Here's our summary of key economic events over the weekend that affect New Zealand, with news financial markets have decided there are no [economic] adults in the room in China's ruling group and are moving to decrease their exposure to the Middle Kingdom.
First, almost 20% of the members of the American Chamber of Commerce in Shanghai said they were decreasing their exposure to China. And this survey was carried out before the CCP Congress changes were known.
On Friday, Hong Kong equity investors took it on the chin with an ugly -3.7% drop to cap a loss of -6.5% for the week. Shanghai was tough too, falling -2.3% on Friday and -3.9% for the week.
And over the weekend reports emerged that the giant Foxconn facility that makes iPhones in Henan Province, one that employs and houses 200,000 workers, has a serious pandemic outbreak forcing a lockdown on the facility and causing great distress. Workers are escaping, some redirected into isolation facilities, but not all. Apple is likely to accelerate its decoupling.
Further, some key commodity prices sank rather sharply over the weekend. That included iron ore, zinc, and steel. Copper remains in the doldrums. The immediate drivers of these retreats are the lower prospects in China.
The Bank of Japan kept ultra-low interest rates and maintained its dovish guidance as recession fears dampen prospects for a solid recovery in Japan, cementing its status as an outlier among global central banks who are mostly tightening monetary policy.
Meanwhile, Japan unveiled an economic package worth about US$200 bln to cushion their "high inflation" as households and some businesses struggle under the impact of a weak yen.
In the US, and following the first positive estimate of US Q3 GDP growth, the follow up PCE inflation rate has been released and it is unchanged at 6.2%. The same data shows consumer spending remained 'robust', growing at a +7.2% rate and above the related inflation level. Personal incomes rose at an annual rate of +5% and higher than was expected. Perhaps more important than the monthly September numbers are that none of these metrics seems to be falling away. Wall Street liked what it saw, more or less validating Janet Yellen's recent comments.
The next Fed meeting is coming up this week on Thursday, November 3 (NZT). Markets have priced in a +75 bps hike then taking its policy rate to 3.75% and expect it to rise to 5% from there through to mid-2023. After that, the October non-farm payrolls report will be released at the end of the week, and markets now expect a modest +220,000 gain in payrolls and little change in the low jobless rate. Full employment there seems unchallenged at this time.
But not all Americans appreciate the current focus on tackling inflation. Pending home sales were down a massive -10% in September from August, and down more than -30% from a year ago.
And another sentiment survey, this one from the University of Michigan, remains very low even if it did inch up in October and confirming the earlier 'flash' result.
Perhaps online sales are peaking out; Amazon is warning that this upcoming holiday season sales may be lackluster.
Across the Atlantic, EU business and consumer sentiment remains very low too - for completely understandable reasons.
And markets believe the ECB is about to turn dovish to support a flagging region and downgrade the inflation fight.
German inflation is getting worse however. The latest 'harmonised' reading has it at an eye-popping +11.6% pa in October, driven by energy costs up +43% and food costs up +20% in a year. But the costs of the Russian invasion seem to have made Germans more hostile to Russia. Their President, who comes from a wing of Germany's Social Democrats that long argued for closer economic ties to Moscow, said Russia's invasion had brought "a change in era".
Germany is living with the stresses, and even managing to grow their economy in real terms despite the extreme pressure.
The EU struck a deal on a law to effectively ban the sale of new petrol and diesel cars from 2035, aiming to speed up the switch to electric vehicles and combat climate change.
We are in for a heavy data week ahead. In the US we will get the Fed's interest rate decision, their non-farm payrolls report, and a raft of earnings reports. Also, investors will be closely watching central bank meetings in England, Australia, Norway and Malaysia. There will be GDP and inflation rate figures from the Euro area. Finally, China will be releasing its manufacturing and services PMI’s for October.
Then there are the tensions in Ukraine, the US mid-term elections, and the Brazilian election results, all of which financial markets will be watching too.
The UST 10yr yield starts today unchanged at 4.01% but down -21 bps in a week. The UST 2-10 rate curve is still inverted at -40 bps. Their 1-5 curve is inverted and at -38 bps. And their 30 day-10yr curve is little-changed at +35 bps. The Australian ten year bond is down -2 bps at 3.78%. The China Govt ten year bond is still at 2.69%. And the New Zealand Govt ten year will start today down another -4 bps at 4.30%. A week ago it was at 4.69% so a -39 bps fall since then.
The price of gold will open today at US$1646/oz. This is up +US$4 from this time Saturday.
And oil prices start today +US$1 firmer than this time Saturday at just on US$88/bbl in the US while the international Brent price is just over US$94/bbl.
The IEA has released its October update pointing out that demand for fossil fuels has peaked for all for types (coal, oil, gas) and will fall rapidly from here, and the demand for renewables, especially hydrogen is taking off. To meet European demand alone, the IEA estimates the total capital investment in hydrogen is as much as US$1 tln. And that is just the start, they say.
The Kiwi dollar will open today at 58.1 USc and little-changed from Saturday. Against the Australian dollar we are firm at 90.7 AUc. Against the euro we are unchanged at 58.3 euro cents. That all means our TWI-5 starts today at 68.4 and also little-changed.
The bitcoin price is now at US$20,625 and down a mere -0.4% from this time Saturday. But it is up +7.5% from this time last week. Volatility over the past 24 hours has been low at just on +/- 0.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
78 Comments
"Lower prospects in China" resulting in lower hard commodity prices.
Wholesale milk price is dropping too despite falling production here, compared last season.
China. They are still attempting to follow the Jacinda Ardern covid strategy but with even more useless vaccines and are totally unable to open up because very few have any induced or natural immunity whatsoever.
Old mate Genocide Jinping is now dictator for life and has a penchant for liquidating anybody that might dare to tell him information he may want not want to hear, which always goes well when running a country. It's now Yes men all the way down.
There are some Putin admirers on these boards that also think China is set for world domination. But's turning out quite the opposite. They are cooked and the world is rapidly decoupling.
Hu Jintao humiliating public removal and now gone missing. Would Chinese authorities deny people to leave... they are going to have to
I believe they will do just that
Less sure about that. CCP has long arms and can control their citizens from afar, particularly if some family or business assets are still in China. It's also been a convenient way to use that influence to further CCP aims internationally (as per Professor Anne-Marie Brady).
There are reports that Chinese ex pats overseas are reluctant to revisit the homeland because they might end up being forced to remain there?
https://i.stuff.co.nz/national/politics/130323053/winston-peters-return…
Pamela will be packing his bags.
✈️✅😶
Rather have a level-headed person being the king/queen maker, than an extremist
Indeed.
Winston is an extremist. He will never approve anything that might threaten the wealth and stranglehold that over 65s have on this country.
This current govt is full of activists that have a free rein right now. Handbrake for racist policies and unfair play. As far as benefiting the elderly and the boomers, JA has benefitted them hugely with virus protections and high house prices.
Covid reporting was a scam that kept us in fear.
Yea, see this would be believable if Winston hadn't torpedoed the CGT reforms. He's a handbrake on anything that doesn't concrete his grasp on power. The way the PGF was run should tell you all you need to know. As much as Winston comes across as a counter-culture figure for people too old to have Sex Pistols posters on their walls, it comes at the expense of every New Zealander under a thousand years old.
You can't expect him to be all things to all people.
My point regarding covid reporting is that we were bombarded with govt messaging and updates constantly. Now there are heaps of deaths and they just report once per week. How weird is that.
It's apparently too much to expect him to be coherent on a policy position too. He's currently on a tour ranting about the government he installed because they gave him the biggest bauble. And now he wants to present himself as the solution to the problems he caused?
Sorry, not buying it. If older NZers keep falling for this stuff then it's no wonder they get scammed so often.
So what is it?
Covid is deadly and the government isn't reporting it? or
Covid was nothing to worry about and the government was just trying to scare people by reporting it?
You're making both points above and it comes across as you just wanting to criticise the government for whatever argument pops into your head at the time.
Anyway we're all pretty over covid, let it go.
I prefer freedom. My gen gets to pay, while others got the rewards. That's hardly fair for protecting people whose time is up anyway. Extrapolating Fiji numbers our toll would have been below 5000. Likely much lower
Probably pays to think in advance before there is another pandemic
Think in advance what? That communicable diseases are all basically the same thing so don't bother taking any precautions in pandemics?
We're basically not taking anyone know despite the pants-crapping and political blackwashing of slogans like 'letting it rip'.
Turns out that's not something people cared about, outside of using it as a brush to tar National with something.
Long way to go until 2023 election and the way things are, nationwide here and globally, a lot of various types of matter are going to be flying in all directions. Regrettably it’s likely to embrace Bertrand Russell’s lament something like - it’s times like these, when the ignorant are too loud and the intelligent, too quiet.
A vote for Winston is a Queen maker vote. Again. You may as well just vote Labor and be done with it.
A vote for Labour in the upcoming election is like paying a dead horse for a ride and expecting it to take you for a trot around the block.
The Rasputin of NZ Politics, back from the dead once more.
He's a smart cookie, having identified that there will easily be 5% - if not closer to 10% - who will vote for a party that stands against Labour/Greens unending obsession with co-governance, soft-on-crime approach (unless it's saying mean things on Twitter - in which case we need that hate speech law tout de suite) and general obsession with identity politics BUT who also don't want National/Act's "save the landlords and big businesses at the expense of everyone else" policy platform either.
If he can just stick to a few simple policy points, my money's on him being kingmaker come election day (the only exception being if Ardern does step down beforehand, and National wins by default).
Only three things in life are guaranteed - death, taxes, and Winston Peters being as cunning as a $hithouse rat.
Surely the signs all point to tiwai producing hydrogen for export.
Come on govt, get this built.
https://www.macdiarmid.ac.nz/news-and-events/news/in-the-media/nz-in-th….
If it's so great, why wouldn't we use it ourselves?
I looked at buying a hydrogen car out of Japan for a laugh. Literally not one retail place in Auckland I could have filled it up.
Lol. Anything good that New Zealand produces is shipped off overseas leaving us the scraps and dross. We should have world class (and affordable) beef, lamb and dairy in our shops, oodles of timber, cheap electricity.
But we have the exact opposite. The meat in our supermarkets is the lowest grade vomit inducing crap and costs a fortune. Our range of dairy products are extremely limited and cost a fortune. Our timber costs a fortune. Our electricity is..., yeah lets export that as hydrogen too.
My dogs refuse the Jimbos brand but love the supermarket beef etc. Its sending me broke
Makes sense. Our generic supermarket beef is not much above dog food.
Chicken carcasses from the local butcher. The supermarket ones are less than 1/2 the size for the same price (but maybe suitable if your dog[s] are small?).
Nailed it. Totally dumb idea, completely ridiculous waste of energy but guess what will happen.
Why? So we can turn a scarce domestic resource into an export commodity, in the most inefficient way imaginable?
Because there is a market for green hydrogen exports and we have the ability to produce it? Ideology won't pay the bills.
What is the scarcity you refer to? It's certainly not water in fiordland! And as you know it's not effeciant to move electricity north from the deep south.
As long as NZ fails to use our unique resources we remain poor.
It is dramatically more efficient to move electricity north than to convert it into hydrogen and move it abroad to be burnt there. Probably by an order of magnitude.
It may be more efficient, but will it be more profitable?
No, and that's the point. Our Minister of Energy and Resources, Megan Woods, is far more interested in making a quick buck than working towards energy security for her country.
As much as I agree I'd love to have all of our top exports at m fingertips, how do you propose we incentivise producers such as farmers etc to sell into the local market?
Argentina, for example, only allows 30% of their wine to be exported and this is by law. Interesting sentiment as although yes they aren't without issues with hyperinflation, from what I see as due to corruption at the root of the issue, it still allows their citizens to have lovely wine at an affordable price.
It's an interesting line of discussion we need to have as a country - as our values will shift in the current economical climate from all about the almighty dollar to quality of life as times get tough, and this is the perfect time to enact solutions to the above issue.
If it's true that we produce ~40x what we need for our domestic market, I don't see why we couldn't just legislate a produce tax -> along the lines of ~5% of your export produce must be supplied to a government gentailer, for sale to the domestic markets.
I can see farmers whinging, but as I spent 3 years watching the farmers upstream of us turn the stream through our lifestyle block unusable for my children by unsuitable land use coupled with 6-weekly nitrogen bombing, I feel no sympathy for them. They've been raping and pillaging our environment without social conscience long enough.
And I'm not even a greenie ><
I don't see why we couldn't just legislate a produce tax -> along the lines of ~5% of your export produce must be supplied to a government gentailer, for sale to the domestic markets.
Because then what will farmers do with their culled dairy cows (which show up in the supermarket)? Dog food? Then what will happen to the stuff used to make Jimbos? Exported to the Pacific?
Just heading off to pull the remains of a deer carcass from a stream having had to tell locals not to pick the watercress below that point. Dumped by some inconsiderate SOB heading back to town.
First and foremost a farm should provide food for the workers/owners/occupiers of the land. Not a given, meat and milk is not as common a part of the employment package as it once was. In the same way the farms should provide food for the community as a priority before export, again not a given.
Great to see someone taking initiative, and thanks for doing it. I assume the backstraps and hindquarters had been removed, with the rest just discarded in the stream. Shameful.
Only thing worse than that is seeing a whole deer, guts and all, bloated and rotting in the bush after having ingested some kind of green-dyed pellet.
Not a nice way to go, either. Such a waste.
Waste? What about all the seedlings and plants that were wasted by this pest? Only good mammal in the bush is a dead one.
Germany is living with the stresses, and even managing to grow their economy in real terms despite the extreme pressure. Indeed.
The German chemical industry has been leading in the world for more than a century & has been at the core of the German industrial success since. Now one of the oldest & largest chemical manufacturers is ending production in Germany & shifting abroad - due to failed energy policy Link
no doubt the offshore manufacturing plant will have access to cheap Russian gas
Just about all of economic philosophy relies on 'growth' and growth is, inevitably, reliant on population increase. We have infested the planet with our growth in numbers, leaving barely anything on it untouched by us, we've even managed to get our plastic to the deepest parts of the oceans.
Degrowth is needed, but that surely, much more manageable done slowly. China's population is tanking, so unless they find different ways to do things, will fail. As for our milk, which they used so much for infant formula, well it doesn't take a rocket scientist.
Watch out for laws coming out of China restricting womens' life choices, if they can't figure out how to prosper without growth
First, almost 20% of the members of the American Chamber of Commerce in Shanghai said they were decreasing their exposure to China. And this survey was carried out before the CCP Congress changes were known.
China Calls Top Chip Execs For Emergency Talks After Biden Unleashes Economic War
Or maybe companies are pulling out of China because they can see the catastrophic path the current regime is taking. In Russia, they have seen how a despotic megalomaniac ruler intent on global conquest works out and are thinking maybe China is not such a great investment strategy.
Don’t even bother trying to convince our in- house CCP lover of anything other than their ineroxable rise to world dominance…
Don’t disagree with you there but unfortunately she is not alone. Ex PM Key for instance, was just as enthusiastic, and from the sound of it still is. There it is.
I might have to reread "1984".
In Orwell’s 1948 conceived novel of a dystopian future, the totalitarian government of Oceania was constantly at war with one of the other two totalitarian superpowers that dominated the world: Eurasia and Eastasia. It wasn’t about ever winning or ending the war, but rather maintaining a constant state of war in order to keep the citizens under control.
Oceania being us; The West, and it's pretty obvious who the other two are. And has Oceania been at war, ceaselessly, from Korea to Afghanistan and beyond? Yes.
1984 was prescient in a way that literature never has been before. This says less about the fortune-telling abilities of George Orwell than it does about the human race; we're way too predictable, and we never learn.
I wonder if people understand that Eric Blair, who used the nom-de-plume of George Orwell was a democratic socialist
John Key is out of the game, you know. Well, mostly
Great stuff Audaxes.
Just look at the last 50 years since 1971. Globally governments and central banks have contributed to the creation of almost $300 trillion of new money plus quasi money in the form of unfunded liabilities and derivatives of $2.2 quadrillion making £2.5 trillion in total.
As debt explodes, the world could easily face a debt burden of $3 quadrillion by 2025-2030 as the derivatives and unfunded liabilities become debt.
And the majority of the sheeple would never consider gold. And they have the audacity to call ol' ratty a scam.
Wow. That really highlights how out of control the bubble has become.
It's the end of the global "free trade" Washington Consensus myth - we traded our jobs for debt, that's what free trade was about. China got the jobs, we got the debt.
... or , with increasing use of robotics in manufacturing , China's previous advantage of having a gigantic pool of cheap workers is diminishing ...
Hmmmm....China there a few years ago - China Has Become The World's Largest Industrial Robot Market For Four Consecutive Years
Worker availability is more of an issue for Western nations than wage levels.
Robotics in their current form only make economic sense when deployed at scale. These technologies tend to replace jobs in the semi-skilled category and create roles in the low and high-skilled ones.
The big winners from RPA are going to be the likes of Mexico, Eastern Europe and, to a lesser extent, larger developed economies that still have the knowhow to retain more productive operations within their borders - Germany, USA.
" Bracket creep is a stealthy and dishonest form of taxation " screams the headline from Stuff ... an excellent piece by Eric Crampton , showing how Robbo is allowing inflation to push us into higher tax bands ....
So let's remove the Bands?
A Flat Tax at 20%; Corporate and Individual, on all income above $20,000 (call that a Floor not a Band!), plus a Land Tax.
"Bracket Creep" is the alter ego of The Fat Controller.
Can’t even make the trains run on time. At least old Il Duce, of the same physique, squarer jaw, could claim that success.
Are you referring to godfather Benitto
As kiwis we have high standards we expect from others, but dont like to be told what to do
About time this started getting said. I'd say Robertson cynically implying that indexing the tax brackets more than once a decade amounts to civil-service-destroying 'tax cuts' is showing an appalling lack of understanding of the core function of his role, but he knows exactly what he's doing.
This type of chops-boosting posturing and pre-election puffery is exactly why the indexing of brackets needs to be automatic and taken out of the hands of those who are the only people who get anything out of years of the status quo.
he knows exactly what he's doing
The Labour party stuck to its pre-2017 election promise to scrap National's tax bracket adjustments arguing welfare payments serve as better "targeted support" than tax cuts.
Then came the perverse economic and environmental policies, and useless pet projects that hamstrung supply while pumping-up aggregate demand.
... the Greens party are calling for a tax on companies making " excessive profits " ...
I do wonder who gets to decide what the definition of an " excessive profit " is ... and , how much more they wish the IRD to take from a " customer " who's already met their existing tax obligations ...
Same old failure in thinking, if you scoop the cream off the top of the pail, that will make up for the milk dripping through the holes in the rusty bottom.
... I wish we had a government who stopped trying to be too clever for our own good ...
Just do the basics ... health / justice / education ... even just repair the potholes ...
... stop trying to shred the economy of every red cent for Robbo to blow on another scheme of ideologically driven woke stupidity ...
The left come up with some well-intentioned but self-defeating stuff.
Given time, a free market will eliminate excessive profits. Fo much of the time excessive profits have been enabled by some other 'intervention' by our leaders.
Robbo has recently concluded that there is nothing excessive about bank profits in NZ. While I don't think a tax on these profits is the best way forward, dismissing the entire argument is not ideal either.
The problem is that Labour and Greens lack the gall to deliver on meaningful bits such as introduce CGT, clean up cheap migration, better resource market watchdogs, etc. that hit certain loud cohorts hard. So, to make up for it, they ensure their "chardonnay socialist" policies hurt the silent majority the most.
Given that nations have effectively given away their sovereignty by allowing private banks to print money, maybe a large fee should be charged for that right? And it cannot be passed onto the customer. Maybe 50% of profits or a percentage of revenue would be adequate.
Which would just be an indirect tax on us plebs.
Pending home sales were down a massive -10% in September from August, and down more than -30% from a year ago.
Double negatives = a positive. so down -10% = up 10%
Stuart Nash has achieved a remarkable turn around in rich immigrants coming to NZ ... there's just 1 ... 6 weeks after tearing up the Gnats policy of passports for rich listers entering NZ ... Nash's new onerous policy has all but killed off attracting wealthy migrants ... nice one , Stu !
( as an aside , in the Gnats last year in government , their policy attracted 400 rich folk , who brought $ 2.2 billion into NZ , plus their business skills & connections ) ...
400 rich folk, ready to use their 2.2 billion playing the only game in town, residential property investment?
... a rather cynical view of the NZ economy .... And quite wrong ...
(DP)
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