Here's our summary of key economic events overnight that affect New Zealand with news the US economic engine is propelling the global expansion again.
First, a US Fed member has been explicit overnight about when the Fed will act. Jim Bullard says they could start to raise their target interest rate as soon as March and shrink the central bank’s balance sheet as a next step in response to surging inflation.
Initial jobless claims in the US rose slightly last week, but a lot of the actual rise was seasonal. There are now almost 1.9 mln people on these benefits reflecting that seasonal rise.
All eyes are now on the December US non-farm payrolls growth which will be released tomorrow. Analysts have kept their forecasts at +400,000 new jobs.
New orders for American manufactured goods rose by +1.6% from a month earlier in November, the largest increase since May and slightly above market expectations of +1.5%. They are more than +16% higher than year-ago levels.
The booming American economy is sucking up imports too. Their exports rose but imports rose faster and that raised their overall November trade deficit for both goods and services. That deficit now amounts to just -3.7% of US GDP and is only 15% of domestic factory orders. And it is a key driver of the international economy.
The widely-watched ISM Services PMI fell to 62 in December from a record high of 69.1 in November, well below market forecasts of 66.9 but still pointing to the 19th consecutive month of growth in the sector. The demand for services remains strong and sustained, but companies continue to struggle with inflation, supply chain disruptions, capacity constraints, logistical challenges and shortages of labour and materials.
Canada also reported its November trade result, and that came in at a modest surplus, with prior month results being revised up too. It's their best result in 13 years. For them, exports are rising faster than imports. This should be seen as a very good result in the light of the flood-closure of the important Vancouver port in the month.
China reported its official PMIs for December late yesterday, and like the unofficial ones, they show a small improvement. But the factory one is pretty modest. The services one shows a moderate expansion however. However, compared to the US, Japan, and the EU, China is now the laggard.
But their property sector default woes just aren't going away.
Taiwan reported December CPI overnight, and as we noted yesterday for Thailand and the Philippines, there is no sign of excessive inflationary pressures here.
However, in Germany there is. Their December CPI is +5.3% and that is above what was expected, and its highest 30 years.
But German factory order growth for December came in better than expected with a rising trend.
EU producer prices are a problem however, up +23% in a year even if the more recent increases are running at a rate less than that. Obviously, Russian energy prices are a big part of that as a geo-political game is being played on them. But nickel prices hit a ten year high yesterday, which shows it is a broader issue.
And it's not just industrial goods. World food prices jumped 28% in 2021 to their highest level in a decade and hopes for a return to more stable market conditions this year are slim, the UN's food agency said. Dairy prices were one of the few categories to end the year with a rise from November.
Also not easing are container freight rates, although bulk freight rates are slipping back to year-ago levels now.
In Australia, there were 34,994 new community cases reported yesterday in NSW, similar to the day before, now with 207,667 active locally-acquired cases (and undoubtedly an undercount), and 6 more deaths. And 21,997 pandemic cases in Victoria were reported yesterday, and another rise. There are now 64,861 active cases in the state - and there were 6 deaths there too. Queensland is reporting 10,332 new cases and one new death. In South Australia, new cases have slipped slightly to 3070 yesterday. The ACT has 992 new cases and Tasmania 751 new cases. Overall in Australia, 67,756 new cases were reported yesterday and their hospitalisation rates are now above peak Delta levels in some states. The sharp rise in the Northern Territories is very concerning. And their testing regime is buckling under lengthy wait times and stock shortages.
The UST 10yr yield opens today at 1.73% and another +3 bps higher that this time yesterday. The UST 2-10 rate curve starts today a little flatter at +86 bps as short rates rise faster. Their 1-5 curve is steeper +105 bps, while their 3m-10 year curve is also steeper at +168 bps. The Australian Govt ten year benchmark rate is up another +4 bps at 1.86%. The China Govt ten year bond is up +2 bps at 2.84%. The New Zealand Govt ten year is up +6 bps at 2.46%.
Wall Street seems to have accepted the new faster Fed rate-raising signals and is up +0.5% in Thursday trade. No tantrum here but there were big reactions elsewhere. Overnight, European markets fell sharply, down an average of -1.4% after having posted record highs earlier in the week. Yesterday, Tokyo fell even harder. down -2.9% while Hong Kong ended up +0.7%, and Shanghai fell -0.3%. The ASX200 fell -2.7% while the NZX50 fell -1.3%.
The price of gold started today at just under US$1791/oz and down -US$34 from this time yesterday.
And oil prices start today +US$1 higher at just over US$79/bbl in the US, while the international Brent price is now just under US$82/bbl.
The Kiwi dollar opens today -½c lower after the Fed minutes at 67.5 USc. Against the Australian dollar we are firmer at 94.2 AUc. Against the euro we are lower at 59.7 euro cents. That means our TWI-5 starts the today soft at 72.2.
The bitcoin price has fallen sharply from this time yesterday, down -7.0% at US$43,143. Volatility over the past 24 hours has been very high at +/- 4.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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92 Comments
Off thread but meanwhile back in another jungle big bad burning riots in Kazakhstan. Catalyst fuel prices but general issues of discontent run deeper. Sandwiched between Russia & China of course. Add in complexities stirring in Belarus and international concern surrounding Ukraine, Putin is getting a bit on his plate now isn’t he?
The Kazakh protestors are protesting the rocketing inflation levels, the increased authoritarian stance of the government and the increased inequality. Remind you of anywhere closer to home? They are calling on Putin to help. I wonder when the people wake up in NZ and start serious protesting how far it would have to go before Jacinda called on Xi for help?
2023 will be the first year I don't vote. Due to kiwis greed only National or Labour can win. We now know that both parties will lie to get into power and then continue to increase house prices, child poverty, homelessness and inequality. Voting for red or blue means voting for neoliberalism, I would rather my vote not be associated with the pain this causes to the most vulnerable.
I think when they are teaching economics at universities internationally, they should use NZ as a case study. “How to over complicate a housing crisis?” Or “How to create inequality”. Either of these course titles would suffice. As long as someone is learning from our mistakes.. it sure isn’t us.
Hilarious. The "Next Generation" is worse still from what I have witnessed. The only difference is they don't even want to work but still want it all and they want it now. Your going to be in for a rude shock if your just sitting on the sidelines expecting things to get better because I guarantee you things will get worse.
The under represented have never had such an opportunity to shift government power in their favour. They are the internet generation.
The Arab Spring was influenced by online collusion, the best we get is cat videos and people refusing to vote but complaining online non stop about the results.
That’s a good comment pa1nter. You are right. I guess the counter argument could be that there is no really compelling options to vote for. People voted for Jacinda based on what she said she was going to do, instead of allowing things to get much worse. I agree that the young have a voice and should be demonstrating their dissatisfaction.
You and Gen Xploited should stop sniveling & remember that over the last 100+ years many people have given their lives up for you to still have the right to safely vote today in our NZ democracy. And if you don't like the major parties policies or credibility you can still stand up and run for parliament yourself - unlike many other countries.
To be fair. Last election we voted back a socialist status quo and got exactly that.
Labour's never going to reinvent the wheel the same way social issues were exploded like say the mid 1800s. And if your looking for alternatives to neo liberalism and embracing cryptos etc, that's what you are talking. But do you really want wholesale change?
Don't disagree that labour come with a string of broken promises, that's why you should vote them out and give other people (not the party) a chance.
We complain about inequality but until we get food or energy constraints and majorities go hungry (as in dying) we will maintain the status quo. More or Less.
Children are educated, food is on the shelf and no one is invading us.
I'm not sure we will avoid social revolution at some point in the next 70 years re fossil fuel dependancy. But that's a different question.
Just when you thought the covid vax cult couldn’t get any more batshit crazy the nation settled by prison guards steps up to the plate.
If you don’t want mRNA therapy, with no stage 2/3 trial data, you are not allowed to leave the house to work, exercise or go to the mosque – even as covid lets it rip amongst the leaky vaccinated. But if you are covid positive nurse you can work with people who are so sick they are in hospital.
“It appears to be grossly negligent to ignore the vaccinated population as a possible and relevant source of transmission when deciding about public health control measures.”
https://www.thelancet.com/journals/lanepe/article/PIIS2666-7762(21)00258-1/fulltext?s=08#%20
Leaky vaccines – “Here, we demonstrate that vaccine-breakthrough or antibody-resistant mutations provide a new mechanism of viral evolution.”
Big issue with MOH and government re: covid 19 policy, appears they are wedded to policy stance. Data showing omicron mortality is less than the influenza virus. I see the number of deaths are published for NSW etc. As some one who works in medicine, the majority are people who were destined to die in the next 6-12 months, it is just the agent doing the rounds that will cause their death, be it influenza, covid 19 or streptocoocal pnuemonia etc. If you work on hospital wards for long enough you see occasional influenza deaths in younger relatively healthy people, often related to a secondary complication. You could also post the daily deaths from influenza next flu season.
This is why a certain sector of medical establishment (nor Epidemiologists and Public Health experts), are advising the government that the endgame is endemic covid-19. In this endgame covid-19 circulates in a population with high immunity from precious infections and vaccination of the vulnerable. The advice is that NZ is at peak vaccination, but this window begins to close from March of this year. Omicron with low mortality, due to minimal lower respiratory effects, is an ideal agent to kick off your endemic phase. I was told the bureaucrats have taken over policy, and that they do not have the best grasp of statistics and the concept that you need to choose an outcome that minimises long-term harm to the population, they are wedded to present policy.
I'm conflicted. Australia is an omni shambles but we need to face up to high Covid numbers in the community at some point. Australia's mistakes were mostly NSW being run by a hard right, pro-business religious fruit loop who removed all restrictions at once without nearly enough testing resources. I hear it was actually worse than a lockdown as most rightly realised it was not sustainable.
NZ needs to secure a lot of testing resources and slowly start to open, that is going to mean density restrictions on hospitality.
If you accept covid-19 will become endemic, and that omicron is the best agent for an initial wave. A strategy would be to maintain essential services as best you can for the 6-8 week large wave. Most of the general public would not require testing, if you have a fever or are generally unwell, it is highly likely you have omicron, no testing required. If you deteriorate and require medical intervention, you are tested to determine if you have omicron, delta, influenza, bacterial chest infection etc to guide treatment. Essential workers and those working with vulnerable are screened twice weekly even if aymptomatic, via PCR or rapid antigen testing, and if positive stand down. To minimise essential workers unwell simultaneously, via reducing workplace transmission.
Frequent ads advising that the infection is viral, and that if have cold or mild flu like symptoms, there is no need to see a doctor as that no treatment is required and that antibiotics will not help. Ads advising that if unwell likely omicron, and that testing to confirm this is not needed. Also put a halt on contact sports, and strictly enforce speed limits to limit presentations to Emergency Departments.
You make some good points, and I agree it has to become endemic, but whatever we do should be guided by the experience in NSW which is invaluable for us. They have only today reinstated serious restrictions on the community in an admission of abject failure. What has contributed to this chaos is the lack of testing where there are no RAT for sale and PCR swamped so bad they had to close it. So now people have stopped going out, cancelled holidays and work from home. The lesson is no system can handle such a rapid increase in such a short time, it has to be a controlled increase.
Surgical lists with complex procedures should have been cancelled in NSW. You could also cancel elective surgeries that are not day procedures. A lot of the chaos in NSW, is people queueing for PCR tests, and scrambling for rapid antigen tests, this is totally unnecessary (a lot of this is people wanting to travel to Queensland and needing a negative PCR test). Hence, the need for ads advising no test needed, if unwell assume you have omicron. But, people feel they need to be tested, a lot of this is due to fearmongering by the media.
The government is acutely aware of their lack of pre-planning, late to order mono-clonal antibodies and hopefully they have ordered some anti-virals, late to expand ICU capacity. Emergency departments and Urgent Cares have been swamped since October, and this is Spring/ Summer not Winter. I believe due to reduced Primary Care (principally GPs) hours available. Some GPs are not working due to vaccinate mandate, some have cut back hours to stay under the 180K 39% tax bracket (eg take Thursday off to go golfing), some have taken early retirement as investments including rental properties have boomed. Try and get a GP appointment, and compare the delay compared to 2 years previously.
There are innumerable second order/unintended consequences. Supermarket shelves now becoming empty there and you really would not want to need urgent medical attention. Much of this could have been avoided if NSW had opened their borders moderately and prepared better. They had one incident alone where an infectious personwas allowed to arrive from Nigeria and was in a packed nightclub in Newcastle they next day, infecting >200 people there alone. No wonder they are at a 33% positive PCR testing rate.
You do know that we are not keeping Omicron out, right? You do know that the part time leader has failed to increase ICU beds, right? You do know that they are turning the focus on boosters to distract from their negligence, right? Why, with such a threat knocking at the door is the Government still on holiday? The Australian government are still very active and appear to have not had a holiday. I suppose the wedding is taking priority at this point.
At some stage the ripping off of the sticking plaster becomes preferential to the slow, prolonged, agony of inching the plaster off bit by bit. I did not believe we were at the ripping off stage before Omicron, but, looking at death rates to infection rates throughout the world, I do now.
I agree, it's time to loosen the controls on the border while simultaneously introducing density restrictions and mask mandates so we avoid this
https://www.theguardian.com/australia-news/2022/jan/06/staff-shortages-…
If our fears have changed from having 1000's of deaths per day to having no chicken sausages or banana milkshake on a New World shelf then I really do think that its time we returned to normal. Those small annoyances will rectify themselves when staff don't have to isolate because they came within some dubious distance to a certain person at a certain time. I agree that a mask mandate will be a good initial buffer, but lets get on with it.
Some people will get sick and die but they will be seriously ill already or unvaxxed. These seriously ill people would be just as effected by the flu and the unvaxxed have been wrapped in cotton wool long enough. Perhaps, these, more at risk people could self isolate and protect themselves as much as possible. Hard decisions really do have to be made and we are at that stage now. We have all done all we can do, we are just delaying the inevitable now.
Mostly people already soon to depart will die. The vast majority get thier lives back.
Not worth billions upon billions of debt, uncontrolled inflation, continuing uncertainty and travel restrictions, losing contact with friends and family, lost school education, closed business, no fun, masks, social alienation.
Stiff upper lip, get on with it.
RNZ made a right royal SNAFU yesterday, reporting that the COVID-19 case detected in a busy Ponsonby bar on New Year's Eve was unvaccinated, and placing the headline story front and center on the home page.
A howling and wailing and gnashing of teeth promptly ensued amongst the commentariat of news aggregator sites and social media, as people rushed to condemn the subject for not only refusing to protect their Friends, Whānau, and Community™ by getting vaccinated, but also for obviously having forged the vaccine pass which was required for entry (but not required to be scanned).
Turns out that just because "RNZ understands" something, that doesn't make it true. The person was indeed fully vaccinated, and RNZ have updated their article - with apologies - to more accurately reflect reality; albeit probably far too late since it's now been removed from the front page, and therefore largely from the public eye.
This mistake and the public response to it illustrates quite vividly how tribal this whole thing has become. It will be interesting to see if we hear any more about this "high risk" event, or if it's only headline news when people aren't vaccinated.
Indeed. Screaming headlines will quickly produce screaming people. The thing is though even if this individual was not vaccinated the reality, the real world, is these events are plainly inevitable in a free society. Individuals will transgress here, just as wilfully as those that break any one law on any one day. It is a fact of life, human behaviour cannot be suppressed unless the authorities want to run the entire nation like a concentration camp. This event was not worthy of a headline, nothing more than poor sensationalised journalism.
Funny.
I've started hoping that the govt takes 10 years to stop panicking about Omicron and whatever is next so I can opt out of an increasingly hysterical society: Decline boosters, never go to vax-pass-required locations/events, never go overseas, and work from home for as long as I can.
The employment scene in the US is now dominated by lack of participation, not those tip of the iceberg jobless claim stats. I'm reading a stream of anecdotes reflecting ordinary workers giving up, eg customer turns up to Starbucks and there is one girl there who apologises and says nobody else turned up so she can't help. Then rock on to another Starbucks and same story. Then someone chats to a bunch of CEOs at a conference and they are all saying they can't get workers.
The way life works, the solution won't be to raise wages significantly, it will be to accelerate automation.
Lack of participation plus turnover/opening is on low-wage end...
https://www.nytimes.com/2022/01/04/business/economy/job-openings-corona…
Only going to get tighter and drive inflation further and faster. The US is past peak working age population:
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
Where is "transitory" now?
The price of gold started today at just under US$1791/oz and down -US$34 from this time yesterday.
Liquidation of collateral to meet margin calls or a general belief better economic times are with us? - US real yields have certainly moved up. There are large growth gaps to fill.
Nothing with the gold price makes sense anymore. We know that central banks are buying it and the demand from places such as Asia (where it is still a store of value) is huge. The price signals being sent by those who do all the price setting (Comex, JPM, etc) are being ignored by the general public because they have zero interest in gold. I don't know what to make of it. Silver price also walloped overnight.
NZ$ still down, but to be fair, so are a lot of other currencies compared to US$ just now. I thought our higher interest rates would have attracted some $ inflow but our current account deficit is just too large. We are not paying our way & the US$ has too much pull with their int rates going up. We've been here before & the NZ$ usually devalues & sure enough...
As KW said very well earlier this week we need to start being more productive in the right areas & for me the obvious move is added value to our food production. This is not making steaks out of carcasses but getting the science working (& the out of date GM laws updated) to create super foods. I know there's a lot of work going on in this space behind the (media) scenes so I am hopeful.
PS: Also interesting to note that there is a lot of Maori money in this nutra-science space.
PSS: MSM are the paid 'real issue detractors' (covid noise) so the general pop is deceived by her real agenda.
NZ$ still down, but to be fair, so are a lot of other currencies compared to US$ just now. I thought our higher interest rates would have attracted some $ inflow but our current account deficit is just too large. We are not paying our way & the US$ has too much pull with their int rates going up. We've been here before & the NZ$ usually devalues & sure enough..
You mean like the GFC when NZD and AUD plummeted 50%+ against JPY? A good example of how these trade offs play out.
AFAIK, the Japanese regional banks are still looking for yield in NZD. But I'm not up to date on who's buying NZ debt.
No. This is personal conversations, with those working at higher levels. Professionals will not go public, as people have been cancelled for less. Risk getting labelled an anti-vaxxer or covid denier. When discussing people normally gradually sound each other out, then eventually express what they really think. But, you can see in people's eyes they are wary of getting in trouble when initially discussing, then they often get concerned later that they may have said too much.
What a disgrace - our forebears fought and died for our freedoms and now here we are cowering, literally, behind useless cloth masks with our Bill of Rights thrown back in our face. Our kind PM jokes about limiting Tinder orgies to 25 but won't let a kid play cricket in the park or go to a school camp.
“It does not take a very large determined minority to shut down a large and silent majority, that’s unfortunately the rule”
From another angle. Beautiful.
https://www.straytravel.com/assets/Uploads/galleries/_resampled/FillWyI…
The tale of two NZ's : The main picture is how the non-working rentier affluent type get to see NZ when the masses are at work and my link shows how the NZ wage earners get to see NZ, surrounded by huddled holidaymakers trying to make the most of their pathetic holiday allowance. New Zealand is heaven for Jacinda's chosen ones and is fast becoming hell for the rest of us.
I don't know why anybody goes to Hot Water Beach. You spend an age trying to find the right spot and work up a sweat just so you can sit in a lukewarm pool up to your ankles. Pre-covid I took some overseas guests there and it was embarrasing.
Thankfully NZ has truckloads of much better natural attractions.
"He bought? Domp eet".
https://www.youtube.com/watch?v=y28Diszaoo4 (for those with an interest in crypto memes and the Bogandoffs ... warning it is somewhat tasteless)
Sad to see only a few days after people fawned over NSW's brave leadership the premiere has done an about face.
New South Wales (NSW) Premier Dominic Perrottet has confirmed some restrictions will be reimposed in NSW from Saturday in response to surging Covid-19 cases and hospitalisations.
Non-urgent surgeries will be suspended until mid-February to ease pressure on the health system.
He added that today’s announcement was a “sensible and proportionate” response to the current wave of Omicron infections.
Stay the course man, let everyone get on with their lives!
Talented young powerlifter and scientist dies with Covid-19 in Australia | Stuff.co.nz
No obvious comorbidities and double vaxxed but nonetheless he died "with" covid
Most news outlets are pushing this as a tragic reminder that even young, healthy individuals are at risk from COVID-19, especially in Australia where they're currently trying to convince everyone that sending Djokovic home was the right thing to do.
The likelihood of a young, healthy, fully-vaccinated individual with no underlying co-morbidities dying from COVID-19 is so low that almost any other explaination is more probable.
Also - The likelihood of a young, healthy, un-vaccinated individual with no underlying co-morbidities dying from COVID-19 is so low that almost any other explaination is more probable. In the first 15 months of the pandemic in Germany zero children aged 5-11 dies of covid. Given the mRNA therapy doesn't control spread, is leaky, and has known potential serious side effects in young people it seems to be all about groupthink and and cashflow than publich health.
https://www.medrxiv.org/content/10.1101/2021.11.30.21267048v1.full.pdf
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