Here's my summary of the key events over the weekend that affect New Zealand, with news the Aussie housing markets are getting worryingly frothy.
But first, American job growth slowed sharply in March amid continued layoffs in the embattled retail sector, but a drop in the unemployment rate to a near 10-year low of 4.5% suggested their labour market strength remained intact. The jobs growth was far below market expectations but markets are not expected to react much at all. This sort of survey result has happened before - and as recently as May 2016 - and that was followed by very strong gains in the subsequent month and most people expect that to happen this time. Average earnings rose +2.7% over the year.
China has stemmed its currency outflow. In March, their reserves stayed just marginally above US$3 tln, according to official data released over the weekend. They also announced tougher enforcement to keep it like that. However, they are also allowing their banks to go on a lending and spending spree outside the country. Like this.
And in China, there is an interesting process being started in the southwest. Beijing is pushing ahead with a regional 'agglomeration' that includes Hong Kong and Macau. It is an area with over 100 mln people and will be 'planned' as one unit. The days of an independent Hong Kong seem numbered. Actually if you look at a map of the area around Shenzhen and Guangzhou you realise just how small Hong Kong really is in the regional context.
In Australia, Ralph Norris, currently chairman of Fletcher Building and previous CEO of Commonwealth Bank told the Aussies they are not in a housing bubble and that banks will be easily be able to ride out any correction. But he did finger longer-term inadequate housing supply as the main driver behind the recent sharp rise in house prices.
But just how frothy those Aussie housing markets are was reinforced over the weekend. Preliminary figures for Sydney, where the number of auctions listed rose to 1,392 from from 1,104 over the previous week, show the clearance rate at 81.5%. Last week it was 78%. In Melbourne, the clearance rate was 81%, up from 79.6% the previous week. The total number of listings also increased to 1,458, a +27 jump from the prior week.
Singapore is often touted as one of the world's most expensive cities to live in. But the locals are buying it. They have developed a more extensive index based on local residents' experience rather than the more usual expat metrics. And the results are surprisingly different to the usual reports. On the basis of local incomes, costs and purchasing power, the world's most expensive city to live in for locals is ... Sydney. Melbourne, Brisbane, Perth and Adelaide are all in the top 11. And coming in at number twenty is Wellington, with Auckland at number 27 of this 103 city list. Don't dismiss this latest ranking too fast. It seems much more relevant to public policy discussion than the usually referred The Economist one. (see page 35).
In New York, the UST 10yr yield is slightly higher at 2.38%.
Oil prices are up and now over US$52 for the US benchmark, while the Brent benchmark is now over US$55 a barrel.
The gold price is marginally higher today by +US$3 to US$1,254/oz.
And the New Zealand dollar starts the week a little lower at 69.4 USc. On the cross rates the Kiwi dollar is unchanged at 92.4 AU¢ and against the euro is at 65.5 euro cents. The NZ TWI-5 index is just on 74.8.
If you want to catch up with all the changes on Friday, we have an update here.
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24 Comments
This sort of survey result has happened before - and as recently as May 2016 - and that was followed by very strong gains in the subsequent month and most people expect that to happen this time. Average earnings rose +2.7% over the year.
Hmmmm..
At just +98k, the headline change in the Establishment Survey was about half of what was expected. In contrast to last month, such a low delta is meaningful in only one respect – given the confidence interval the BLS cannot say with significance that the payroll report for March 2017 was even positive. It still may have been lackluster or even a good one, but it also may have been negative.
It is therefore consistent with the rest of our economic findings. Though there is some improvement in certain areas, it isn’t meaningful so as to indicate what everyone seems to think it does. Instead, the US economy remains weak even if this year’s weakness isn’t as immediately dangerous as last year’s. The payroll reports fall well within that range, especially when viewed beyond a single month.
Because of that 98k as well as a -38k revision to last month (February 2017), the 6-month average of estimated payroll gains is now just 163k. That is 102k per month less on average than the estimated peak in the middle of 2014, a serious indicated slowdown. It is also the lowest average gain in four and half years, going all the way back to late 2012 and the initial slowdown. Read more
Agree that it is a shocker but i am not sure that I believe the rankings. This suggests that the average wage for Wellingtonians is less than that of Jafas. While many of the Jafas I know are only around the average wage, but with much higher costs than Wellingtonians. Plus as many of the Wellingtonians are Government servants is this an indictment of the Government failing to pay it's workers adequately? Need to see the detail.
The Fed’s monetary policies have purposefully encouraged businesses and consumers to borrow. But debt doesn’t just go away. It accumulates. By now, an increasing number of businesses and consumers are suffocating under this debt overhang in an economy that never developed the “escape velocity” needed – and hyped by Wall Street for years – to outgrow this debt. Rising bankruptcies are a turning point in the “credit cycle.” They’re not exactly a positive mile-marker for the economy.
The irony is thick: In all major sentiment surveys, economic confidence has soared since November: consumers, owners of small businesses, and corporate executives are riding high on their own ebullience. But the economic reality is tough for businesses and consumers struggling under the hangover from eight years of ultra-low interest rates.
I hope the model is wrong. Read… Atlanta Fed GDPNow Forecast Spirals Toward Zero Read more
In theory I would have thought that a measure that used local salaries, tax rates, mortgage rates etc would provide a more realistic ranking of the cost of living in various cities. But everyones situation is different. That is the problem. Each individual person is in a unique situation. Age, housing, salaries, savings are family situation are probably the main variables. Taking your example. You have come from Adelaide to AK. Maybe you did not sell your Adelaide house and bring the equity with you to NZ. The exchange rate difference would have made a huge one-off difference to your overall situation. Maybe you have not yet brought your Oz super to NZ, again a big sum of money that would have taken way longer to amass if you had lived in NZ for that time. The benefit of that will only accrue when you reach 65.
A measure which looks at the situation for a static theoretical person in Adelaide vs a static person in AK or wherever would probably be more valid for people who do not move city. But if someone moves, then this introduces a huge number of one-off changes which would throw the comparison out because this person has taken their very unique history and translated it at a fixed exchange rate into the new cities'/ countries' environment.
Thanks for the comment though Fritz, its interesting.
I found the report, I think.
http://redfame.com/journal/index.php/bms/article/download/1824/1907
I ran my eye over the tables which are indexed to ordinary people in New York.
Seems to me the index may reflect some national factors like taxes or food preferences
The point they are making is the expats in swanky apartments have a different cost structure to ordinary people.
Never mind.
I just read the report. I think it's garbage.
Having lived in Adelaide, I can say hand on heart that almost all the major expenditures were significantly cheaper there than Auckland - housing, fuel, groceries, many cars. The only thing I noticed that was pricier was beer (!), doctor appointments, and the school fees were generally a bit more.
Salaries were perhaps slightly lower than Auckland.
But the household income level at which families get support is significantly higher.
Plus, you get 12% super on top of your salary.
I think The Economist's findings are much more accurate.
Cost of Living nonsense
Having lived (until recently) in Melbourne for over 20 years and now living in Dunedin I can assure you the cost of living in Melbourne is half the cost of living in Dunedin, particularly Food, Vegetables, Fruit, Power, Petrol and Local Body Council Rates. And we got all the live sports broadcasts for free.
In Dunedin we are spending double on those essentials compared to Melbourne
In Melbourne Supermarkets the choice of fresh fruit is huge to the point you could live on a varied diet of fruit whereas here in Dunedin the fruit availability is so awful you have to carefully pick over what is available. The apples are tasteless
iconoclast,
Without competition,the 2 supermarket chains are not under pressure to cut prices. if only Aldi or Lidl would come in,then things would start to change,but without the population to justify it,they won't come. Melbourne has roughly the same population as the whole of NZ, I would much rather live in Melbourne than Dunedin,but I am lucky enough to be able to afford a decent lifestyle in Mt Maunganui and visit Melbourne regularly.
Council Rates here $2000 (excluding Fire Service Levy) are slightly more than Melbourne $1600 (including fire Service Levy) but nowhere near the Council Rates quoted by Kate last Week for Wellington and Palmerston North between $7000 and $10000. Melbourne Council Rates now include the Fire Service Levy $200 which used to be included in the Insurance policy levy
I was mulling over the costs for the ordinary man, food, rent, transport.
Rent of course may be mortgage repayments and rates.
A londoner living in a council flat shopping at Aldi may indeed have a low cost of living, Oyster card for transport.
By comparison NZ supermarkets, taxes, transport may look expensive.
I shake my head when the local supermarket sells avocado for $2.50 and the local farmers market sells them for $1
I make a stove top expresso in my Bialetti pot every morning about 7am. Heaven. The best coffee in New Zealand but one and New Zealand coffee is the best in the world already. And it's a stainless pot on an induction cooktop.
The best however is in the Central Otago house where the Bialetti is the old standard pot on a gas cooktop. I am truly blessed.
Our $7 packet of L'affare coffee seems to last for weeks and I guess the cost is about 20c a cup.
In Singapore you can buy a great brew made from condensed milk and filtered coffee. Filtered though what looked like rags and only about a dollar. All the very cheap eateries have it and it is very popular with the locals. I tried to make it myself here but couldn't quite replicate it. Highly recommended.
A very interesting thing in the superior Economist study and chart is how much the cost of living has climbed in Auckland and Wellington over the past year.
presumably that is largely attributable to housing inflation and currency ?
http://www.economist.com/blogs/graphicdetail/2017/03/daily-chart-13
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