Here's our summary of key economic events overnight that affect New Zealand, with news the US economy still seems to be exhibiting impressive resilience in the face of global and domestic uncertainties.
Initial jobless claims in the US last week came in at a similar low level as the prior week at +191,000 leaving 1.427 mln people on these benefits. This data is still bumping along at all-time low levels. It is an impressive run.
The Philadelphia Fed Manufacturing Index rose to 6.2 in August from -12.3 in July, returning to positive territory after two consecutive negative readings. This was better than expected and far better than the neighbouring New York survey we noted yesterday. However new orders levels remained negative. But employment levels rose and the price indexes continued to fall back from elevated levels.
But American existing home sales fell almost -6% to an annual rate of 4.81 million in July, the slowest pace since May 2020 and below market expectations. This was the sixth consecutive monthly retreat reflecting the impact of the mortgage rate peak of 6% in early June. The median existing-home price for all housing types was $403,800, up +11% from July 2021, and total housing inventory increased +4.8% to 1,310,000 units.
Canada's producer price hikes seem to be past their peak with a notable fall back in July. Still, they remain +12% ahead of year-ago levels even if the monthly reversal was a sharp -2.1%.
In China, the important inland manufacturing city of Chongqing (population 32 mln) has ordered factories to suspend operations until August 24 to conserve energy after an exceptionally hot spell led to a surge in electricity demand. The extreme heat has led to a huge increase in the use of fans and air conditioners. Chongqing has a high number of factories that make cars and computers, and their shutdown could have an impact on supplies domestically and internationally. Previously, the government had only required that factories cease production during consumption peaks, but the tight power supply-demand situation has become so severe that shutdowns were deemed necessary. Local authorities said that many areas in Chongqing have been experiencing high temperatures of over 44o C.
Meanwhile, a major Hong Kong-based lender, the Bank of East Asia, has seen its profits plunge as it provisions for losses from the Chinese property sector. If mainland banks recognised the same reality, it would undoubtedly crystalise a full-blown banking crisis in China - but almost all large banks are state-owned there. This is what makes the BEA result 'interesting'. Shares in companies like Evergrande are now worthless according to fund managers.
The EU confirmed its July CPI inflation rate as 9.8% although less in the eurozone. But their core rate - that is, without food or energy - is only 4.0% and in their special circumstances, that will be pleased with that.
In Turkey, they are still doing odd things with monetary policy. With inflation running at 80% and rising fast - they cut their benchmark policy rate by -100bps to 13%. Their currency, which was already historically its weakest ever, slumped to a record low (as any independent observer could have predicted) and this will likely boost inflation further. Their current account surplus has turned to a deficit. Harsh “liraisation” measures by the central bank have failed to support their currency. It is just more evidence that the laws of economics apply to autocrats as well.
In Australia, their July labour market stats show a jobless rate that dropped to 3.4% s.a. from 3.5% as a further 20,000 people moved out of unemployment (3.3% actual). And that was despite their employed labour force shrinking unexpectedly by -41,000 in the month. (New Zealand's June jobless rate was 3.2% actual.) Australia's participation rate is 66.4%; New Zealand's is 70.5%.
China's official propaganda news outlet seems to have rolled back the claim that China is about to ban Australian and New Zealand beef imports. Their language is odd and the accusations very wolf-warrior (and ignores the fact that other bans like on Aussie wine were never officially promulgated), but it does seem to be a relenting by Beijing.
Container shipping freight rates are falling faster now, especially for trans-Pacific cargoes out of China. Overall, rates fell -3% last week to be -35% lower than year-ago levels. It looks like American buyers are successfully pivoting their supply chains away from China. Bulk cargo freight rates are lower too, now back into the range that has applied since the GFC.
The UST 10yr yield starts today at 2.88% and little-changed from this time yesterday. The UST 2-10 rate curve is less negative today, now at -37 bps. Their 1-5 curve is also also less inverted at -22 bps. Their 30 day-10yr curve is now at +74 bps and little-changed from this time yesterday. The Australian ten year bond is down -2 bps at 3.35%. The China Govt ten year bond is lower by -1 bp at 2.64%. And the New Zealand Govt ten year will start today up at 3.52% and up +11 bps from yesterday's levels.
Wall Street is holding today, with the S&P500 up a mere +0.1% in late Thursday trade and struggling for any traction. Overnight European markets all rose about +0.4%. Yesterday, Tokyo ended down -1.0%. Hong Kong fell -0.8%, and Shanghai closed down -0.5%. The ASX200 ended its Thursday session down -0.2% and the NZX50 fell -0.3%.
The price of gold will open today at US$1759/oz which is down -US$6/oz from this time yesterday.
And oil prices start today up +US$3.50 at just over US$91/bbl in the US, while the international Brent price is now just under US$96.50/bbl.
The Kiwi dollar will open today at 62.6 USc which is a touch lower than this time yesterday. Against the Australian dollar we are also a touch softer at 90.4 AUc. Against the euro we have risen slightly to 62 euro cents. That all means our TWI-5 starts today at 71.4, and little-changed.
The bitcoin price is down -0.8% from this time yesterday at US$23,256. Volatility over the past 24 hours has been low at just under +/-1.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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104 Comments
So now the bank's forcast is that market will crash (if now their forecast is fall of 20% and 20% fall is termed as crash).
Why not have headline " Banks Forecast Housing Market Crash By End Of Next Year" and is true.
Checked this article from Bernard Hickey
"The Reserve Bank surprised no one yesterday by hiking the Official Cash Rate another 50 basis points to 3.0% and lifting its forecast for the OCR peak by around 10-15 basis points to 4.1%.
However, it extended its forecast for a peak-to-trough fall in house prices to as much as 20% by the end of next year from closer to 10-15% at its last Monetary Policy Statement in May. It saw the effects of higher mortgage rates and cost-of-living pressures taking more steam out of demand. It also saw the reverse of the ‘wealth effect’ taking enough heat out of inflation to see it sliding back into its forecast range by the beginning of 2024."
Yes. As is the tradition Rbnz boil their frogs slowly.
Every ocr announcement ... they will push up the 'final' ocr date and number, throw a '20% off house prices' comment.
Because the labour media, national (landlord party) and labour govt are all committed to minimise falls in the market nobody is looking to spook anyone so articles will always be 'kind'. Lol.
Maybe when ocr is at 10%, house prices have fallen 60% (40% accounting for inflation) from peak and people are living on one meal a day (except the 1% who will obviously be in hawaii with all our money) people will question the reality of what they are being told about how great our economy is and how any downturn isnt anyones fault.
all the dams are full in Akld, no water restrictions this summer, thats for sure!
https://www.watercare.co.nz/Water-and-wastewater/Where-your-water-comes…
As the atmosphere heats up thanks to AGW it can hold more water and so more energy. Exactly as climatologists have been saying for decades. Just as they have been saying some places will get hotter and dryer, then will get bigger rain deluges. Remember it wasn't long ago those places in Europe had devastating "one in a one hundred year rains".
But yeah, apparently it's all a hoax.
This is just the first lashings of AGW climate change, given the amount of feedbacks and delays in the systems involved. So it gets worse from here. How long before it really starts breaking down our systems? For instance, there are roads in Marlborough still not fixed since the last great storms a few years ago, how long before they are abandoned altogether? We will have to withdraw from the seaside in many places too, which is already scaring councils everywhere. Thats a lot of built infrastructure that has to be rebuilt. And the big problem is our mitigations add to the problems we are mitigating...
Liz Chenney looses by 30 pts. Trump Jr posts a video of his father dancing. Gutfeld rips Liz on Fox. D Trump says that the loss sends Liz to political oblivion.
In her speech in "God's country" she talks of family, and truth. Liz vs D Trump in 2024 is now a possibility.
Possibly, but given the current administration is a worse train wreck than the last one, I think republicans will vote for whoever is put on the ticket
Branden's approval ratings couldnt be worse and word salad lady isnt far behind
https://www.cnbc.com/2022/07/20/president-joe-biden-job-approval-rating…
https://www.latimes.com/projects/kamala-harris-approval-rating-polls-vs…
If that can happen as you described, there would have been quite a few republicans running as independent candidates. Sorry to disappoint you but it ain't gonna to happen. The US politics are not same with other countries' ones. Rep or Dem, people are voting for parties, not for particular persons, otherwise how on earth do you think Biden would be elected as president? But Trump is an exception though...
... how hilarious is Harriet Hageman , the Trump backed victor , who claimed that Liz Cheney hadn't called her to concede & to offer congratulations ...
Cheney immediately released a recording of her phone call to Hageman , where she had done exactly that ..
Be careful who you vote for ! ... not us , of course , we only vote for the most transparent , kind , unbullying politicians in NZ ...
... it is a sharp contrast in managerial styles , rather enlightening I think :
Luxon shuts down the Uffindell story very quickly by ordering an independent enquiry ... transparent ... we'll see in 2 weeks , okay ...
Ardern obscufates , hedges & hummmms , hold secret meetings , denies & deflects ... and the Sharma karma rolls on ... making her look shifty , evasive ... they'll sack him soon ... and not once look at the legitimacy of his complaints ... an ongoing festering sore for Labour ...
I googled Gurav Sharma ... this guy is an actual doctor , a heal the sick Dr ... unlike all the pHD's in Labour ( Dr David Clark ! ) ... he's very well travelled , experience with the WHO , intelligent & articulate ...
... so , why is Ardern fobbing off his complaints ?
Sharma is someone who we need in parliament , a very bright fellow , with top notch credentials ... why is the PM bullying him into submission ?
As suggested above the body itself, this government, resembles something of a cross between a rats’ nest and wonderland. So in keeping with the latter, is it any wonder then that the Queen herself would likely shout out “off with their heads” and so it has come to pass.
... remind me how that played out for the Queen ... didn't she get exiled from Wonderland , into the wildeness , a wind swept bitter place where no one will talk to you ...
Imagine that ... Jacinda gets booted out of Labour , and winds up in the Greens !
... teeee heeee heeee ....oh no , I shouldn't larf ... I'd not wish that on anyone , except Mallard ...
I think Trump will win the next election. Which will make for another entertaining few years again! Given his propensity for rubbishing their democracy, one wonders if he will set up a family dynasty under the guise of democracy. He has quite a few kids so transferring power between them would ensure the family runs the country as an oligarchy for quite some time. With his desire to make political appointments everywhere, he could control the institutions that would ensure it happens.
Then people will be able to vote, but the only candidates will be Ivanka/Trump Jnr/Erik/Tiffany... Barron eventually. Oh there will be a democrat candidate on the ballot papers, at the bottom. But if they get too many votes, Trumps cronies can claim voting irregularities and continue their reign effectively forever.
While I think what you are describing as a fantasy of the right in America - the only reason why I can see why people could believe that is the because the rabid right are so vocal. How many have made death treats against the FBI - and one idiot though he would try (how did that turn out)..
I think it's a real possibility, given that he likes to appoint his cronies into all the institutions that could stop him from doing it. You put his cronies into leading the federal law enforcement orgs, justice departments, electoral departments, congress/house of reps etc, he could become a defacto dictator. And he has pretty much expressed his desire to become exactly that with his unjustified attacks against the last election result and his admiration of other dictators along with his tacit support of violence by his supporters while riling them up with "stealing your country" rhetoric. He is a master of playing to his base and whipping them into a frenzy.
EU
"But their core rate - that is, without food or energy - is only 4.0% and in their special circumstances, that will be pleased with that." I see we have special circumstances akin to special operations.
So we'll be back to normality within a year as oil, gas, diesel, petrol and fertiliser prices drop. I'll be intrigued on the drivers for that.
The best thing that happened to Christchurch was the EQ, jobs for young people for ever. The kind of buildings that have been replaced are still everywhere, Wellington is full of them. Hard to see at the time, but read the Herald, now they are blowing Christchurch's trumpet, every day.
Hard to see at the moment, but Ukraine will rise from the ashes, stronger, way stronger, just like NZ they are food exporters, they have the climate, they have the soil, they have people, they will have jobs forever.
Did you see Putin has promised a cash bonus for women producing 10 children (net)? fodder for the next war? The problem is, 10 children will take a while to incubate, and there are so many conditions (#10 has to make it to 1, the other 9 have to survive etc). Seems a bit desperate to me. Russia's birth rate is almost at terminal decline levels, so the few women who pick this up won't make much difference.
They cannot invade Taiwan without neutralsing okinawa. And that would be a blood bath both ways. They'd lose too many airframes that cannot be replaced.
Then theyd Lose access to the straights of malacca, and sleath bombers would take out the thousands of miles of oil pipeline from Russia.
Good luck sustaining the subsequent war with local oil reserves.
No inbound energy, and outbound trade would collapse.
No more economy.
Nukes of Course remain an option. Back to that old chestnut..
The Chinese are not in the all powerful position that many make out. As long as the US navy, Japan, aus etc are willing to back it up with blood, then the Chinese can be very easily bottled up.
Fair points Fluff, but here's the question; do the Chinese understand it from that perspective?
Their rhetoric suggests they don't. But It's not just Okinawa (I assume you're referring to the US military installations there), but Japan and South Korea have already publicly stated that they would not stand by if Taiwan was invaded. Both see that as a precursor threat to themselves. The Philippines and Indonesia would likely be the same, although i don't recall similar statements from them.
But recent actions have also indicated that one of the strategies China is considering is not invasion, but a blockade. Would Taiwan's 'allies' militarily support ships getting to and from the island? For how long?
Two tactics. Firstly take the islands on the approaches. The critical ones are heavily fortified, but they are not insurmountable and would anyway need to be possessed before any actual move on Taiwan itself. Civilian casualties would be obviously vastly less numerous than that too. The downside is that even that might fail. Amphibious invasions are treacherous as the WW2 marines demonstrated. Todays pin point armaments are something else again. Think, way back what the old primitive excorcets did to HMS Sheffield etc in the Falklands and then of late, the Russian Moskva.Secondly a 360 degree blockade land and air. The problem there is that involves international waters despite what China may claim and should the USA choose to sail elements of its fleet where they are so entitled, and they get attacked, then the prospect of outright war as it sits today becomes an actual reality.
The Chinese are very aware of their giant death star exhaust vent. Thats why there is just talk and no landing ships, so long as the US guarantees Taiwans security.
Any blockade of Taiwan just invites the same thing being done to China. Just a bigger scale.
Look at our response to the Ukraine. All trade with China would more or less cease between them and the west. There would be immediate sanctions, a complete stop of all exports from China. All maritime traffic in that area would stop. No food going into China and they would lose 70% of their oil needs.
China's current position has been attained only via importing energy and the west buying Chinese made stuff. That more or less completely stops.
Yes it would be painful for the whole world... but factories would shut down, huge internal strife and perhaps even famine. Property crashes. Then we see unemployed and potentially hungry people.. millions of them.
And for what? more or less national pride. Taiwan has no strategic value, aside from maybe securing more of the South China Sea resources? But really they can just build bases in the sea out of nothing & so Taiwan has zero strategic value.
And all this can be achieved by a small fleet of subs operating out of Australians west coast... see what the Aussies did there? =)
Not that its required as a blockage can be achieved via diplomatic email messages.
And the Chinese cannot project force out of this area as it would just see them lose all their naval and air assets in a 1 for 1 slogging match with the free world, for no increase in strategic reserve (think Japan in WW2). That's assuming that their tech is up to the task. And then what? Millions of Chinese soilders can't magic up continued trade or new oil reserves, or food.
Essentially no nuke power can really 'lose'. And at this point we are talking MAD level war. So I think the likely game for the west would be to create such conditions that the the Chinese reject the ruling class and go rouge, civil war, or uprest etc. Make it so painful they don't. Or stop.
Pray of course this never happens!
Add to that unless they go intercontinental ballistic the theatre and fall out is totally their region at every point of the compass. The USA is not weak in the Pacific. Hawaii, Wake, Guam,Midway, Okinawa & of course that huge superiority of operational nuke subs, anywhere at anytime, some nuked others not quite.
China are no doubt more powerful than 30 yrs ago when Clinton sent a carrier through the straight, but they are unlikely to be able to take Taiwan if the Taiwanese decide to fight.
Just look at the numbers of troops China would need to put on the ground in order to subjugate Taiwan - probably around 1 million.
Taiwan can mobilize half that in a matter of days and they have contingencies that could mobilize another half a million within several months. Taiwan are no small fry and China knows it. A land victory would require about 60% of Chinas active military force just to match Taiwan.
There is of course the matter air superiority, Russian planes v American. Yes Chinas are more advanced and they have plenty more of them - how is that going for Russia?
Peter Ziohan also holds the view China is rooted. I've just ordered this book after listening to his interviews..
Yes, his Geo demographic political view is very interesting,
In a 2017 interview, he said that Russia will need to/probably invade the likes of Ukraine within 7 years if they have hope of securing the passes/borders all invaders have come through to Russia BEFORE there is a huge drop in available army recruits (due to declining birthrates kicking in) and at the other end the die-off of all the older people with the War technical knowledge from the Soviet era that has never been replaced under Russia.
And of course, he shows why China is foobar.
As Zeihan points out that all the 'ism's, like capitalism, communism etc. are all growth based, and we need a new 'ism' for a non-growth, less globalist approach. But no one knows what that looks like, yet.
He points out that if China invades Taiwan, the response from others which includes most of their non-western neighbours ie this is not just a West vs East issue, is just to cut off their energy supply route which they can do in the Indian Ocean without going anywhere near the Chinese borders.
He says if this happens within one month the trucks stop running, one month after that the lights start going out, and in the following year 500 million Chinese starve to death.
Yes, the rest of the world suffers as well, but it is more of an inconvenience compared to what happens to China. However, in generalizing this, it is always overlooked that on an individual basis this may be catastrophic no matter where you live, EG while Covid has not affected the country generally, on an individual basis many people have had their lives ruined. The pain is never shared equally, or proportionally.
Our economy goes out the window without phosphates from Africa though. Yes we could survive but goodbye current questionable living standards for a vast portion of the population.
http://www.rockphosphate.co.nz/
Hard to disagree with that.
A fly on the wall of Volodymyr's office might be observing a conversation - "How much is it going to take, Volodymyr? We already have your personal offshore bank account number. So how much do we have to tip into it for a settlement of this situation to be agreed?"
Russian paratrooper who fought in Ukraine says troops are deliberately shooting themselves in the leg to escape the war and get a $50,000 payout
https://www.businessinsider.com/russia-troops-in-ukraine-shooting-thems…
All these deserting soilders. Ukrainian super drones destroying vast tank armardas. Ace mig pilots blowing ruskies out of the sky at will!
Yet by some miracle the Russians are slowly but steadily advancing accross the donbass...
So much you tube bs.
The Russians have nukes and oil.
Therefore they cannot lose.
Only very slowly , and possibly about to lose Kherson . The Russians have lost over 5000 military vehicles and an unknown number of KIA and wounded. They appear to have a problem with people smoking in ammunition dumps Need I go on.
Russia for all it's might should have overrun Ukraine months ago - doesn't appear to be going well.
In Turkey, they are still doing odd things with monetary policy
Turkey face a stark choice. Do they:
1. Keep interest rates sky high to protect their currency and keep the price of imports down - knowing that this creates the conditions for (a) foreign investors to extract vast proits from the Turkish state and (b) zero domestic business growth
2. Drop interest rates to support local business growth and exports, and reduce payments to foreign investors - knowing that this will weaken their currency and increase the price of imported goods (inflation).
Inflation month on month in Turkey slowed to about 2% last month - with many commentators predicting the peak. Their food and energy inflation is also dropping quickly because they are clearly dealing with Putin.
Now, Erdogan should have implemented capital controls, but, even without those, I still think Turkey might pull this off.
Do you - I think Turkey has completely lost their mind. We whinge at 7% inflation imagine the pain of 80% inflation.
in the last 20 years the only new forms of monetary policy to stabilise economies and specifically asset values created have been LVR’s and the jury is still out on if this actually works.
I highly doubt Turkeys decision to defy documented monetary policy and come up with their own methodology will be successful
You're mistaking me for someone who thinks that monetary policy is the 'go to' tool to control inflation. In Turkey (and many other developing countries) monetary policy is the lever they are told to pull by the IMF to attract foreign investment / currency. The model is broken.
Good news from Genesis's annual report today. Emissions 44% lower than last year and they are forecasting coal use to never come close to last year's heavy use at Huntley (see page 18 of the annual report).
"we believe that we have reached the peak of coal use and it will continue to rapidly decline as new renewable generation comes online."
~1,500 kilo tonnes burned in FY21 reducing to barely 100 in FY25 and 26, and 200 to 300 in a 'dry scenario'.
"According to figures from the Ministry of Business, Innovation and Employment (MBIE) released today, coal use for electricity generation is up 29.5 per cent in the past year. "
Might be a bit of spin in that as its from
https://www.act.org.nz/press-releases/coal-powered-government-sets-new-…
But here are the stats
https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resourc…
Act seem to be sharing 2021 calendar year data compared to 2020, so this is the same story we heard all last year of high coal use due to dry weather and low hydro generation. With a political spin as if the ruling party control the weather.
2022 will be much lower as the Genesis data shows. I'm sure Act and others will be quick to point out this as a major success for Labour...
Great article on the US housing market and how quickly things are changing there too
https://wolfstreet.com/2022/08/15/housing-recession-nahb-homebuilders-c…
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