Here's our summary of key economic events overnight that affect New Zealand with news there been a set of somewhat surprising good economic news just ahead of the holidays.
The final US GDP result for Q3-2021 came in better than expected with a +2.3% expansion when the earlier estimates had signaled +2.1%. It not a huge positive change, but it wasn't expected. And for an economy as large as the US, that +0.2% is an extra US$50 bln of annualised activity and is largely based on better personal consumption levels than had previously been estimated.
Also better than expected, and much more current, is consumer sentiment. The widely-watched Conference Board survey advanced sharply in December, continuing a three month shift up. And concerns about inflation declined after hitting a 13-year high last month.
Existing home sales rose faster in November than October, although this rise wasn't quite as strong as anticipated. Still, homes are now selling at their fastest pace since February.
The estimates for expansion in the US economy in the final quarter of 2021 are actually very positive. The Atlanta Fed's GDPNow tool signals an expansion topping +7%. Most other analysts see it closer to a +6% annualised expansion. Either way, the US economy should add more than +US$1.4 tln in real activity and far more than the inflationary impact.
But inflation is the thing to watch in 2022. It is being embedded into everything now. In the US transportation and logistics providers are demanding big boosts in prices for contracts for the coming year. Strong demand and tight capacity in freight markets are likely to persist. Pressures like this encourage re-shoring. But re-shoring is to an environment of higher costs, permanently. The cost of 'logistics safety' is now being embedded. What will be interesting to watch is how far that will go when Asian goods continue to cost less and probably significantly so as Asian/Chinese suppliers struggle to win orders. China is now pivoting back to 'supporting' their exporters. Price advantages can win many orders. Not every company will forsake low-cost manufacturing even if it comes with logistics downsides.
We don't often report on the Russian economy, but two data points caught the eye today. Producer prices rose +29% year-on-year in November along with consumer prices. And consumer confidence - which is never positive in Russia, is falling more negative again. And both data sets are as produced by the Kremlin.
In the UK, Omicron cases have surged to more than 100,000 per day with what appears to be the world's worst pandemic management system. While hospitalisation rates are lower than Delta, the actual number of hospitalisations is staying moderately high. Their death rate is holding at about 170/day.
In Australia, 1503 pandemic cases in Victoria were reported yesterday. There are now 13,888 active cases in the state - but there were another 6 deaths. In NSW there were 3763 new community cases reported yesterday, and another big jump, with 21,991 active locally acquired cases, and 2 more deaths. Queensland is reporting 79 new cases. The ACT has 58 new cases. Overall in Australia more than 4000 cases were reported yesterday, an all-time record high. 89.6% of eligible Aussies are fully vaccinated, plus 3.5% have now had one shot so far.
Wall Street has opened its Wednesday session with the S&P500 up +0.7% and building on yesterday's rise. Overnight, European markets all rose more than +1.0% with the exception being London which was up +0.7%. Yesterday Tokyo gained another +0.2%. Hong Kong was up +0.6% but Shanghai slipped -0.1%. Bothe the ASX200 and the NZX50 gained a minor +0.1% on the day.
The UST 10yr yield opens today at 1.46% and a -2 bps dip since this time yesterday. The UST 2-10 rate curve starts today a little flatter at +79 bps. Their 1-5 curve is marginally steeper +96 bps, while their 3m-10 year curve is little-changed at +144 bps. The Australian Govt ten year benchmark rate is off -1 bp at 1.64%. The China Govt ten year bond is down -2 bps at 2.86%. The New Zealand Govt ten year is also up +3 bps at 2.27%.
The price of gold will start today at US$1799/oz and up +US$12 from this time yesterday.
And oil prices start today +US$1 higher at just over US$72/bbl in the US, while the international Brent price is now just over US$74.50/bbl.
The Kiwi dollar opens today almost +¾c firmer at just under 68.2 USc. Against the Australian dollar we are softer at 94.4 AUc. Against the euro we are back up to 60.2 euro cents. That means our TWI-5 starts the today up at 72.7 and a further gain of +40 bps overnight.
The bitcoin price is up to US$48,888 and a mere +0.5% above this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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32 Comments
UK. Keep calm and carry on. Talking pre Xmas as usual, relatives & friends over there, folk seem resigned to the status quo, omicron and all. There is not panic in the streets. It is up to the individual to act with responsibility for themselves & others. C’est la vie!
UK hospitalisations have been running at around 2% of cases for the last couple of months with a lag of around 10 days, deaths have been running at about 0.25% of cases with a lag of 2 - 3 weeks. If Omicron is as dangerous as Delta, hospitalisations will be pushing 1,500 per day at the end of December, and deaths will be back above 200 per day in the New Year (and circa 400 per day by mid-Jan). Even if Omicron is only half as dangerous, the numbers are still grim.
Imagine the public response here to thousands of cases per day, 150 hospital admissions per day, 30 - 40 deaths per day?
If it where anywhere close to 0.25% the health service would already be flooded. Remember the lag between people becoming symptomatic (typically when people are tested) and presenting in hospitals is only 1 to 6 days [link.] Cases have been running at an estimated 200k per day (remember testing doesn't capture all cases so that 90k is a gross under-estimate) so you'd expect an additional 500 hospitalisations per day. Instead the number of cases has been flat.
Two things are happening I think. Foremost Omicron hospitalisations are only a fraction of Delta hospitalisations [link] and even those that are hospitalised recover far faster. Secondly the more dangerous Delta is just out-competed.
I think government should not over react to the situation anymore. There should be some restrictions and promotion of boosters. But with highly transmissive omicron variant, lockdown will be a less effective strategy. Now we are in the long run to fight against the virus.
Yes, deaths running at 0.25% of reported cases with a couple of weeks lag - no doubt unreported cases are higher.
The Imperial College study provides some reassurance, but it will be a week or so before we can be confident that the anticipated reductions are playing through to admissions / deaths. Fingers crossed.
That ONS data is good news. I'd been crudely matching the peak cases and peak hospitalisations to estimate a 10-14 day lag between case reporting and showing up in hospital, so was reserving judgement for another week or two. I'm sure the ONS have better methods than me.
Russian costs skyrocket...even after raising interest rate very high.....think RBNZ are screwed as have created a situation where it was easy to calm the economy short term by reducing the interest rate to zero theyby successfull in boosting asset price but now by manipulating in extreme, even after realizing it last december, the damage it is having on fundamental, RBNZ still persisted with wait and watch and when pressuerised in March to act were rigid and came out openly confirming their policy of wait and watch using transitory inflation as an excuse and are now screwed as monster has taken control and is beyond RBNZ has have screwed themselves.
Now it is Wait and Watch though all failures will be attributed to covid19
My gut is telling me there is & has been, a lot of conflict inside the RB this year. This site and others have been brutal on them & I believe the high end resignations we're seeing currently is a result of the vigorous & perhaps even ugly, discussions going on behind closed doors. Orr seems to be getting his way, but others who may have been in disagreement with him are choosing to leave?
The Russian data adds a degree or perspective on Putin's recent actions. The Russian population must be getting increasingly antsy. He is already acknowledged as trying to resurrect the Soviet authoritarian state, and his posturing over the Ukraine are looking like distractions from the internal problems for the population. Putin may well have backed himself into a corner here.
This is a huge complex issue as Xi will be watching with interest and with the world distracted by Russia, will Xi move on Taiwan? The US is still trying to recover from the ravages of the Trump presidency, which has done much international damage to their reputation. Europe no longer see them as a reliable ally, no matter that they are the principal member of NATO. But do they have the capacity to face down China and Russia (even with NATO's backing) together? I wonder if the world will be asked to choose side in the not too distant future?
I can now see that 40% of kiwis may actually benefit from a Xi invasion. We could show loyalty to him and turn on our rich asset owning friends who have so enthusiastically watched us be trodden on by this government this year and last. We may be rewarded with an asset reallocation. This really is now our only hope.
The desire to secure supplies by locking into medium-term contracts is going to bake in some of those price increases. Already seeing this in shipping where people are getting slightly better prices for the coming months, in exchange for guaranteed capacity in the future at higher prices (relative to historic trends). Worth noting that the calculations for those future prices factor in predicted interest rate increases. So, the higher the expectations of future interest rate rises, the higher the prices in the future.
...what appears to be the world's worst pandemic management system.
The UK has made many mistakes but I can't see this as one. The rate of hospitalisations and deaths remains about the same level as a month ago due to the mild symptoms. This is no time for government to bottle it and rush in measures that end up being unnecessary.
This is very mild by comparison to Delta:
https://www.bloomberg.com/news/articles/2021-12-22/omicron-hospitalizat…
Home lending continues to tighten up.
https://i.stuff.co.nz/business/money/300484390/home-loan-borrower-told-…
This is a risky time to be selling and aiming to upgrade or even transfer your existing mortgage to a new property - you risk being declined or your borrowing power to be significantly reduced.
"Producer prices rose +29% year-on-year in November along with consumer prices. And consumer confidence - which is never positive in Russia, is falling more negative again." Perhaps Vlad might have to actually pull the trigger on the Ukraine border? Russians are a cynical lot, but oddly extremely nationalistic and easily manipulated.
Russia is struggling no doubt about that. Covid has hit hard & Putin needs a re new narrative to deflect the heat. Ukraine is his only (& I believe best) hope due to Russia's strong nationalistic nature (as someone above commented) & his control over their media. Will Xi go as well? Might as well. The puppet in the white house keeps losing his strings & with no one behind the scenes there with any real global experience even if the strings were still working. America's a hot mess.
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