Here's my summary of the key issues that affect New Zealand overnight with news of a world on the move.
But first, out of the US today there are a mixed set of data. Firstly new orders for manufactured durable goods fell -3.4% in December from November, although they were a remarkable +19% higher than the same month a year ago.
Secondly, sales of new single-family houses in December were +12% above the revised November rate and almost +9% above December 2013. The Case-Shiller house price index also came in higher than expected, as did consumer confidence which rose to its highest level in seven years in January.
The forecast huge blizzard that was supposed to shut down the US Northeast has turned out to be a normal winter event that has shut down virtually nothing, and has been somewhat of an embarrassment for weather forecasters.
Elsewhere, sagging demand in China has sent the price of iron ore to a 5½ year low.
In Australia, ANZ's boss says the Reserve Bank of Australia should resist calls to cut official interest rates. Mike Smith says Australia can weather falling commodity prices and a global currency war. “If I was the central bank I would wait and see how this plays out because if the currency can take most of the shock, it’s a much better way to deal with it,” he said in remarks to be published by the bank on Wednesday.
And in a remarkable piece of data released by a UN agency overnight, apparently 1.1 billion people traveled internationally in 2014. That's about one in six who made an international trip. Not only are more people visiting New Zealand, the are on the move around the world. The fastest growing destination was the US with visitor numbers up +8% in a year.
In New York, benchmark UST 10 year bond yields fell again and are now at 1.76%. Swap rates in New Zealand are unchanged today from yesterday.
The oil price was also basically unchanged overnight at US$46/barrel while Brent crude is at US$49/barrel.
Gold rose by about US$10/oz and is now at US$1,290/oz.
We start today with the New Zealand dollar lower again this morning at 74.5 USc, up against the Aussie at 93.9 AUc and the TWI is at 77.5.
If you want to catch up with all the changes yesterday we have an update here.
The easiest place to stay up with event risk is by following our Economic Calendar here »
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Have a listen to the new Greek Finance minister, link attached.
Varoufakis, who left a position at the University of Texas to enter Greek politics only in the run-up to the election, stressed he would keep writing a blog which he has used to denounce the austerity policies demanded by Greece's creditors in return for 240 billion euros in bailout loans.
"The time to put up or shut up has, I have been told, arrived," he wrote on his blog. "My plan is to defy such advice."
Varoufakis has railed against the bailouts of struggling euro zone states as "fiscal waterboarding" that risked converting Europe into a "Victorian workhouse".
http://market-ticker.org/akcs-www?post=229780
here is the fulkl interview. half way down page.
http://www.zerohedge.com/news/2015-01-27/full-breakdown-greeces-new-cab…
Many thks for the link Andrew.... "Bankruptcy cannot be dealt with by more borrowing"..
Wow... I like this guy.... He seems to be "outside" the usual Political /financial club..
Watch this space..... Maybe Greece is the centre of the Universe.... for a while...as far as the EU debt crisis...deleveraging goes...
Very interesting... an economist with lots of commone sense..>!!
What do u think ..??
Consumers can 'feel' as confident as they like, however this is not going to change the actual reality that for most households/consumers outside of Auckland they will be facing a decline in their largest asset (house) while facing one of the highest mortgage interest rates of the developed world.
The Consumer 'confidence' may also be that NZ consumers are not aware of the economic crisis world-wide and that our economy is linked to global conditions.
Consumers /wage earners will also be facing the smallest wage rise this year as deflation figures will be used to suppress wage rounds.
Consumers can 'feel' as confident as they like, however this is not going to change the actual reality that for most households/consumers outside of Auckland they will be facing a decline in their largest asset (house) while facing one of the highest mortgage interest rates of the developed world
Also one of the highest household debt to disposable income ratios in the world.
International credit rating agency Fitch Ratings has highlighted New Zealand's high household debt levels in its 2015 outlook for New Zealand banks.
Although saying it expects the performance of the New Zealand banking system to remain sound in 2015, Fitch notes household debt has risen to 156% of disposable income from 152% in 2011 and is "high."
"Fitch does not foresee a significant improvement in this ratio in 2015. In fact, there is a risk that household debt could continue to increase if property prices continue to rise on credit supply," Fitch says.
"A significant correction in house prices and a sharp increase in the Official Cash Rate could pose a risk for the banks' household exposures." Read more
The RBNZ felt compelled to publish a detailed missive late last year: Household debt:
a cross-country perspective
Yes, but.... Auckland house prices have actually fallen 13% since July if you measure them in US dollars. One of the rules of measurement is to use a ruler that is as independent as possible of the thing you are measuring. Measuring Auckland house prices in NZ dollars is useful for some purposes (like comparing with NZ incomes), but misleading for others; it's the stretchy tape measure from the Mitre 10 ads.
As the NZD goes down and down, and then down even more, then wages should go up a few (12? 18?) months later. I think this is the way the housing affordability problem gets solved. Interest rates are adjusted by the RBNZ to suit the ability to pay of the mortgaged borrowers, so the only thing left to adjust is the real purchasing power value of the NZD (which the cpi sort of tries to measure in a funny, roundabout sort of way).
So as the NZD continues on its merry way on down (for the next 18-24months with occasional spikes up) we will start to see price rises, and improved profitability of exporters, and wage rises, followed eventually by interest rate rises as borrowers start doing what they do best, which is borrow more.
How low will the NZD go? Who can say, not me for sure.
Also worth pointing out that the last 7 US new house sales data points have all been subject to subsequent DOWNWARD revisions, some of which have been huge:
http://www.zerohedge.com/news/2015-01-27/seven-consecutive-downward-rei…
Dont blame the weather forecasters, they simply reported what they saw on satelite images , it was politicians who made a big deal of it , and a sensationailist mews media, prone to blowing everthing out of proportion .
America is in an - over - reaction - to -everything cultural psyche.
Everything in the US is upgraded to a an event of 9/11 proportions from weapons of mass destruction , to ISIS to North Korea , to the damn weather .
That said , its worth remembering that the authorities really understated the possible effects of Hurrican Sandy in 2012 , with dire consequences .
Now politicians climbed on the bandwagon to ensure people did not get harmed and the news channels went ape.....
Maybe its better to be prepared and err on the side of caution anyway
Case-Shiller higher than expected? Not according to this:
http://www.businessweek.com/news/2015-01-27/home-prices-in-20-u-dot-s-d…
''Home prices in 20 U.S. cities rose at a slower pace in the year ended in November, a sign the industry struggled to find momentum even amid low mortgage rates.The S&P/Case-Shiller index of property values increased 4.3 percent from November 2013 after rising 4.5 percent in the year ended in October, the group said Tuesday in New York. The median projection of 28 economists surveyed by Bloomberg called for a 4.3 percent year-over-year advance.''
Forexfactory had a median projection from economists of 4.4%, versus the actual 4.3%:
1.1 billion people travelled internationally? or 1.1 billion international passenger trips?
They are not the same, one is saying that 15% of everybody on the planet travelled internationally by air, the other would be significantly less than that as 1 person can travel multiple times. I travelled overseas 5 times last year....
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