Here's our summary of key economic events overnight that affect New Zealand with news two more central banks signaled they will be raising rates in 2022.
But first in the US, October job openings rose far more than expected, up by 431,000 from a month earlier to just over 11 mln. September was revised up. Hires were little changed at 6.5 mln and the quit rate stayed high at 2.8% (or 4.2 mln) from a record 3% (4.4 mln) in the prior month.
Today's UST 10yr bond auction saw the Fed pull back sharply too (just like we reported on the UST 3 year auction yesterday). Despite that it was very well supported with the median yield rising to 1.45% from 1.37% at the prior event a month ago.
Fed data on consumer credit came in unexpectedly weak for October (and September data was revised down).
US November vehicle sales, the world's second largest market after China, came in little-changed in November at 12.9 mln (annual rate).
The Bank of Canada held its policy rate at 0.25% in its overnight review but sees quickly improving economic conditions domestically, and still expects to raise rates starting in the middle of 2022.
Japan reported a final Q3-2021 GDP contraction that was much worse than expected.
Japan's new prime minister is readying a plan to deny some tax breaks to big companies that do not hike wages, while boosting deductions for those that do. It is trying to boost salaries that have been stuck for about 30 years. They are looking for a +4% wage boost.
In China, Evergrande shares fell another -5% yesterday after missing a key repayment date to bondholders. Kaisa share were suspended from trading.
The Indian central bank also held its policy rate, in their case at 4.0%, at its MPS yesterday. It is 'focused on growth' and is letting its looser policies run a bit longer so their economic recovery beds in. They are expected to start hiking their policy rate in early 2022.
We think we have an inflation problem? We all know about Turkey's raging 20%+ rate, but Russia is getting up there too, reporting an 8.4% CPI rise and a five year high.
In Australia it looks like their Government is moving to require BuyNow/PayLater (BNPL) fees to be passed on to customers rather than being adsorbed by the merchants (and thereby raising the costs for everyone). That is expected to add about 4% to the cost of a BNPL transaction.
And staying in Australia, pandemic cases in Victoria jumped to 1312 reported yesterday. There are now 11,331 active cases in the state - and there were another 5 deaths yesterday. In NSW there were another 403 new community cases reported yesterday, another jump, with 3,196 active locally acquired cases, and one death. Queensland is reporting one new case. The ACT has 8 new cases. Overall in Australia, just over 88% of eligible Aussies are fully vaccinated, plus a bit under 5% have now had one shot so far.
The UST 10yr yield opens today at 1.52% and up +6 bps overnight. The UST 2-10 rate curve starts today much steeper at +83 bps. Their 1-5 curve is also steeper at +99 bps, while their 3m-10 year curve is steeper as well at +148 bps. The Australian Govt ten year benchmark rate has risen +2 bps to 1.69%. The China Govt ten year bond is up +1 bp to 2.88%. The New Zealand Govt ten year is also firmer, up +2 bps at 2.39%.
On Wall Street, the S&P500 has started their Wednesday session flat. Overnight, European markets all fell about -0.8% (except London which was little-changed). Yesterday Tokyo ended up a strong +1.4%, Hong Kong was up +0.1%, and Shanghai closed up +1.2%. The ASX200 closed up +1.3% while the NZX50 caught up with a +2.1% rise.
The price of gold will start today at US$1782/oz and down -US$3 overnight.
And oil prices are little-changed at just over US$72.50/bbl in the US, while the international Brent price is up to just under US$76/bbl.
The Kiwi dollar opens today firmer at 68.1 USc. Against the Australian dollar however we are softer at 95 AUc. Against the euro we are also softer at 60.1 euro cents. That our TWI-5 starts today little-changed 72.7. We should also note that the Chinese yuan rose to a 3 year high against the USD. Against the NZD, the yuan is at an 18 month high.
The bitcoin price has slipped to US$50,401 and down -1.9% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.7%.
And please note there will be no 4pm Review later today. The whole interest.co.nz team who bring you it will be out of the office at our end-of-year function, 'reflecting' on 2021 and looking forward to 2022 - and our holidays before that. :)
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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64 Comments
https://dothemath.ucsd.edu/2021/11/caught-up-in-complexity/
Might explain the failure of academia at large - we already know why economics fails as a single discipline.
It's a concept I have long thought had merits Foxy.
Consider this, the Government could effect better employment and economic balance by;
- provide tax breaks for establishing in regions (aim to increase opportunities in regions)
- provide tax breaks for higher median wages paid to staff (lift wage rates)
- provide tax breaks for more staff employed (increase employment)
- Provide tax breaks for smaller gap between management and staff median wages
I can envisage that it would be possible with the appropriate structure that a business could pay no tax, but ultimately the Government and country would gain; less benefits paid out, higher standard of living achieved, poverty issues addressed, improvement in secondary benefits such as mental health, and so on. Taxes lost would be regained through wage taxes and taxes gained through spending. Grow from the bottom up.
Undoubtedly the intent may be valid but as you know any form of subsidy, be it pre, direct intervention such as Muldoon’s SMPs, or post, subset through taxation, immediately introduces market distortions & opportunistic advantages. Going way back to well regarded Australian economist (Rufus Dawes) lecture language of the 70’s, never forgotten, “all subsidies are RATFINK.”
I would go away from considering a tax break to encourage and support employment as "subsidies". Subsidies in that context would be to drive down pricing of products. My suggestion would be used to take the emphasis off profit for shareholders to supporting and building the workforce. Profit in itself is not a bad thing. But when the workers who produce are not paid adequately it becomes bad. It's like so many other things, in themselves not bad, but the application makes them that way.
Government is the problem. Solve one problem and create two more. Taxes lost are never regained, hence the massive government debt in the US and Reagan's trickle-down theory, and Trump's tax cuts. Provide tax breaks for more staff employed. Should you not say, pay a business to employ a worker they do not need? Leave supply and demand alone and let the market decide.
Where is the money coming from? Crickets.
https://twitter.com/pierrepoilievre/status/1468594502080237568?s=21
Experts and agencies believe that house market may cool like recent announcement by core logic....has been believing since March but reality is that house prices are touching new high every month .....Feb...Mar....Apr........Oct....Nov....
Why lie, if want the ponzi to continue, which is, where is the need to strattegise and lie AS neither Orr nor Robertson need excuse to support....drop of hat and will find thousand reason to support and promote the ponzi.
Good.
Mortgage deals that would have gone through a month ago, are now being rejected....including deals involving people who cannot be described as vulnerable borrowers..... The consequences are massive, and people aren’t really awake to it yet...The collateral damage is going to be big.
https://www.stuff.co.nz/business/127220010/new-lending-laws-a-nightmare…
The covid smokescreen is lifting & drifting & big issues, very big issues indeed, are looming through the gloom for this government. 2020 year of covid. 2021 year of he vaccine (only half of it in fact.) 2022 year of reality. What may that be. Just speculating.Mortgage defaults, households sunk by inflation, discretionary spending corralled, unemployment ascending, welfare dependency rocketing and what to really do about China.This government has been their own for one year and under the smokescreen of covid fiddled away $millions on wayward non essentials. So next year let’s see how they go about addressing some of the big stuff then.
Have you heard our PM speaking on anything but announcement related to COVID-19...able to cover themselves and hide behind pandemic but for how long.
Once the Tsunami waves of COVID reduces, will see the economy damage it has done (Health damage can be seen now, also) but economy damage will be clearer specially the one committed by government and RBNZ.
One should tell them that anything in extreme is bad. Patient needing oxygen to survive but give him too much to help as is free and can print, will have other serious repecurssion.
It all started from Fed and our Orr picked it up as it suited him and also by following fed is immune from criticism when things go wrong.
In USA everyone is gunning for Powell but is now not worried as has been RE nominated and is secure. This too highlights that it is me first than economy otherwise why would he take a U turn on biggest lie - transitory inflation just after getting the plump job back.
What may that be. Just speculating.Mortgage defaults, households sunk by inflation, discretionary spending corralled, unemployment ascending, welfare dependency rocketing and what to really do about China.
RE China: Emulate Apple - Apple’s ‘secret’ $275 billion deal with China exposed
Good stuff farmers.
Between 1961 and 2015, global crop production increased by 250% - "Using LMDI decomposition analysis, we find that rising aggregate yields contributed far more than cropland expansion (89% compared to 11%). That is, growing global food demand has by and large been met by growing more crops on the same amount of land, rather than expanding cropland. Our second-stage decomposition showed that nearly two-thirds of aggregate yield improvements have come from pure yield, or the output of a given crop per unit of harvested cropland area in a given country per unit area per year."
Drivers of increasing global crop production: A decomposition analysis
The world will likely start to lose some of it's most productive farm land due to water shortages. The Central Valley in California and Ogalalla Aquifer are good exampes although you can point to more diverse examples like Iraq and Central Asia.
Luckily this should broadly coincide with population decline in OECD countries.
That may be true for some crops, but not all. Some haven't kept pace with population increase
https://www.fao.org/faostat/en/#data/QCL/visualize
I wonder how much extra fert and energy is required compared to 1961...?
Where are you getting your data saying fert use is dropping?
https://ourworldindata.org/grapher/nitrogen-fertilizer-consumption
Doesn't seem to be much reduction to my eyes...? But their data only goes back to 2002. ..
Tedious much - there is more to life than N. Maybe read up on precision ag.
https://ourworldindata.org/grapher/fertilizer-application-rates-over-th…
That's true, but what has happened on the input side of the equation? Remember most fertilizers and other inputs are oil derived products... what happens when oil is $200 a barrel... what about $1000. The answer is becoming clear, that money will be printed (which everyone is falling into as "the way out"), which will mean general inflation, even if it's delayed. We are locked into this now, massive population drops will be required to change this, which aren't incoming. This is without even thinking about the water issues, so we have real food issues about to hit us big time over the next few years...
Another complicating factor is wastage. I'm willing to bet that food wastage was MUCH lower back in 1961. Now it's something like 30% i think. So we're producing more to throw it away.... :(
https://www.statista.com/chart/24350/total-annual-household-waste-produced-in-selected-countries/
Yield increases at the expense of nutrition. Now growing commodities, instead of food. Soil turned to dirt, taking ever more fertilizer and water to grow. Soil genome destroyed. Yield increases have rose in proportion to obesity creating a host of other diseases. Round -up ready farming is toxic and provides no nutrition to the masses.
Had to post this... it could be NZ. Skip to the 4 minute mark if you’re in a rush , but you’ll no doubt shake your head all the way through.
Where does the money come from question to politicians voting on $7 Bill spend up.
https://twitter.com/pierrepoilievre/status/1468594502080237568?s=12
(apologies I see Pacman has already posted)
https://twitter.com/steve_hanke/status/1467573990487035905?s=20
Steve Hanke (the spineless squid that he is) measures inflation in Turkey at 87%
Ignore the ridiculous government numbers.
Today's UST 10yr bond auction saw the Fed pull back sharply too (just like we reported on the UST 3 year auction yesterday). Despite that it was very well supported with the median yield rising to 1.45% from 1.37% at the prior event a month ago.
The Fed did no such thing - the Fed participates in these auctions as a non-competitive bidding party to replenish retired US Treasury assets to continuously match it's circulating currency liability, currently around $2.222 trillion.
Furthermore, authorised primary dealers seek a yield concession by shorting the issue tenor, in this case the current on the run 10 year, since this was a 9 year 11 month reopening auction.
Solid 10Y Auction Despite Modest Tail As Shorts Cover Into 1pm Deadline
Hence:The UST 10yr yield opens today at 1.52% and up +6 bps overnight. The UST 2-10 rate curve starts today much steeper at +83 bps.
US continues to dis-credit the El Salvador government - I wonder why? Let me guess they are aiming for a new leader who is supports the USD as legal tender (and not BTC)
US accuses El Salvador of secretly negotiating truce with gang leaders
https://www.theguardian.com/world/2021/dec/08/el-salvador-us-gang-leade…
The US should clean out it's own first - Papers reveal what CIA did to captives in Afghanistan
The US willingly drops bombs on the heads of children with impunity, we should all be discrediting them.
Hmm I like the Japanese idea of company tax rates being linked to pay rates. Or maybe linked to number of employees, that will screw over the overseas firms that don't actually employ people here.
How about the total expenses write off has a maximum of 2x total wages cost or something?
Maybe we should send Hone's checkpoint team over to help out the Royal Nay man the gangplank - or maybe they should have used a traffic light system?
"The virus has spread through the strike group’s 3,700 strength crew despite them being fully vaccinated. “As part of routine testing, a small number of crew from the Carrier Strike Group have tested positive for Covid-19,” a Royal Navy spokesman confirmed in a statement.
The incident comes despite a series of measures deployed on board Navy warships in light of the pandemic. These include the use of masks, social distancing and a track and trace system."
https://www.independent.co.uk/news/uk/home-news/hms-queen-elizabeth-cov…
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