Here's our summary of key economic events overnight that affect New Zealand, with news the US and Chinese economies both seem to be struggling for momentum.
The latest data for durable goods orders in the US for July have delivered mixed results, and at first look somewhat weak. They were unchanged from June, disappointing market expectations of a +0.6% increase and following an upwardly revised +2.2% rise in June. It was the first month in five that orders showed no growth. But a little deeper look shows it is all due to low orders for 'transportation equipment' (read, aircraft). Defence spending was lower too. Outside these lumpy categories, new orders climbed +1.2% which is actually pretty good. Capital goods orders rose +0.4% from June. Year-on-year, overall orders are up +9.4% and capital goods, up +16%.
US mortgage applications fell again last week and are now more than -20% lower than the year-ago period - and to a 22 year low. The benchmark 30yr fixed mortgage interest rate rose +20 bps in a week to 5.28% plus points.
Pending home sales fell for the second consecutive month in July, and for the eighth time in the last nine months. They were down -1.0% from June, and are down nationally -20%. In the Western states, they are down more than -30%. With the volumes easing fast, the real estate industry is expecting prices to follow down soon.
Canadian wholesale sales slipped -0.6% in July from June in a generally weak outturn.
Trapped in current imports of oil and gas, Japan will order new nuclear power plant construction and restart plants that have been idled for more than ten years to shore up some energy security.
In China, major effort is underway to save this year's rice harvest. Extensive engineering is at work diverting dwindling water supplies to where it is very short, some work risking the degrading of future reserves. And water issues generally in China are causing extinction events for many species. Next week, very high temperatures should ease in central China, but that won't means rain - just not so hot. But rains are coming relatively soon.
To help SMEs, China instituted a tax deferral program. But as time has gone on, their economy has gotten worse just as these deferred tax debts become due. It will be fierce bite on a struggling sector soon.
In Europe, another dramatic spike in natural gas prices appears to have ended any hopes that their inflation battle is set to ease, with financial markets now bracing for higher prices, a faster pace of interest rate hikes and a deeper economic downturn. Limited heating and lighting will be on the menu in Germany this winter. Interestingly, China has over-ordered natural gas and is selling some of it to Europe to ease their stress. But of course, that will only last as long as demand stays sluggish in the Chinese economy. Some of that excess is obviously Russian, but some is Australian, even American.
In Australia, the world's largest timber skyscraper has been ordered by software giant Atlassian for their new headquarters at Sydney Central tech precinct.
And staying in Australia, in a move full of irony, the Murdochs are suing for defamation from a news site (Crikey) after they wrote that Fox and the Murdochs have been defaming and undermining democracy in an organised and major way. They can dish it out, but they can't take it. 'Truth' is to be Crikey's defence in a David & Goliath encounter.
And of course, central bankers, including Adrian Orr, are now heading to Jackson Hole, WY. All eyes are on a Powell speech set for Saturday morning NZT.
The UST 10yr yield starts today at 3.11% and up +6 bps from this time yesterday and back to levels last seen at the end of June. The UST 2-10 rate curve is little-changed at -27 bps. Their 1-5 curve is slightly less inverted at -10 bps. Their 30 day-10yr curve is now at +92 bps and steeper than this time yesterday. The Australian ten year bond is up another +2 bps at 3.69%. The China Govt ten year bond is staying lower at 2.65%. And the New Zealand Govt ten year will start today up +3 bps at 3.83%.
Wall Street is up a relatively minor +0.3% in Wednesday trade today on the S&P500 index and making back yesterday's dip. Overnight, European markets closed higher about +0.4% similarly, except London which was down -0.2%. Tokyo ended its Wednesday session yesterday down another -0.5%. Hong Kong ended down a sharper -1.2%, while Shanghai was down -1.9%. The ASX ended its Wednesday session with a +0.5% gain, while the NZX50 was up a smaller +0.1%.
The price of gold will open today at US$1749/oz which is up just +US$1/oz from this time yesterday.
And oil prices start today at just under US$94.50/bbl in the US which is small +50 USc rise, while the international Brent price is still just on US$100/bbl.
The Kiwi dollar will open today at 61.8 USc and -¼c lower than this time yesterday. Against the Australian dollar we are little-changed at 89.6 AUc. Against the euro we have slipped slightly to just on 62.1 euro cents. That all means our TWI-5 starts today at 71 and a -30 bps easing.
The bitcoin price is now at US$21,632 and a small +0.9% rise from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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63 Comments
With US debt at 92 trillion of money they can't pay back, UK inflation tipped to reach over 18%, Europe without enough power for winter and china in all sorts of housing, economic, social and water troubles, I would be surprised if anyone has something positive to say.
Summer is on its way and Tesla's Semi Truck will start shipping soon?
https://www.topgear.com/car-news/electric/tesla-semi-truck-coming-later…
I don't think their reserve status will change any time soon. Compared to other possibilities the US is at least superficially a democracy, which means that there is some level of accountability to the people for what that dollar can buy. In addition it is the worlds largest 'free' market (the term 'free' is tongue in cheek as i can't think of a better adjective) which means it's value is largely determined by the people.
Yes their Government has a problem with constraint in their budgets, but as a 'world wide commodity' there is also a lot of external demand for their dollar. That external demand is due at least in part, to the size of their market.
A big problem they do have is the level of manipulation of their markets by the big players, and this is where the actions that undermine their level of democracy become a concern as politicians are bought and paid for by big players to constrain any measures taken to create a fairer society.
In part I agree with you PDK, but you're being too narrow minded. There is a lot of faith in the US dollar, true. But ask your self why and you'll get to the other things that help set the value, such as the size of their market, the fact that they are at least superficially a democracy which has enshrined personal freedoms and that means people can get very rich in their markets (and as indicated that in itself creates its own problems), it is understood that the rest of the world sees how large their market is and wants to be able to operate in it. All these things contribute to the value of the dollar, but there is more too such as resources like research universities technology companies, and yes raw materials and just plain entrepreneurial spirit. It all adds to what the dollars value is based on.
From the USA
Pendleton added: "They priced too high because their neighbor's home sold for an exorbitant price a few months ago, and expected to receive multiple offers the first weekend because they heard stories about that happening."
As the winds in the pandemic boomtown shifted this summer, she advised sellers to "price their home correctly" to market conditions and understand things are slowing.
Extraordinary nation. Extraordinary history. Long bony islands, beset by earthquakes. 1923 Tokyo/Yokohama decimated estimated 140,000 deaths curtailed a then economic spurt, yet the nation got up and invaded China 8 years later & 10 years after that most of sth east asia and fought the allies for four hard years in the Pacific. Restructured politically & economically by Douglas MacArthur ( got something right this time) and thus reinvented itself and has forged ahead. Seems to me they have a rare ability to foresee & recognise problems & situations and more importantly know what to do about it and how to do it. And now they are found to be hugely strategically & economically positioned with regard to let’s say, the Western Allies.
Are you one of these people that move to NZ then tell us we need even more people? How about asking the natives if they are happy with the population we already have. It's difficult for them to pull up long roots to move somewhere else to get away from a burgeoning population, but easy for potential immigrants to avoid NZ if they think we don't have enough people.
Oh yeah ? I lived and worked there for 36 years after a career in engineering, intelligence defence and energy in NZ, and while much of what you say is true and to be admired, there are always two sides to every coin. In Japan I worked as a business consultant, mainly in high tech, heavy, civil, aeronautical and weapon related engineering sector and business intelligence, along with teaching Japanese diplomats and security forces officers and at some leading universities in the Kanto area.
One of the key things one needs to now about Japan are the concepts of tatemai and honne. Tatemai is the face you present to the world and what you want the world to think of you; honne is the truth. Japan has been spectacular successful with the projection of its tatemai, especially in New Zealand, of presenting a wonderful image of itself to the point where many vendors use the word Japanese as an adjective to describe the products they are selling. And in many cases it is true because the Japanese took American developed TQC and pushed it into their work culture with the support of their CEOs - whereas the Americans, outside defence production, did not. Think Detroit. I will also say, having married into the culture and lived, unlike embassy and corporate staff, outside the gaijin ghetto as well as working at middle and higher levels of corporate and governmental Japan, that there is a dark and grossly inequitable and hopelessly inefficient side that is the honne.
Economically, their corrupt political/business culture has led to massive misallocation of resources in the form of bridges, roads, airports and tunnels with little if any traffic and no chance of the massive investment ever being paid back - and arguably the world's highest sovereign debt, amongst other things. They are also the poster child of world wide demographic collapse - except for my two sons in Tokyo who seem to have inherited their filthy father's interest in Japanese women and are, unlike many of their generation in Japan, ensuring the continuation of my bloodline.
Great, balanced post. There’s certainly a lot of negative sides to life in Japan, as well as the positive. Just like anywhere. There’s a certain number of misinformed Japanese fanboys and fan girls who think Japan is a utopian paradise. It’s nowhere near that. Some parts of life in Japan are better than NZ, and some parts of life are better in NZ.
I lived there for a few years in the mid 90s, and like you married a Japanese woman.
And the Japanese Government have requested a plan to restart their nuclear reactors and develop and build new designs. Knowing the Japanese, any new designs will be likely the way to go. they will take the new modular, throttlable ideas and go further to produce safer, more reliable, and more efficient reactors that will offer huge promise.
Really ? See my previous post. In aeronautical engineering and business in which I was directly involved, take a look via the 'Net at the YS-11 and its successor the Mitsubishi Regional Jet. Mind boggling incompetence and waste of money via the Iron Triangle. At least they got it right with the Shinkansen, whereas the Chinese, who as usual ripped off the Japanese designs, have dug themselves an enormous hole with their high speed rail network and, like the Japanese, are leaving this mess to what may be the fastest shrinking population in history.
I've read your posts and they are interesting, but do you really think that is much different to the US or Europe or even NZ? True their way will be wrapped in cultural differences but what you talk about in the end is down to personal corruption as people move to seek power and influence, and that happens every where.
But my comment takes a number of things into account. first and foremost any new reactor designs will initially be for themselves, and as we know they will need to be built to be safe in severe earthquakes, tsunamis and even volcanic eruptions. They understand the need to cater to variable demand and all the other aspects that power suppliers must meet. The Japanese have a long history of taking other peoples designs and making them better. They are extremely good at it. I expect their new design nuclear reactors to be no different.
Well Murray, I worked at Toshiba's Nuclear Engineering division not long after they took over Westinghouse and the engineers there told me they really did not know what they were doing. That is, they had bitten off more than they could chew. Today, the Toshiba where my father in law worked all his life as a loyal salariman is no more and is in the process of being broken up with various entities squabbling over how to dismember the corpse.
In Europe, another dramatic spike in natural gas prices appears to have ended any hopes that their inflation battle is set to ease, with financial markets now bracing for higher prices, a faster pace of interest rate hikes and a deeper economic downturn.
Good Morning from #Germany, where risk of a wage-price spiral is increasing. Harbour workers have signed pay rise of 9.4% from July 1 this yr followed by hike of 4.4% from Jun2023, incl #inflation clause covering an increase of up to 5.5%. Shows that inflation offset is possible. Link
Cool to see timber sky scrapers, although that one sounds very Hybrid. Reinforced concrete from level 1 to 7 and a steel exoskeleton. That is going to require lots of fiddly connections no doubt and be a nightmare to build.
Low rise buildings (around 6 storeys, 1 level basement) seem to be the sweet spot for apartments and there is no reason these can't be timber construction, especially if the true price of carbon gets factored in to building materials.
It might have been eclipsed already, only by 3m but...
https://www.theurbandeveloper.com/articles/timber-tower-heights-rise-de…
Redstag purchasing Timberlab the other week are positioning themselves for this. Marty the owner is very smart. I was involved getting their CLT (cross laminated timber) design, manufacturing plant and compliance up to speed with one of their first jobs in Rotorua, a 3 level office block with CLT mid floors.
Its a good idea and I agree low-mid rise timber framed buildings are the future, however as you mentioned design is key.
I did a 3 level walkup townhouse build in Hobsonville where the structural steel and timber designs may as well have been for different jobs in different languages and everyone either died or went bankrupt or both (apart from the designers who won a medal for *insert green progressive thing* here).
Like our other building material woes i can see the stage being set for Redstag to control the LVL, Glulam and CLT market in NZ and price discovery for the public will be denied.
Macron warns of ‘end of abundance’
We need more stability of food supply chains. Supporting domestic farmers & encouraging them to produce more food crops to expand livestock farming increases domestic food security & sustainability. The EU is doing the opposite. Conscious decisions to disrupt European agriculture - Professor Werner
German farmers also rise up. Today in Berlin the headquarters of the Minister of Agriculture besieged by many tractors to protest against the EU climate policy which is destroying the entire European agricultural sector. Link
...the market had already fallen 20%, but the data was lagging because sellers were refusing to accept the new going-rate, resulting in sales not happening, and the true prices buyers were willing to pay not being captured by analysts. The market has definitely tanked all of the 20%...
https://www.stuff.co.nz/business/129655152/20-price-fall-a-different-pr…
This article shows you what la-la-land some investors are in. Mr King, quoted in the article said he thought sustainable prices would be when capital gains are between 5-8% per year. Some sums for Mr King:
Assuming a $750,000 price for a house (well below the national average in 2021) and the lower point of his range:
Īn 5 years: house costs $911,000
In 10 years: $1.16m
In 15 years: $1.48m.
Moving to the mid-range of Mr 100 houses King:
In 5 years: $965k
In 10 years: $1.32m
In 15 years: $1.81m
At the upper range:
5 years: $1.02m
10 years: $1.49m
15 years: $2.2m.
So in his fantasies he's wanting his 100 houses (assuming they all are $750k today) to earn him $63m in untaxed capital gains in the next 10 years.
Interesting response. Have the insane house price spikes of the last 5 (and especially the last 2) years so numbed us to huge increases in house prices? $100,000 is nearly $400 a week for 10 years yet we casually throw 100s of 1000s around when talking about houses.
In 15 years, compounded capital gains on a very average house (the starting price I used was the max bid on my definition of median house in Wellington in March 2020, which cost me $280k in 2013) will require eye watering deposits for a basic abode. Even 5% annual gains at current prices would rapidly make NZ's housing values look like the US national debt.
Hickey has been beating the same drum ever since he was Managing Editor of this site, and while I agree with him on the need for major surgery to radically reorient the NZ economy away from its slave like addiction to housing, his and many others in the NZ journalistic herd's assumptions about returns to growth in the face of mind numbing debt all over the world, collapsing demographics, the growing lack of educated and skilled workers as the hated Boomers retire, the continuing and even accelerating effects of automation is laughable. To this can be aded the increase of geopolitical risk which is being exacerbated by access to resources such as water and energy, much of which is not only being depleted but is in the wrong place relative to consuming populations. She the invested in reading history would be well spent here.
Kiwi soldier killed in Ukraine "not on active dutiy". Do we believe that? Are the NZDF forces sent to Europe doing more than we are being told?
https://www.stuff.co.nz/national/300670217/kiwi-soldier-killed-in-ukrai…
“Yeah that's the official position, the question is do you believe it?”
I do. They have no reason to obfuscate.
Their operational involvement in Ukraine (from a deployment perspective) in a support capacity is overt and well reported.
”Like asking Mossad…”
If you think the NZDF are like Mossad, I have a bridge to sell you…
Operationally, it's highly unlikely the NZDF know what individuals are up to specifically, or care to know. They're not on deployment.
MFAT will take an interest for consular reasons. Other agencies might take an interest in specifics depending on other risk factors.
NZDF active duty personnel will be under an obligation to disclose, as there are HR implications, service obligations, security considerations etc. - whether they have done so is a different matter.
Edit: this from The Guardian
”He had not told the defence force he was travelling to Ukraine or sought its permission.”
Irrespective, NZDF will very likely (read almost certainly) be aware via other agency mechanisms of individual serving member's presence in Ukraine, but beyond that, probably not very much.
Govt employees are generally allowed to travel where they like in a personal capacity (with a few exceptions), and at their own risk.
This company should be put out of its misery and nationalised.
Air New Zealand has lifted revenue by 9 per cent but posted a mammoth net loss of $NZ591 million ($529m) for the 2022 financial year. After another year of COVID-19 lockdowns and border closures, New Zealand’s national carrier limped to a third-straight loss and will not pay a dividend.
It already is - the Government is a 51% majority shareholder. They provided the support to ensure it weathered the ravages of COVID. Now it's starting to pick up again. As COVID becomes endemic, it will start be able to pay back the Government for the handouts it received over that period.
It’s an interesting one. The airline was bailed out by the government after the absurd venture into Australia, Ansett. Rough times then and now certainly. Didn’t much think so at the time but probably the bail out is now proven to be a correct action. Otherwise during the pandemic/lockdown NZ may not have had any certain good air connection with the rest of the world.
If the Murdochs can show that they were telling what they saw as the truth, then it is defamatory to accuse them otherwise. They have been defamed all over all US MSM for many years now, but this will be really interesting. It could be the end of being allowed to express views of anyone who does not agree with Joe Biden's controllers narrative. On a side note, what has their news sites ever reported that was against one person, one vote? This is of course the only definition of democracy.
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