Here's our summary of key economic events overnight that affect New Zealand with news that despite lingering recession worries, there are a set of 'comeback' moves on today. Equities are rising, bond yields are firm, currencies are strengthening and some data is expanding. All this gives a comeback vibe, even if none of them are completely convincing on their own.
First in the US, the National Activity Index compiled by the Chicago Fed delivered a rise from sales, orders and jobs, and the gains were from personal consumption and housing. But these April gains were the sixth in the past seven months, so they have now established a rising trend.
And the US Fed has been surveying households and has found most of them are pretty happy with their financial status. Self-reported financial well-being reached its highest level since the series began in 2013. In Q4-2021, almost 80% of adults reported either doing okay or living comfortably financially. Financial well-being also increased among all the racial and ethnic groups measured in the survey, with a particularly large increase among Hispanic adults. Parents were one group who reported large gains in financial well-being with three quarters saying they were doing at least okay financially, up +8 percentage points from 2020. These are results that challenge the accepted narrative that "most people are struggling". It seems that most American are not.
Singapore reported its April inflation data late yesterday and it was highish but not excessive, coming in at 5.4% and unchanged from March.
Hong Kong inflation was even tamer, reporting just +1.3% annualised inflation when 1.9% was expected.
And Taiwanese April inflation came in at 3.4% with a small rise from March. Taiwan also said its April industrial production was up 7.3% and a gain that well exceeded its March result. Retail sales were up +4.7% and a growth rate slightly lower than for March.
In China, more analysts are accepting that their Q2-2022 economic activity will be lower than in Q1. And that seems to include officials in Beijing who have announced new tax cuts and increased rebates, postponed social security payments and loan repayments, and they have rolled out new "investment projects" to support their economy. They say "the downward pressure on the economy continues to increase and it’s very difficult for many market entities". These measures are said to be worth more than NZ$32 bln in this round of stimulus. Recall, they have also recently cut their loan prime rate that underpins mortgages.
And this latest set of economic rescue measures seems to be being driven by Premier Li rather than President Xi.
Meanwhile, the US has assembled 13 countries to be part of its Indo-Pacific Economic Framework (IPEF) free-trade group, its follow-up to the Trump-rejected CPTPP (which includes neither China nor the US nor India), and its answer to the China-sponsored RCEP. New Zealand is 'in' the IPEF, as it is with the other two trade sets as well. India is part of the IPEF, but not the other two. The IPEF will encompass 40% of global GDP. The RCEP encompasses 30%, and the CPTPP covers about 14% - at least until China and Taiwan are accepted.
And there was positive news out of Germany. Their Ifo Business Climate indicator rose unexpectedly to a 3-month high in May and April's reading was revised up. Views of both current conditions and future expectations improved. There are no signs of a recession at the moment in Germany, Europe's largest economy, though demand for industrial products has waned significantly and supply issues persist in industry and retail, according to the surveyers.
And the head of the ECB confirmed it is likely to increase its key interest rate, currently negative, to zero by September and could continue raising rates after that. It is doing this because underlying economic conditions are improving.
The UST 10yr yield will start today at 2.85% and up +6 bps. The UST 2-10 rate curve has steepened a bit at +22 bps and their 1-5 curve is steeper at +80 bps. Their 30 day-10yr curve is a lot steeper at +232 bps. The Australian ten year bond is now at 3.32% and up +8 bps. The China Govt ten year bond is little-changed at 2.82%. And the New Zealand Govt ten year is also up at 3.52%, a rise of +3 bps.
Wall Street has shaken off last week's wobbles, temporarily at least, and the S&P500 is up +1.7% in late Monday trade today. Overnight, European markets were up a similar or slightly lesser amount. Yesterday, Tokyo was up +1.0%, but Hong Kong fell -1.2%. Shanghai closed flat.. The ASX200 ended its Monday session also flat with early gains fading, while the NZX50 rose +0.4% on the day.
The price of gold is a little firmer today, up +US$5 since this time yesterday at US$1852/oz.
And oil prices are marginally softer today and now just under US$109.50/bbl in the US, while the international Brent price is still just over US$110.50/bbl.
The Kiwi dollar will open today back up another +½c against the US dollar, now at 64.6 USc. Against the Australian dollar we are little-changed at 91 AUc. Against the euro we are softish at 60.5 euro cents. That all means our TWI-5 starts today at 71.5 which is up +20 bps from this time yesterday.
The bitcoin price has risen a mere 0.7% from this time yesterday and is now at US$30,131. Volatility over the past 24 hours has been moderate at +/- 2.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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79 Comments
"And the US Fed has been surveying households and has found most of them are pretty happy with their financial status."...
Where did they conduct the survey? Beverly Hills, Melrose, The Hamptons or Laguna beach?
There is a web site called Google.com that is helpful.
The latest survey interviewed over 11,000 individuals in October and November 2021.
https://www.federalreserve.gov/consumerscommunities/files/SHED_2021code…
Yes its seems out of line with other data
https://thehill.com/news/sunday-talk-shows/3497189-more-than-two-thirds…
US is in a better position than us. After all, they don't just over inflate their housing price. Yes, there is bubble in their stock which will be affected by raising interest rate. But there are other factors makes US economy quite resilient. Even in New Zealand, it's not bad for current setting. People still go out enjoy their breakfast, shopping malls still fill with people, the road is still busy. For many years, even before covid, there is always narrative that try to convince us that recession is near and use it as excuses to lower interest rate, that's how we got this inflation. There likely to be a recession in near future but not right now as Fed rate and OCR are still pretty low.
Yet the survey shows households are pretty happy with their financial status?
Self-reported financial well-being reached its highest level since the series began in 2013. In Q4-2021, almost 80% of adults reported either doing okay or living comfortably financially. Financial well-being also increased among all the racial and ethnic groups measured in the survey, with a particularly large increase among Hispanic adults. Parents were one group who reported large gains in financial well-being with three quarters saying they were doing at least okay financially, up +8 percentage points from 2020. These are results that challenge the accepted narrative that "most people are struggling". It seems that most American are not.
Not an FTA. Basically high standard setting under US lead.Labour rights,environment issues problematic for India. No immediate market access gains.Nuclear deal lifted technology sanctions, strategic hurdle in ties. IPEF provides no such bilateral strategic breakthrough. Link
Biden is in Asia to drum up support for US's answer to China's Belt and Road. Prediction: it will be a miserable failure. China enjoys huge economic support in East Asia because it started in the early 90s and its market is huge. The US doesn't even offer market access. 1/3
The US pitch to East Asia is overwhelmingly military: economic support an afterthought. China is the opposite. Economic mutuality dominates its approach. The US doesn't stand a chance except with its closest allies, esp Japan and maybe S Korea. Australia is insignificant. 2/3
Take trade. There are three key trading agreements in East Asia: RCEP (world's biggest trading group), CPTPP, and Belt and Road. China is a member of all three. The US isn't in any of them. The US missed the bus over 20 years ago and is still waiting at the bus stop...3/3 Link
Successive Labour governments have de-armed this nation and our old allies have quite rightly dismissed us not-serious people. We are not. We currently have only the Canberra pact to rely on and even then it is clear the Aussies know we are blatantly not funding our military.
Like the Germans prior to Putin's invasion, we are taking the piss. Unlike the Germans, if we get caught short we do not have the financial means to re-arm. "Chancellor Olaf Scholz in a landmark speech pledged a special budget of 100 billion euros for the military"
To be fair as an ex member of the NZDF it is not like National was throwing buckets of cash at it either outside of trying to buy the F16s in the early 2000's.
I also did always think that the RNZAF and Air New Zealand could probably share resource for maintenance services
Well that was something I guess even if it did not come off.
Air NZ has always welcomed the tax-payer funded mechanics and pilots of the RNZAF. I believe they do some work on the Herc's but not sure of the details. They were able to do that I think due to the USAF using them for their Antarctic Hercs.
The RNZAF did use AirNZ and Safe Air (now Airbus) for heavy maintenance.
But yes while the RNZAF always delivered a very good bang for our buck they were neglected by successive governments. Now when the world is returning to the old geopolitical divisions of the past and conflict is becoming increasingly likely, we have bugger all to offer in our own defence. Shameful. Political ideologies have shafted this country, and increasingly our isolation is not enough to protect us.
Just a thought for you to ponder, this Government took the guns away from thousands of registered gun owners so you had better hope the Chinese or anyone else for that matter does not try to invade because you will get the big middle finger from ex owners if you suddenly expect them to race into action.
When that military is a foreign one, what would be the legitimacy of their claim? they were a threat to that foreign country?
Let's arm all the worlds bullies with justifications for attacking others shall we? It is my experience that bullies imagine threats where there is none, and treat others poorly in a way they do not tolerate themselves, but try to justify their actions.
The better economic argument to make is the return on investment for military service. Both in GDP terms and social terms, it is huge. It is worth noting that the massive training campaigns conducted during WW2 to upskill millions of men had enormous productivity implications when you suddenly had huge pools of tradesmen, engineers and scientists.
They will teach you a profession, to drive various vehicles, how to discipline yourself for work, how to iron your clothes properly, how to look decent and you can experience a mannerbund. The social benefit of these things is totally underestimated. The problem with the Service is the lack of funding, the bloated higher ranks (Way too many O-3 and higher relative to lower rank numbers) and the lack of exercises. Full time infantry kick off at 11am some days after some PT and the occasional lessons, there is simply no money for exercises.
The government treats the NZDF as a welfare program with guns rather than as a means to social mobility and a great career starting point.[
I waited 4 hours to see a doctor in Hamilton on Sunday night. It was the better of my two options, the other after hours had a wait time of 7-8 hours. Recently someone in the Waikato Hospital "A&E" (quotes used on purpose) waited 40 hours to be processed. (https://www.stuff.co.nz/national/health/128673999/workingweek-wait-in-w…)
I for one would most sincerely and honestly welcome our new over-lords they can surely do no worse.
I continue to ponder if that certain type of brown person had children in Australia and their offspring several generations later returned to NZ...would these children have more rights than those non persons who would have lived in NZ for unbroken generations since Cook?
Seems a reasonable question.
It ought to be trivial - her reply must be "any Kiwi can report to either health service".
If she determines only registered Māori can attend their own health service then my next question would be "If my PI/Aussie cousin and her Māori husband were unfortunately injured in a road accident would they be treated in different locations by different medical teams?"
If the Māori version is faster at curing illness and does so with more compassion then that's the one for me.
I'm looking forward to some competition in the health market place but not the competition you get with private medicine where amputating two legs is more efficient than one and the more drugs that can be charged the better.
We've underinvested in health for years now because at every election we vote for tax cuts, and now we get the results. Meanwhile, we've pumped housing costs to feel rich and now nurses' salaries don't make sense, and we get the results.
Might be time to try a different approach.
I think you would be surprised. The top hospitals in China are really, really good, as good as anything in the West, well equipped with fantastically trained staff. But getting into them is difficult, wait in line for hours to get a ticket to maybe see them on the day. For specialists, you are talking about months for an appointment (sound familiar?) in most cases. Even emergency departments don't seem to use triage principles, they mix it with guanxi principles or something. There's also a whole lot of bureaucracy, even for patients. Go here to pick up a ticket... to get a recommendation to go to the next line to pick up a ticket... yes, I know you are almost dying, but please present me with your ticket... like a Monty Python skit. Many of the hospitals are staffed by basically useless "doctors" from a Western perspective as well, the good ones have often been trained in the West or at least had decent exposure to the West. Many however are a mixture of Chinese traditional medicine practictioners (which is rarely but sometimes better than Western) and scientific/reductionist/Western medicine.
Basically there isn't a lot of standards, you roll the dice with medical facilities in China and hope to roll a 7. But sometimes you will get snake eyes...
I had to pay a visit to a relative in hospital on Friday afternoon and there were 7 people posted to monitor my arrival and departure.
I was asked if I had any symptoms or had come into contact with anyone recently who had been ill.
Once I replied I was given a sticker by someone and was allowed to enter.
It's not a surprise we are poked.
The bitcoin price has risen a mere 0.7%
It's odd how 0.7% is described as "mere". A daily rise of 0.7% in any investment class should be regarded as very good. Perhaps that's the problem with these sorts of 'investments'. I'm not sure get rich quick schemes are a good thing.
It says something about the writer's attitude toward the investment class. It should be volatile, it needs adjectives! Perhaps if it rises too much it should be described as being in danger of another pump and dump cycle? We need an adjective for that.
Probably not so good being down over 50% from the high. I know its all about being positive today, but come on. The problem with Bitcoin is that people are trying to make money from it just being Bitcoin and not using it as a currency. Its doomed to failure as it receives less and less suckers you can rip off as time goes by.
Not all countries suffer from high inflation
Countries that have high levels of energy and food security, coupled with robust controls on profiteering are largely avoiding inflation. Switzerland inflation rate is currently 2.5% driven by housing and energy (interest rate 0%). The Swiss got sick of companies with too much market power profiteering and they took action. Singapore has a 3.3% inflation driven by electricity and gas tariffs, but they basically have price controls on key goods.
Countries that have low energy and food security and / or a corporate profiteering culture with lax competition regulation, are seeing very high inflation.
If we want to avoid inflationary episodes like this in the future - we need to drop our reliance on imported fuel like a stone, and seriously consider creating some bufferstock items for key goods. We can't keep pretending that a small Island in the Pacific can have functional, competitive markets that deliver value for consumers across all sectors - it is hopelessly naive.
On a micro level, less and less farms provide milk or meat for the workers or owners. Surely the first responsibility of a farm is to feed those immediately associated with it.
Take that up a level and surely the first objective is to feed and house the population.
Obviously not.
100% -- Fonterra should be made to supply enough milk butter and cheese at cost to NZ markets in return for the fact that the Government acts as an insurer of last resort and often bails out aspects of our Agriculture sector -- from the effects of major weather events - drought, floods, hail etc -
In one single act - we could make the 2nd largest expenditure for the lowest incomes in society more affordable -- with better health outcomes for those, as well as going a significant way to tackling the cost of living crisis -
Alternatively -- the government could just refuse any further handout/bailout to the sector - after all these weather events are not unseen -- and are a business operating factor that has to be considered by any long term sustainable business -- sometimes yeilds will be high - other times not so high!
Excellent idea. It's this that sticks in the craw the most, the fact Kiwi taxpayers are always called upon when business risk occurs - i.e. too dry or too wet of weather - but are hit hard when buying dairy, paying more than overseas buyers. The double standard hurts.
Swiss companies and brands in the less profitable sectors (manufacturing, food, farming, retail) walk a very fine line relying on the government to protect them (and subsidize them) from the EU's efficiencies and impacts. In return they don't squeeze the swiss consumer and don't try to get ahead of inflation.
Swiss people buy into the pride of their own industry and brands, as long as they can afford to do so and as long as the marketing and quality remains convincing.
It is probably the trifecta of successful banking, science, and education industries that allow most of the country to be able to afford it all.
Perhaps Kiwibank is the only equivalent effort seen in NZ - if the government invested in them more and didn't get taken for a ride you may well have a NZ entity worth of a bit of national pride and seen to be serving kiwis.
Since when is a huge profit necessary to be successful? That is the ideology of the neoliberal economic model. For national resilience I believe our government could do a lot more to support NZ companies and employment and make us less vulnerable to supply chain disruptions.
Indeed. Our duopolies and banks extract as much profit as they think they can get away with - and the prices we pay reflect this 'socially tolerable' level of profit. Price controls may not be the answer - but the unregulated free market is not working to provide kiwis with goods and services at a reasonable price either.
If Fonterra decided it wanted to improve its social licence to operate then maybe it could allocate some non-trade exposed production to NZ to lower prices here. Given most of its product is exported, the overall effect on the milk price for farmers shouldn't be significant.
But Fonterra hasn't really even been about the farmers, let alone the people granting them licence to operate.
The only thing I can come up with is that maybe this could be viewed as Fonterra favouring dairy consumers over those who do not... But as they are not their customers and it is a private business why should they have to care?
Other than that it seems like such an easy thing to implement to buy some good will from the public at a low(ish) cost I don't know why they won't do it.
But as they are not their customers and it is a private business why should they have to care?
So long as they are a private business and the taxpayer is not called to rescue when business risk - such as too dry or too wet of weather - occurs.
But the taxpayer is repeatedly called upon, thus Fonterra needs to consider its place in NZ society.
Price control. Nah.
We need a free market - but but but - remembering always that our big companies don't want free markets and work to achieve market control and profit big subsequently. Screwing both consumers and suppliers as they do so.
It's a bit of an oxymoron, but it takes an iron fist to ensure free markets.
eg: Supermarkets. Allow maximum 50 outlets per group. And let them work out how to breakup. Best thing is new disrupters will emerge.
Meanwhile our daft civil service talk 'codes of conduct' and 'monitoring' (giving themselves endless employment)
Economically, the Swiss do rather well out of money laundering, banking, high-end pharma, chemical engineering, and manufacturing. They also have massive hydro power resources. They are a high wage economy.
On top of all of this (and quite separate from it) they also have firm regulation to reduce rampant profiteering.
There is more to this.
The Swiss have a resource as profitable as oil. Private banking. 9% of their GDP. They have bank assets = to 172% of GDP, the world average is 65.4%. "The aggregate balance sheet of all the banks in Switzerland amounts to CHF 3,467 billion in 2020 (€3,204 billion)." 3.5 Trillion dollars in the banks of a country of 8.6 million. Please don't think they are leading the world at any moralistic market action, this is simply a smoke screen to the private banking of those that prefer not to use their own nations banks. Those good guys...
Singapore is also a financial powerhouse and their ports are very profitable as well.
You do make a good point though, we cannot avoid inflationary effects as they are transferred to us via our trade.
See my comment above. I am not saying that Singapore or the Swiss are the 'good guys' (SIngapore treats immigrants like slaves!!) But, small developed economies with smart leadership have realised they need regulation to prevent companies with excess market power extracting excess profits from their citizens. We could use some of that smart.
Yes you are so right on this. If only we had a government that was able to pass legislation without needing another party...
On a related note, I remember (warning - onion on belt story to follow) the Commerce Commission being set up. It's first task was to task all government departments with delivering a formal corporate plan that detailed how they were going to deliver the outcomes they were being paid to. I was working for the police at that time and wrote a part of theirs, a really good discipline, no longer followed. You can't manage what you don't measure. It had a set of responsibilities (setting electricity prices) that it no longer has and seemed like a pretty proactive and useful group. What happened? I look at it now with the same pity I look at a toothless meth-head.
Xi has long removed, executed or exiled anyone around him with any actual intelligent decision making abilities. He cannot sit down in a room and ask his CCP inner circle to advise him on anything constructive. Xi doesn't actually know what the facts are, as every report presented to him is so skewed towards the predominant mode of thinking for the CCP, that it is all ineffectual.
China is in deep doo doo, and by association, so are many other countries.
I think you need to download the Xi Thought app and do some re-education.
Had to laugh while watching the goings on in this video:
From Wikipedia "" Higher officials did not dare to report the economic disaster which was being caused by these policies, and national officials, blaming bad weather for the decline in food output, took little or no action. Millions of people died in China during the Great Leap, with estimates ranging from 15 to 55 million, making the Great Chinese Famine the largest or second-largest famine in human history""
What shocked me most is the long section ""Causes of the famine and responsibility"" where it is clear expert historians after 60 years of historical research cannot agree whether Mao wanted to kill millions or millions died because nobody was brave enough to tell him his policy wasn't working.
Just rereading the article I found the remark that people actual starved to death in front of the doors of grain warehouses hit me emotionally (stunned sadness).
Mao was obsessed with asserting human dominion over nature (hence his saying "man must conquer nature" and all that neurotic dam building etc) and Xi is just carrying the torch ... or perhaps more accurately holding the bag.
Combine a delusional belief that you can always control nature with an additional obsession with needing to prove superiority over the Western way of doing things, and you've got a recipe for insanity.
That is before we get on to any conspiracies about China deliberately doing this to harm the West, or because they really know how deadly Covid is (because they made it).
Indeed, it's crazy. Even internally they are getting a lot of pushback and as I have said, the CCP might lose their license to govern their people if it continues. David might be right, one wonders if Li is/has staged a coup of sorts against Xi... one wonders if he might end up "dying of natural causes" over the next few months...
Perhaps, I do not know the man but based on his public persona he does not seem like much of a conversationalist. I don't suspect Xi got to be the head of the country by arguing his intellectual position. If anyone is going to have a tragic accident it won't be Xi.
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