Here's our summary of key economic events overnight that affect New Zealand, with news that generally isn't positive, but the data and sentiment seems to be remarkably resilient.
US durable goods orders rose more in September than August, but not be as much as was expected. But the rise from a year ago was an impressive +11.5%. Orders for capital goods rose +13.6% on the same basis which is actually quite impressive in itself and indicates a broad commitment by firms there to new capital spending.
The US economy grew an annualised +2.6% in Q3-2022, beating forecasts of a +2.4% rise and rebounding from a contraction in the first half of the year. Helping was strong business investment and a smaller current account deficit. Hurting was a fall in residential construction and marginally slower consumer spending. But this actually was the bit that held better than expected. This result is the first of three estimates, so is subject to revisions.
There were +183,000 new claims for jobless benefits last week, another low level and taking the total to 1.225 mln and a small increase but really, still bumping along near record lows. Next week's October non-farm payrolls are likely to remain very solid.
Not so positive is the next regional factory survey, this one from the Kansas City Fed district. This one points to a sharpish softening in production, shipments, and new orders. Still, employment rose mainly because those surveyed expect a pickup because "the economy is still decent". That is borne out by remarks by one very large business in the region.
In China they reported that industrial profits slipped in October. Apparently foreign firms made losses in the month, as did local privately owned businesses. But State-owned businesses reported improved or holding profits.
In Taiwan, the trifecta of an invasion fear, rising inflation and interest rate hikes, saw consumer confidence there drop to a 13-year low in October.
As expected the ECB raised its policy rates by +75 bps earlier today, taking the key one to 2.0%. They tweaked a few of their support programs, but didn't change them significantly. In just three months, they have raised rates by +200 bps, the fastest pace of tightening in the bank's two-decade history. They are presiding over a set of economies on the brink of recession while trying to tame raging inflation, a very tough ask. They want to shrink their bloated balance sheet, but haven't started that yet.
German consumer sentiment improved in October according to the widely-watched GfK survey. It was a very minor improvement, but going into winter and with a war on their doorstep, this is perhaps a somewhat surprising outcome. It still is however at a quite depressed level.
Global freight rates for shipping containers fell faster last week than in the prior one, down another -7% in this latest survey. It is rates out of China, especially to Europe, that drove this latest fall. Rates from China to the US also continued to fall. Trans-Atlantic rates are actually now rising. Rates for bulk cargoes slipped again too.
In Australia, the Annual Report from their central bank reveals a huge loss, just like many other central; banks. Their actions may have helped 'save' the Aussie economy, but the price was not only a -AU38 bln loss, it put the bank into negative equity. That sacrificial action has enabled the big trading banks to trade on well and post super-profits. The story is no different in New Zealand.
The UST 10yr yield starts today down another -6 bps at 3.96% and back to where it was two weeks ago. The UST 2-10 rate curve is still inverted at -40 bps. Their 1-5 curve is more inverted and at -40 bps. And their 30 day-10yr curve is little-changed at +62 bps. The Australian ten year bond is down another -10 bps at 3.79%. The China Govt ten year bond is down -3 bps at 2.71%. And the New Zealand Govt ten year will start today down a sharpish -17 bps at 4.34%.
Wall Street has started its Thursday session with the S&P500 down -0.4%. But so far for the week it is up +2%. The value of Facebook's owner, Meta, is in the headlines with a spectacular valuation rout. Overnight, European markets ranged from down -0.5% (Paris) to up +0.3% (London). Yesterday, Tokyo fell -0.3%, Hong Kong rose +0.7%, and Shanghai fell -0.6%. The ASX200 rose +0.5% and matched by the NZX50.
The price of gold will open today at US$1659/oz. This is down -US$8 from this time yesterday.
And oil prices start today +US$1 firmer than this time yesterday at just under US$89/bbl in the US while the international Brent price is just over US$95/bbl.
The Kiwi dollar will open today at 58.4 USc and little-changed from this time yesterday. Against the Australian dollar we are up +½c at 90.3 AUc. Against the euro we are up a bit more than +½c at 58.5 euro cents. That all means our TWI-5 starts today at 68.5, and another +30 bps firmer than yesterday.
The bitcoin price is now at US$20,567 and -1.0% lower than this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
65 Comments
The US economy is resilient because they have the ability to export their inflation through having the world's reserve currency (for now). By my estimates, it takes the US $3 to $4 Trillion of added debt a year just to operate. What a great model for an economy.
Hey China, send me a container of disposable, throwaway goods and I will print you a bunch of US treasuries (paper) and we will keep them in our possession. Great economic model.
Well Trump in his time appeared to be posing the question does the world need the USA more than the USA needs the world. It’s quite a question isn’t it. Wonder what the answer is?
The US is substantially a closed economy so doesn't need trade because it has mineral resources, manufacturing and a large domestic market. That's why Biden has substantially continued Trumps trade restrictions.
Aye, believe it was mentioned here that California is near to the fifth largest economy in the world. And then Texas, Florida, New York are not all that far behind either. By comparison NZ is roughly the same size as Phoenix, AZ.
Not only that, but it's being floated that China's economy could be 50-60% smaller than what they advertise:
Whatever it is the ever increasing flight of foreign owned activities is hardly helpful to that cause. Only thing that’s sticking around is covid. Full circle. Wuhan in partial lockdown. Where are those vaccines, that Comrade X so keenly espoused on here that NZ should use, when you. need them.
That's plausible.
The FT published an article a week ago discussing this exact issue around diminishing Chinese transparency. The Chinese government has quietly scrapped thousands of statistical series in recent times to keep the world from calling BS on their overstated headline economic figures.
A good sign of dodgy statistics is when govt organisations post positive numbers and private sector negative ones
And a huge trade deficit!
exports will slow once they have emptied the strategic petroleum reserve, Trump filled it, down to 40%
Trump did not fill the strategic petroleum reserve, it's another one of his lies.
In fact, the highest level ever for the SPR was in 2010, when Barack Obama was president. Further, there was actually a net decline in the SPR when President Trump was in office. When he took office in January 2017, the SPR contained 695 million barrels. When he left office four years later, the SPR contained 638 million barrels. So not only is the claim of filling it untrue, but the level of the SPR actually declined while President Trump was in office.
https://www.forbes.com/sites/rrapier/2022/04/01/no-former-president-tru…
There is a difference between "finance" and "business". Reading DC it seems finance is challenged and business is not.
Watched an excellent video on China on Macrobusiness last night.
[The RBA's] sacrificial action has enabled the big trading banks to trade on well and post super-profits. The story is no different in New Zealand.
Banks make off like bandits at the tax-payers' expense, while the rest of the country tightens their belts. Who were these measures supposed to help, again? Central banks are acting like enablers, not regulators.
Nothing new here. Decades back, Garrick Agnew realised what you've just written, and his answer was ...start his own bank!
It eventually disappeared, but the man he chose to help him with the start-up was.... Mark Johnson...who then went on to create a longer lasting version of that start-up called..... Macquarie Bank.
https://en.wikipedia.org/wiki/Australian_Bank
Sounds like I should start my own bank, then.
Regulate me harder, Adrian...
Or how about having no central entity in control at all, and we can all be our own bank? With the added bonus that they can't print money out of thin air and no one can stop any transactions?
Yea I like the sound of Bitcoin thanks 😊
Central banks work for the global banking system at the expense of the rest.
Robertson rules out student loan relief because apparently the country can't afford it. Tell me Robbo, can the grads on minimum wage afford it in this dumpster fire you've created? Why do the Australians take repayments from a level 2x as high as ours, on a sliding scale and that tops out at 10% once you hit $140K AUD rather than our flat 12%?
Why do we have a student loan repayment threshold taking huge chunks of desperately needed income that kicks in at half our minimum wage, which you have insisted needs to be raised to reflect increasing costs to low-paid workers? Which is it? You can't keep having this both ways.
I'd love to see Terry compare our student loan repayment frameworks sometime. It would make an excellent feature of how we are telling our young that their dues to the state are more important than them getting by in the low wage, high-inflation economy we've created, where most basics cost more than in Australia but pay packets are far smaller.
If you have a student loan
And you're on minimum wage
Then the individual and state have made very poor investments.
Glassdoor tells me my industry's grad wage is only $1K higher than it was when I was a grad. Over a decade ago.
It's also not far away from what the minimum wage will be shortly either.
So you tell me where the problem lies. I don't think it's at an individual level.
If an individual choses to invest considerable time and money into a tertiary degree that offers no economic benefit to them then surely that individual has made a poor choice.
Perhaps "grad wage" is not an appropriate measure there.
It's probably a useful metric when it's in an industry where the roles are on a skills shortage list because they're in such high demand that local talent can't fill roles, yet the grad wages have gone backwards. So which is it? Again, not the result of an individual decision.
And the default 'blame the individual' without even knowing what the industry is kind of tells you exactly how we ended up in this space to begin with. Maybe things are actually that bad and looking to pin things on individuals is part of the problem that enables it.
E: Look, this isn't about the merits of who studied what. It's pointing out that our student loan repayment scheme is basically twice as aggressive as our nearest neighbour, while we have lower wages and higher living costs. Trying to make that out to the fault of individual young Kiwis for studying certain things is intentionally avoiding the actual point I'm making.
I've been talking about a steep decline in 'real' grad wages in IT, finance, engineering and accounting. It is commonplace for locals to have to compete with experienced, older migrants for the very limited grad opportunities in the job market. Employers generally favour migrants with overseas experience and better 'work ethic' (basically would bend over backwards to get their PR application sponsored).
The green list could make matters even worse for higher-skilled locals in the long run because the threshold is set at the median wage for occupations across the board. Basically, recruiters have the incentive to flood the labour market with candidates who appear good on paper but have few deployable skills.
It is kind of pertinent that after several decades of pushing the knowledge economy, large amounts of subsidized education and student loans, that there's a questionable net gain to the individual and wider economy.
Our government doesn't have to follow Australia, because they have a much higher barrier to their subsidized tertiary education. Moving to study there isn't really an option unless you were already a citizen.
While that's true, it's worth pointing out that it's starting to severely undermine what are generally considered 'high' value work that has a degree requirement attached to it. Sciences have long been out of whack, with the requirement for extensive post-grad study needed for many lab-level roles. Now it's hitting finance, IT and other previously highly prized skillsets.
So yes, while people who study underwater basket weaving will probably still be boned, there's an increasing number of professions with a log-jam of imported talent taking mid-level roles and the relationship between those entry level roles and wage/career progression now seems quite broken, where that simply wasn't the case a decade ago. Take a look at how many fields are on the regional skills shortage lists and then wonder how that can be, if we're producing thousands of grads in these fields locally each and every year. Something is very very broken.
I'm in a skills shortage role as well, in the Health sector. In the decade or so I've worked here, our Union's focus has been entirely on raising wages at the middle and top end a the expense of trainees - the argument being that we get lots of high caliber applicants and easily fill training roles. We just don't have enough training roles to fill our qualified posts, and many that qualify leave to higher wages in Australia. End result is new trainee wages didn't even keep up with inflation before it really kicked off.
It's a difficult situation when the other side of the bargaining don't seem worried about workforce issues and are just doing their best to stick to the overarching mandate of low pay increases. The Union made the decision to throw trainees under the bus to try to address other issues.
No idea if this is similar to your profession, but that's how it is for us.
- Annual student loan drawdowns: less than $1b per year.
- Non-means tested superannuation: $16b+
The latter has "*mumble grumble* paid taxes all my life" and the former will likely pay taxes elsewhere for most of their life, because what University graduate would want to stick around in this basket case of a country.
Plenty of money to throw at oldies who made poor voting choices on matters such as superannuation, but not enough to keep the nurses, teachers and firefighters from striking.
If the univeristy graduate is not going to stick around to pay taxes here then of course it makes sense that they pay for their studies here.
But the university graduate will pay for their studies even if they stick around to pay taxes.
Yep, and they'll lose 12 cents in the dollar for every dollar over $21K, while the Aussies don't start taking anything from you until you earn over twice that amount. So we have a minimum wage that's going to approach $44K for the sake of worker protection, but the government that set it is going to reach into your wallet for 12% of everything you earn from under half that.
So who do low wage workers really need the protection from, again?
- 12 cents in the dollar student loan.
- 30 cents in the dollar to their share of rent (assuming $200 per week share).
- 15 cents in the dollar for transport. ($100 per week)
- 3 cents in the dollar for Kiwisaver.
So there's 60% of their take home pay gone. Just need to chip in for their share of food, power, contents insurance and if society says they're allowed to.....saving for a house deposit....out of the remaining ~$280 per week. No avocado's folks!
Politicians and policymakers don't give a squat about young Kiwis. The commentary from the ministers and their advisors on young workers leaving NZ is shameful.
Back in May, MBIE downplayed a 4% drop in 25–29-year-olds in NZ as pent-up demand for OE. More recently, on further reports confirming an exodus of working-age Kiwis, the response from MBIE was that the "emigration loss is offset by other channels of labour supply".
Avocados are a good source of cheap calories right now - about 300 calories per dollar
Fire fighters need no student loan and minimal education achievement i.e their recruitment pool is massive).
Grossly overindulged with their wages already. Not sure why they (or Police) ever get lumped in with teachers and nurses when it comes to pay (probably due to the aggressive Union/Associations compared to the nurses).
😂
Pay for firefighters varies depending on experience, responsibilities and performance.
- Trainee firefighters usually earn $46,000 a year.
- Qualified firefighters earn a base salary of $58,000.
- Senior firefighters earn a base salary of $65,000.
- With extra training, firefighters can become station officers or operational managers and can earn between $126,000 and $184,000
Firefighters can also earn overtime and extra duties allowances.
https://www.careers.govt.nz/jobs-database/government-law-and-safety/pub…
Pay
Pay for secondary school teachers varies depending on experience and qualifications.
- Graduate secondary school teachers usually earn between $52,000 and $57,000 a year.
- Secondary school teachers with two to five years' experience usually earn $58,000 to $71,000.
- Secondary school teachers with more than five years' experience usually earn $71,000 to $80,000.
https://www.careers.govt.nz/jobs-database/education-and-social-sciences…
The base salary for Qualified Firefighter is currently $58,400 and for Senior Firefighter it is $65,000.
All firefighters who have completed their initial 12-week training course have the opportunity to earn significantly more than their base salary by undertaking additional or specialist duties and working overtime.
This is usual for nearly all firefighters. On average, firefighters’ total annual earnings are currently around $97,000 and officers’ total annual earnings are around $137,000.
Not bad for a job that provides all training needed, no student debt and no entry level skills or qualifications.
Yeah not bad at all, especially when all you have to do is turn up to the odd kitten stuck up in a tree, a child with their head stuck in the back of a chair or a teen Tik Tok superstar stuck in a front load washing machine.
The student loan system - more so in the US - has created an environment of guaranteed customers who make litttle demand on the fees charged or the value the study provides.
If you want to see how education at Uni level could be delivered, take a peek. This site would educate you better then 90% of the NZ system -
NZ universities have bloated administrative structures by international standards, shockingly even when compared to American universities.
The national average of faculty-to-admin staff ratio was 0.71, with Otago being the worst performer at 0.53. The ideal ratio is supposed to be 3, yikes that's a long way off.
Despite sky-high tuition fees, American unis averaged 2.5 in 2018.
An associate professor at Sydney-U believes both Aus and NZ have the highest % of international students in their tertiary systems, so more money has to spent on non-teaching staff for keeping the tap on and supporting non-English speaking students than in other Western countries.
You cannot compare Khan academy with a NZ university. The former is for people who want to learn. The latter is for people who want a status qualification to help them find a white-collar desk job while giving them several years of social life in their narrow peer group.
The UST 10yr yield starts today down another -6 bps at 3.96% and back to where it was two weeks ago. The UST 2-10 rate curve is still inverted at -40 bps. Their 1-5 curve is more inverted and at -40 bps.
I must be missing something.
The European Central Bank vowed to continue its money printing programme despite surging inflation.The ECB increased interest rates by 0.75pc in an effort to limit sharply rising prices, with inflation hitting 9.9pc across the eurozone last month. But it also said that it would continue the quantitative easing (QE) programme where money is created....
Saving Italy?
Rock and a hard place. They will all be forced into QE in a high inflation environment because their banks and economies are all over leveraged and drowning in debt.
Just like the UK having to print money to bail out their pension funds. It is only a matter of time.
They will revise their inflation target upward, maybe even to an upper bound of 5%... they have to devalue the debt.
Even the foaming at the mouth NY Times is beginning to walk back on the climate change apocalypse theory. 1.2 degrees of warming, half of which was pre-WW2 industrialisation could top out at 2 degrees of warming. Assuming no major volcanoes this century of course.
"Beyond Catastrophe A New Climate Reality Is Coming Into View
...Just a few years ago, climate projections for this century looked quite apocalyptic, with most scientists warning that continuing “business as usual” would bring the world four or even five degrees Celsius of warming — a change disruptive enough to call forth not only predictions of food crises and heat stress, state conflict and economic strife, but, from some corners, warnings of civilizational collapse and even a sort of human endgame. (Perhaps you’ve had nightmares about each of these and seen premonitions of them in your newsfeed.)
Now, with the world already 1.2 degrees hotter, scientists believe that warming this century will most likely fall between two or three degrees. (A United Nations report released this week ahead of the COP27 climate conference in Sharm el Sheikh, Egypt, confirmed that range.)"
https://www.nytimes.com/interactive/2022/10/26/magazine/climate-change-…
R Graphics Output (wordpress.com)
Is 2-3 degrees a good outcome?
What's not to like about global greening? Why would we want to be living in Little Ice Age climatic conditions?
https://www.csiro.au/en/news/news-releases/2013/deserts-greening-from-r…
https://www.nature.com/articles/nclimate3004
LOL :
They want you to believe inflation is an uncontrollable act of nature, while the weather is a controllable act of mankind. Link
Not one 'Experts', climate model has got it right. These so called 'Experts' have become authorities, when they should only advise.
"Major European cities will sink beneath rising seas; Arctic summers will be ice free 2000... 2005... 2010... 2015... 2020... Earth will enter into another ice-age, Australia will have no more snow, Britain to be plunged into a Siberian climate. Which one is it? These so called 'experts' continually overstep their bounds of knowledge. What is wrong with man having an impact on the climate (CO2 emissions)? It is a positive impact for me, my garden will grow better, I like a warmer climate, with more rain.
The biggest risk to humanity is the war on fossil fuels and the 'experts' spreading more fear. Feels a lot like the mild cold that circulated.
https://twitter.com/DaxxTrader/status/1585724193672376320?t=5JbRZXcOX-b…
Next big tec stock to trade like a shitcoin....Amazon. The air really is coming out of these well over priced bubbles propped up by money printing and passive investing.
Wall Street has started its Thursday session with the S&P500 down -0.4%. But so far for the week it is up +2%. The value of Facebook's owner, Meta, is in the headlines with a spectacular valuation rout.
Let's not forget Amazon and others.
So, just a handful of US stocks have lost $4 trillion this year… housing market is sputtering… and inflation is up the wazoo… but the US GDP in Q3 grew 2.6%? Link
Brilliant, non-partisan article from Matthew Hooton in the Herald today about, amongst other things, inflation, the economy and the increasing menace that is China (and how dangerously and naively reliant on it we are….). He has a go at J. Key for continuing to grease up to the CCP.
Behind paywall, but you can always buy a hard copy.
Hooton:
China did not make New Zealand its best little friend in the west a generation ago out of benevolence, but to infiltrate, influence and undermine the Five Eyes intelligence alliance through its smallest, weakest and most naive member.
We are now stuck. If Xi has no qualms about calling in the foreign media to his party congress to witness the ritual humiliation and disappearance of his predecessor Hu Jintao, we should be under no illusion about what he would do to our economic and security interests should we step out of line.
There is evidence China successfully placed spies into our two main political parties.
MFAT officials have growing concerns about other Chinese agents of influence in New Zealand. China is not our friend because its people like milk powder and bungy jumping.
Meanwhile, the return of Trumpism looms in the US, ultimately our only true security guarantor either directly or through Australia, our sole remaining military ally.
The U.S. Isn’t Ready to Face China on the Battlefield
The invasion of Ukraine has exacerbated critical deficiencies in America’s defense industrial base.
.
https://www.cnbc.com/2022/10/27/credit-suisse-results-and-strategy-q3-2…
Credit Suisse shares plunged 18% [20%] on Thursday after the Swiss bank posted a quarterly loss that was significantly worse than analyst estimates, and announced a massive strategic overhaul.
The embattled lender posted a third-quarter net loss of 4.034 billion Swiss francs ($4.09 billion), compared to analyst expectations for a loss of 567.93 million Swiss francs. The figure was also well below the 434 million Swiss franc profit posted for the same quarter last year.
https://www.reuters.com/business/finance/credit-suisse-says-raise-4-bil…
ZURICH, Oct 27 (Reuters) - Credit Suisse (CSGN.S) plans to raise 4 billion Swiss francs ($4 billion) from investors, cut thousands of jobs and shift its focus from investment banking towards rich clients as the bank attempts to put years of scandals behind it, sending its shares sliding.
Chairman Axel Lehmann dubbed the plan a "blueprint for success", but it fell flat with investors after the bank's unexpected 4 billion Swiss franc third-quarter loss.
A bit more than a social media event.
"Chairman Axel Lehmann..." what do they say about history not being repeated, but rhyming?
So to summarize, Facebook/Meta down 75% in the last year, and Amazon (at after market price plunge level) down 50%.
That's an awful lot of wealth missing from many entities virtual accounts.
Yep. And people look at ol' ratty and say "I told you so".
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.