crisis by attacking speculative demand while waiting for supply ( which will always remain).
If they do not throw in everything and more and hide behind excuses or try to fig or pass on to RBNZ or anyone, will stand exposed FOR if cannot deliver it today, will never do it and that Jacinda and Labour party has been talking is and was only for affect with no intent.
Today it is not only Jacinda reputation which is at stake but of entire Labour party though they may not realize it.
Will Jacinda rise to the occasion for succumb....will know shortly.
KH...exactly, each and every year we are having to build over 25 000 new houses for "new NZers" before we can even start building for our own people. There is no chance the housing and rental crisis will ever be fixed while we continue with mass immigration pouring into the areas with the biggest shortages of houses.
One of the biggest barriers to solving this is that many are worried or even scared to voice their concerns regarding immigration for fear of being labelled a racist.
We should also note that the US Fed's balance sheet took an unusually large jump last week, now at US$7.7 tln, and up +$114 bln in one week to a new record high.
Indeed - Fed bought $87.993 billion MBS and $22.626 billion UST for the week ending 17/03/21.
BNZ make a pointed comment in respect of RBNZ's QE endeavours:
The domestic rates market was supported by global forces while the RBNZ’s stepped up bond buying over the past couple of weeks continues to particularly distort the long end of the market – the Bank’s motivation for driving rate compression at the long end remains a mystery. The 10-year NZGB and swap rates both fell by 6bps to 1.75% and 1.93% respectively, while 2-year rates fell by 3bps. Link
"And the Prime Minister's made it clear she wants house prices to continue going up. You can't make house prices more affordable by having house prices continue to rise from what are already among the most expensive in the world."
https://www.newshub.co.nz/home/politics/2021/03/don-brash-praises-phil-…
FOR ONCE DON BRASH IS BANG ON. IF YOU SUPPORT AND PROMOTE HOUSE PRICE TO KEEP RISING E ERY YEAR - THAN HOW WILL MANAGE THE CRISIS. IT SHOULD BE UP AND DOWN AND UP.....SO OVERALL IT RISES AT MODEST PACE AND NOT AT 10% PER MONTH.
So basically Jacinda and her team has to get the priorities right to solve the crisis.
Most probably today's announcement will be a fiasco - only for publicity with no real intent.
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