Here's our summary of key economic events overnight that affect New Zealand, with news investor fascination with the possibility China may back off its strict lockdown regime doesn't seem to be reciprocated by official announcements yet.
In China, exports fell in October, their first retreat since May 2020, and prior to that their January 2019. The fall wasn't large (-0.3%) but over the past two years it is well lower than the prior low of a +3.5% year-on-year rise.
China's October 2022 trade surplus was lower too at +US$85 bln, and well lower than the +US$96 bln expected. Imports fell faster than exports but these are actually little-changed in the past seven of eight months.
Apple has warned it will ship fewer premium iPhones and customers will face longer waits for products after strict COVID-19 curbs disrupted production at a key factory in Zhengzhou, China, which is operating at "significantly" lower capacity as pandemic-related restrictions affected assembly of the premium iPhone 14 Pro and Pro Max. Key supplier Foxconn has had to run the facility under tighter restrictions, including daily testing and limitations on staff movements.
Analysts had expected China's foreign currency reserves to dip marginally in October by about -US$18 bln. But in fact they rose marginally by +US$23 bln to US$3.05 tln.
Those rumours continue to swirl about a coming easing of pandemic controls. It is 'seducing investors'. But news of a wider spread of infection, especially in the Guangdong region, remains a real public health and economic worry.
In the US, a detail from the strong October jobs report is worth noting. Logistics firms shrank their workforce by -20,000. This is a sign that the supply chain stresses are easing faster than expected and the great employment run-up during it may be over. But it is an industry with a very much larger jobs footprint now.
In Europe, German industrial production rose in September from August and by more than expected and is now +2.6% higher than year-ago levels. But you may recall that we have already reported than new order levels are not rising.
International air travel made a "strong recovery" in September, including in the Asia/Pacific region, but it is still down -50% from equivalent pre-pandemic levels. Only North America is almost back to those benchmark levels. On the air cargo front the situation is closer to normal volumes, but the Asia/Pacific region is dragging. Again, it is strong North American air cargo markets that is driving this recovery.
The UST 10yr yield started today at 4.21% and up +5 bps from this time yesterday. The UST 2-10 rate curve is unchanged at -51 bps. Their 1-5 curve is slightly less inverted at -39 bps. And their 30 day-10yr curve is steeper at +59 bps. The Australian ten year bond is up +9 bps at 3.97%. The China Govt ten year bond is little-changed at 2.71%. And the New Zealand Govt ten year will start today unchanged at 4.61%.
In New York, Wall Street has opened higher with the S&P500 up a relatively minor +0.2% to start their week. Overnight, European markets were all up too, except London which fell -0.4%. Yesterday Tokyo ended its Monday session up +1.2%, Hong Kong was up +2.7%, and Shanghai ended up +0.2%. The ASX200 closed up +0.6% and the NZX50 ended up +0.5%.
The price of gold will open today at US$1678/oz. This is down -US$5 from this time yesterday.
And oil prices start today marginally firmer than this time yesterday at just over US$92/bbl in the US while the international Brent price is just on US$98.50/bbl.
The Kiwi dollar will open today at 59.2 USc and little-changed since this time yesterday. Against the Australian dollar we have stayed firm at 91.6 AUc. Against the euro we are down slightly at 59.3 euro cents. That all means our TWI-5 starts today at 69.5 and -20 bps lower than this time yesterday.
The bitcoin price is now at US$20,718 and down -2.5% since this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
72 Comments
Apple has warned it will ship fewer premium iPhones
Intolerable, surely lines have been crossed here. Lockdowns may have been a rational, science-based approach when we did it, but not if I have to miss out on the latest iGadget for Christmas.
FOMO has moved from houses to phones...and you damn near need a mortgage to buy one.
Apple is falling behind on foldable phones, a dangerous miss. Ericsson used to be the biggest phone maker in the world and they disappeared into oblivion when they didn't recognise touch screen mobiles as next big thing.
I think foldable phones are nothing more than a novelty
That's exactly what Ericsson used to think about touch screen phones...
I still miss my Nokia 5210.
If you we want to go net zero we really need to give up our smart phones. I think that will not go down well with the school strike brigade.
"Historically, the energy costs of manufacturing a product roughly tracked the weight of the thing produced. A refrigerator weighs about 200 times more than a hair dryer and takes nearly 100 times more energy to fabricate. But it takes nearly as much energy to make one smartphone as it does one refrigerator, even though the latter weighs 1,000 times more."
The “Energy Transition” Delusion: A Reality Reset | Manhattan Institute (manhattan-institute.org)
One way or another people will be forced to deal with reality.
Some folk just want to be allowed to live at a cost to next generations, to climate as to property speculation.
Cool, now look at the full lifetime energy requirement. A fridge uses 10x as much energy every day as a typical phone.
Unsurprising that the manhatten institute is publishing what after a few seconds reading looks like nothing more than a pro big-oil propaganda piece.
If your smart phone could replace a refrigerator you would have a point Praggers.
I wonder how many years we have left of manufacturers competing on hardware. Screens aside - as screens are probably going to be all there is.
I expect in future the current competition on the basis of specification - fastest chip, the most lenses, etc. - will be replaced with dumb devices and frames streamed from the cloud. Google's Pixels look like the first inklings, where they don't seem to feel the need to compete like for like on hardware, because their AI and Cloud services outdo the competition.
Perhaps the market will split somewhat, with a subset of devices for less connected places.
They should have tried harder. The Tensor chips are still middling and now they've thrown away their photography and video cred, and are being left behind by the iPhone. These were generally what saved Pixel phones despite the rest of the spec sheet being decidedly on the light side. Yes, the processing is good, but they've now fallen notably behind Apple, even on the Pixel 7 Pro. Not a lot of reason to choose it over a Samsung anymore.
That's still talking local processing, though. I'm suggesting the long-term trend is less processing at the edge and more in the Cloud, with devices competing far less on local hardware and moving toward being dumb terminals.
We're at the stage of adding yet more camera lenses (a la Gillette and blades), mostly unnecessary incremental chip generations, and searching for screen form factors as attraction via fashion.
That's an interesting view RS.
Not something I'm necessarily keen on either. Just something I think is likely.
However, I'm hopeful that a market split might provide viable local hardware and tinkerer options.
We used to have flip phones, they came and went. Price is the limiting factor, they are so expensive its just ridiculous. I just bought a new laptop with 10 times everything performance wise for less.
Look after the phone you've got. You don't need to replace them every 35minutes. Nobody die
Been taking it as a personal challenge to find better and better phones but spend less and less each time I get one. Switched from the Galaxy S to the Galaxy A series and never looked back. Only downside is with a young family my camera isn't quite up to it anymore as I'm taking way more photos.
Solution? Update my 2019 Galaxy A for the new Galaxy As coming next year. Probably spend? $650 every three years. I can live with that. Beats the hell out of $1600 every 12 months for sure.
100% agree, except I run for more years between phones and do a battery replacement in the middle. The whole latest IPhone thing, while funny, is in diminishing 'new features' cycle, at ever higher prices.
My 5 year old $400 Huawei remains a fine phone. But my sons new $200 Oppo is better.
Mid-rangers have definitely stopped developing as fast now that the Huaweis are virtually unusable :(
The old Huawei works fine. But a new one is doomed as USA sanctions on Huawei block most of what you want.
Such a shame too. They basically had an answer for Samsung in every segment. It's the only reason the cameras got sorted out on the S range and the feature sets stopped being so crippled on the A series phones. Consumers really did lose out from those sanctions.
Apple is falling behind on foldable phones, a dangerous miss. Ericsson used to be the biggest phone maker in the world and they disappeared into oblivion when they didn't recognise touch screen mobiles as next big thing.
Not if its a iPhone they are designed to last until the next model arrives.
Is Central government - a help or reason of current crisis
https://www.stuff.co.nz/business/money/300732921/central-banks-will-not…
Love the "no more sugar hits for households, we just have to take the pain" meme.
Buddy, households are already taking the pain. The people insisting there's some sort of hit that we have to take for the greater good have absolutely no understanding of the rational responses households have already made to spiking living costs. There's no easy wins left, now we're meant to throw in a meaningful drop in living standards.... because why, exactly?
Most Kiwis believed our love affair with houses is a romcom that has most of us riding away in the sunset with multiple properties. However, this is turning out to be a real tragedy for many.
now we're meant to throw in a meaningful drop in living standards
I didn't think we would make it this far without a significant drop in living standards occurring. For over 2 decades, we've shifted our economic model towards labour-intensive businesses, housing speculation and lower-skilled migration.
Now that the cheap debt wells are drying up, we can no longer keep up our 'first world' lifestyle.
A good share of the cause. That and incompetent Govt.
For the last two decades. Happy to feel rich by running up the bill and passing it to following generations, instead of focusing on enabling the country to live within its means and increase its means.
Everybody is rapidly learning the folly of operating in China.
China has everyone guessing as per the caption here. Perhaps that is why their vassal North Korea has been prompted to tickle up their southern neighbours. China has repeatedly proclaimed if North Korea starts up a war they won’t be supporting them. But things can change.
International air travel made a "strong recovery" in September, including in the Asia/Pacific region, but it is still down -50% from equivalent pre-pandemic levels.
I'd be interested to learn what % of international travel is people redeeming flight credits built up over 18-24 months vs actual new travel spend. Our household is still using flight credits, even after 3 international flights in the last 6 months.
Global overheating says shame on your household unless overwheming mitigating circumstances.
https://www.interest.co.nz/property/108301/pm-jacinda-ardern-says-susta…
So the government wanted house prices to come down. They blew out by 40%. Then they wanted them to stay level. Now they're dropping and households are facing negative equity.
Why is no one challenging them on this and the comments that they made about house price stability, given that house prices no longer stable? If that was the desired outcome, and they have failed on it yet again, when do we start asking the 'r' question?
Good question
It was these quotes by Ardern that finally turned my POV to be against her and the government.
The fact they couldn't publicly admit that house prices needed to actually come down (even then) to be affordable was just abysmal.
People need to read more about China. I am not fan of the regime, but their strategy has not exactly been a secret. The plan was to:
- let foreign capital and companies into the country with strict controls and conditions (avoiding shock therapy)
- tolerate the exploitation of their cheap workforce and natural resources in return for technology and employment, improved living standards etc
- educate the workforce aggressively with the skills needed for the future
- amass trillions in foreign reserves by running a huge trade surplus, and use these to secure the supply of critical natural resources (cobalt etc) from subservient developing countries
- aggressively build self-sufficiency, so that...
- once everything is in place (tech, skills, supply of materials etc), cut exploitative foreign companies / capital loose and focus internally on building living standards
Perhaps we are finally seeing the final stage of this strategy coming into play?
As usual I think you have nailed it!
Meanwhile in the West
- Allow China to undercut your industries by keeping the Renminbi artificially low. Pressuring many businesses that produce real goods and services to close
- Start selling debt to China in exchange for real goods & services.
- Lower interest rates so this debt is managable
- This lowering of interest rates fuels asset bubble's, making housing unaffordable for many.
- Eventually this cheap money spills over into consumer inflation
- Raise interest rates to deal with this inflation
- Economy crashes
- Blame Putin while China buys up your economy at fire sale prices using all this debt they have accumulated.
I seriously think they laugh at how easy it is - and we are sending primary / low value-add products like crap timber, milk powder, meat etc. A virtual colony.
99% of people in the West still believe we buy all our manufactured goods from China only because of the wage differential.
Hardly the case considering our top imports by value from China are broadcast equipment, computers, office machinery and electronics.
Labour input costs make up a tiny portion of these items and much of the West does not have the skill availability, infrastructure or knowledge ecosystem to manufacture complex goods at scale.
Meanwhile in NZ, BusinessNZ welcomes measures to alleviate severe skill shortages for restaurants, cafes, and other industry members.
As usual, we're aiming for the skies!
Sadly, poor government over the last 20-30 years has focused on feeling wealthy only through rewarding speculation on land (i.e. living it up at a cost to following generations) rather than rewarding productive enterprise and those who add value.
Sounds more like a tributary.
Maybe - although 'tributary' probably doesn't describe our dependence. Maybe 'plaything' would be better!?1
It all makes sense, until you realise:
- being a hermit kingdom in the modern era is a path to poverty, not greater wealth, and
- especially when you have a rapidly ageing population which is not good news for a stronger domestic economy
If your economy depends on physical labour you are right. But modern economies depend on wisdom.
Are there any other methods of fighting inflation other than hiking the OCR?
At this point people with a decent sized mortgage are already experiencing the diversion of tens of thousands of dollars from discretionary spend to mortgage payments (or will be at their next refix of rates). How much blood is left to squeeze from that stone before it makes sense to look elsewhere?
You'd think with tens of thousands in discretionary spending they'd have a fair bit saved.
It's a good thing all the other living costs people face have stayed perfectly flat over the last 12 months.
The increase in living cost 7.2% has been exceeded by the increase in wages 8.3%
Food price rises are 11%.
I don't buy consumer electronics more than once a year but I have this weird hang-up about not starving to death so I tend to do that eating thing every day.
Yep. Also the increase in wages is pre tax
Not a fan of Luxon but I agree with his position on fiscal policy that the government isn't pulling back from its spending spree, particularly on the billions on ill-timed projects, such as those health rebranding exercises, polytech super-merger, etc.
There is merit in the argument that the additional Crown funding being put into circulation chasing limited goods and services will have to be pulled out by the Reserve Bank with even higher interest rates.
Well letting more foreign workers into NZ, to alleviate the shortage will help, it won't replace the need for a higher OCR, but it will help the 8.3% wage increase spiralling out of control.
Logistics firms shrank their workforce by -20,000. This is a sign that the supply chain stresses are easing faster than expected and the great employment run-up during it may be over.
Could you please elaborate on this statement DC?
- Could the reason not simply be that there is less demand for goods?
- Are you implying that worldwide record unemployment is due to supply chain problems?
Thank you
Trotter doesn't hold back.
"Virtually every claim made by the Prime Minister in the passage quoted above is either historically contestable, or just plain, flat-out, wrong. For that very reason, it is a powerful illustration of the deeply flawed thinking that has led the Ardern Government to the brink of electoral ruin.
At its heart is a cynical contempt for the truth, and a smug conviction that the falsehoods scattered through it will not be noticed by anybody whose opinion matters. Labour’s leaders have been able to get away with this sort of rhetorical flim-flam since 2017 because the intervention of the unpredictable – Christchurch, Covid – helpfully distracted the country from its government’s moral vacuity. The longer the electorate has had to take stock of its government’s ethics, however, the less it has found to like."
https://thedailyblog.co.nz/2022/11/08/much-worse-than-it-looks/
Small wonder New Zealanders feel disappointed, concerned, and angered by their Prime Minister. And, no wonder at all that, come Election Day, a very much larger number of them than usual will steadfastly decline to make their way to the nearest polling booth and cast a vote.
Yes, they will experience a pang of guilt as they watch their older, whiter, and righter neighbours set off to destroy the Sixth Labour Government.
And sadly it has meant that the opposition parties don't need to offer workable policy, just need to show up. So we're seeing a resort to rewarding property speculation over productive enterprise once more, Tory tax policy, and no need to address long-term stability or workability.
What a shambles our two main parties are.
Don't forget abandoning any pretense of minimum skill levels for migrants.
John Key 101.
the opposition parties don't need to offer workable policy, just need to show up
The hope is that ACT can at least maintain its current popularity until election day and bring a big chunk of seats to the centre-right coalition to force the Nats out of their hands-off "conservative" approach into making meaningful reforms across NZ.
My faith in ACT is tempered by their unwillingness to own their principles.
Yes, supporting putting the nation under house arrest, ignoring the Bill of Rights/Universal Declaration of Human Rights etc. is a stain that won't wash off.
Don't forget forcing co-governance of public-owned assets with ethnic representatives down the throats of the public.
The shameless behaviour of the 6th Labour Govt of New Zealand towards its own people (those people that put them there, remember) is one of the 21st Century's more brazen applications, where black has become the new white, where communism is the new capitalism & where the buying & selling of poor quality houses is today's new industrial frontier. This may not end well.
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