Here's our summary of key economic events over the weekend that affect New Zealand, with news that away from the headline political shifts, the global economic signals seem to be dimming further.
In the week ahead, the most important American economic releases include retail sales, producer prices, and housing data. Investors will be also keeping an eye on earnings reports from big retailers and the state of the crypto market after the weekend FTX bankruptcy. All this comes after their mid-term election results become clearer, and with a surprising good outcome for the incumbent President.
Elsewhere, in the spotlight will be inflation rates from Japan, India, UK and Canada. Also, we will get more German economic sentiment data, Q3 GDP growth rates from Japan, and industrial production, retail sales, and fixed investment data from China. And don't forget our own REINZ data for October will be released tomorrow.
But first in the US, the widely-watched University of Michigan consumer sentiment survey fell in November to its lowest level since July and by slightly more than expected. The current economic conditions index sank sharply and the expectations gauge tumbled too. Meanwhile, inflation expectations increased marginally for both the year ahead and the next 5 years. Of course, since this survey there have been elections and a moderating of a key inflation measure which have both energised financial market optimism.
That same survey reports about four in five consumers now describe buying conditions for homes as bad, a record in data going back to 1978. In fact, mortgage rate rises show no sign of slowing.
The American Federal Budget repair continues. In October, the first month of their new budget year, they posted a deficit of -US$88 bln, about half the level of the same month a year ago. That was because tax collections for a swelling workforce and stronger company earnings were up +12%, and spending was down -9%. By any measure this is impressive.
Meanwhile, giant crypto platform FTX has been placed into bankruptcy, and Twitter's mercurial new boss has warned that it too faces bankruptcy - after he paid US$44 bln for the firm, and then promptly moved to wreck it. For sure it needed repair, but the toxic way he handled the takeover has pushed it close to the edge. FTX was also hacked. Masters-of-the-Universe tech moguls (and narcistic recycled Presidential candidates) look vulnerable these days.
The spreading tech-sector layoffs should be watched closely. The numbers involved are large, large enough to impact their overall labour market.
China has labour market issues too. We all know that their economic slowdown is stubbornly extending. And we know that their jobless rate is surprisingly high with the official level over 5%. But what might surprise is that their youth jobless rate is approaching 20%. A growing number are university graduates. A shackled private sector can no longer absorb the numbers coming on to their market and the risks of great social unease is high as a consequence.
Normally at this time of year we report of the huge Chinese retailing event, "11/11" or 'Singles Day'. It went off as normal, but for the first time ever, none of the large platforms (Alibaba, JD.com) released specific results, rather saying trading was "in line with last year".
And China is reportedly working on a new sweeping rescue package for its troubled property development sector. It's not public yet but Bloomberg claims to have been briefed and they say it includes "16 measures" that range from addressing the liquidity crisis faced by developers to loosening down-payment requirements for homebuyers. Developers’ outstanding bank loans and trust borrowings due within the next six months can be extended for a year, while repayment on their bonds can also be extended or swapped through negotiations, they were told.
India's industrial production rose by +3.1% in September from a year earlier, reversing a revised -0.7% decline in the previous month and easily beating market expectations of 2.0% growth.
But not so positive was an unexpected fall in new car sales in India. They rose more than +9% in September from August to 307,000. But in October they fell to 291,000, and although that is much higher than year-ago levels, that base for both months was weak.
In Europe, a fall in Germany's industrial production, and a retreat in the UK's overall economic activity is generating rising talk of a winter economic recession there. It has been expected since the start of the Russian invasion, but the reality of it is closer now - even if it probably won't be as deep as originally feared. But some think the economic storm will be fierce, and be global.
At the ASEAN meetings in Cambodia, the full rivalry between the China Bloc (including Russia, Myanmar, Laos, etc) and a varying grouping led by the US, was on display, especially around freedom of navigation issues in the region. The heightened levels of distrust only seemed to deepen.
In Australia, the giant hack of the records in their Medibank Private company, and the subsequent ransoming of personal details on the dark web, has brought an official claim that the hackers are known Russians: REvil. Security experts believe cybergangs are scaling up their attacks and changing their behaviour as they gain a form of protection from Russian President Putin.
Meanwhile, Sydney’s housing auction clearance rate sank to 61% as almost one-quarter of homes scheduled for auction last week were withdrawn, in a sign that rising borrowing costs and growing uncertainty are biting the east coast-dominated residential market.
The UST 10yr yield starts the week at 3.81%. Recall, a week ago it was at 4.16% so a net -35 bps retreat since then. The UST 2-10 rate curve is inverted at -52 bps. And their 1-5 curve is also inverted at -67 bps. Their 30 day-10yr curve is positive at +25 bps. The Australian ten year bond is down -2 bps at 3.68%. The China Govt ten year bond is unchanged at 2.75%. And the New Zealand Govt ten year will start today unchanged from Saturday at 4.29%.
The price of gold will open today at US$1771/oz. This is up +US$5 from this time Saturday but down -US$4 for the week.
And oil prices start today +0.50 USc firmer than this time Saturday at just on US$88/bbl in the US while the international Brent price is just over US$95/bbl. There was a surprisingly strong rise in oil rigs in production last week in North America - surprising because much of the recent talk is about how this sector is running out of steam at these prices. But apparently not.
The Kiwi dollar will open today at 61.2 USc. For the week it has revalued by +3.1%; over the past month by an impressive +9.5%. Against the Australian dollar we are little-changed at 91.3 AUc. Against the euro we are also little-changed at 59.1 euro cents. That all means our TWI-5 starts today at 70. This broader measure is up only +0.4% for the week, but up +5.4% over the past month.
The bitcoin price is now at US$16,561 and down -1.4% since this time Saturday. And volatility over the past 24 hours has been modest at +/- 1.5% with the light volumes returning after the prior four days of instability and highish volumes.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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But not so positive was an unexpected fall in new car sales in India. They rose more than +9% in September from August to 307,000. But in October they fell to 291,000, and although that is much higher than year-ago levels, that base for both months was weak.
The United States is happy for India to continue buying as much Russian oil as it wants, including at prices above a G7-imposed price cap mechanism, if it steers clear of Western insurance, finance and maritime services bound by the cap, US Treasury Secretary Janet Yellen said on Friday.
Goodbye free trade.
What the Saudis have done in Yemen should be met with a worse round of sanctions, but the "leader of the free world" gives you a free pass to commit atrocities on innocent lives as long as it is done using American-made equipment.
Not belittling Putin's inhumane war but I respect the Indian government for holding its ground here and not getting played as a pawn by the US.
Finally everyone is pointing finger and voicing concern on the very existence of rbnz
https://i.stuff.co.nz/business/opinion-analysis/300737450/bank-profits-…
According to the Reserve Bank, the new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest.
Past time for banks to share the profits with the main loan underwriting creditors - particularly those that are under rewarded and unsecured.
By far the largest number of banks in the Eurozone is German. 80% of German banks are not for profit local community banks not aiming at RoE, but helping the local community and economy. They have delivered for 200 years, irrespective of what financial scribblers have said. Link
The UST 10yr yield starts the week at 3.81%. Recall, a week ago it was at 4.16% so a net -35 bps retreat since then. The UST 2-10 rate curve is inverted at -52 bps.
Another key comparison Oct '07 to Oct (now Nov) '22: Heavily inverted curves. https://youtube.com/watch?v=uYfzks
When the FOMC gathered at the end of October 2007, their summation of the situation and what they perceived as risks to it sound like it was written today about today - or last month, October 2022. The Fed was about to commit a crucial series of errors, something one of its members warned against. Heed this guy's warning because no one back then did; including the guy.
Nobody "purchases" a rest home room. Basically you pay for it like a hotel room. But if your assets are below circa $275K the govt will pick up the tab, but you lose your fortnightly superann payments. If the sale of your house is a stumbling block the govt can still pick up the tab, but they place a lien over your house and retrieve what you owe them from the sale proceeds when it finally does sell. It's a pretty sound system IMO.
Only one is listed and it is at a price that 6 months ago would have sold - but after 7 weeks no offers (fortunately for her she has wealthy family that have bridged her for the rest home). Other two owned are still not organised enough to get on market (they have another property out of town they are trying to sell first - and it's not selling either).
No idea what the rental (Auck owned, this is in the Hams) is up to. I suspect may have had plans for the multi apartment thing - but I'm guessing.
Sure but from recent family losses the government, and certainly not unjustifiably, goes pretty effectively after all assets and uses them to first pay for hospital level care, save I think about $230k. So put simplistically, that identity is much less costly to the tax payer than a citizen who ends up in care without any savings or assets. Also the ability to “off load” assets into such as trusts or transferring to family has been targeted & addressed and virtually ceased.
True. There are definitely different levels of care and a patient can always dip into & use that $230k to “upgrade” their facilities & enhance their care etc. All that helps but unfortunately many of them just get to a point where they don’t know much about that, or anything else for that matter. Probably the worst potential for the patient on the, let’s say, bare essentials is being transferred round and about. Having said that do think that generally best efforts are made to give all a decent standard of care and respect but too often though there are reports of the opposite having occurred. Of course the dire shortage of trained care givers & clinical staff for this sector currently being reported, hardly helps matters.
A few months ago I enquired of Oz (QLD) Aged care subsidised support on behalf of an elderly family member (NZ citizen). I was pleasantly surprised to be told that "anyone who is legitimately in Australia on any Visa" can be assessed for aged care support. While the person had lived in Oz for 20 years, I had expected that Kiwi's on Special Category Visas would be excluded from aged care support as they are from eg unemployment support - apparently not so.
Yes Oz also has means testing for subsidised care however it is at a higher threshold (approx double) & excludes the family home. Further, people can buy the "right to occupy" their retirement village unit in a couple of ways: say $500k cash up front in which case they get 100% back on exit, they could also rent out their family home & pay a rent for the LTO in which case they don't get the money back however the family home remains in their estate for children.
Depending on an individuals circumstances it could be a much better financial deal overall than the NZ option (which my family member is actually taking up).
Stand-off time. No one wants to price the drop in. At some point it will give. Rest home prices will need to drop to meet the drop in the oldies home sale price. And away we go.............
I see the rest home industry as a 'watch and learn' space as what happens to them will be easy to see and at the same time be mirrored across thousands of other non-headline grabbing smaller businesses.
You don't need to be bridged into a rest home. Most people in the rest home either have nothing (or less than $234K) or else their assets are in trusts in which case the government is paying for it. I was pretty shocked to find out that the rest home on the North Shore my father was in only 1 resident in 3 was actually paying for it. Yeah a village is a totally different setup and from what I heard is a major rip as they take 30% to fully renovate it even if they are only in it 6 months, huge waste they even change the dishwasher when most of the time its never been used.
And as those properties, and many other to join them, pass through the inevitable python of Life, the beneficiaries to the Wills will be less concerned about sale-price, when as executors they sell-up, than settling the estates of the deceased.
Some property will get passed on as the asset itself. But given the way household finances are stretching every day, not all of they by any means.
Real estate agents ask the vendor - "do you really need to sell or should we take this property off the market for a bit......?"
Then the vendor is forced to decide.... it's surprising how much lower they will accept after they have hard these hard conversations.
I have heard training videos on the correct way an agent discusses this - Neurolinguistic prompts etc - like hitting a golf ball, these things need to be practiced so the agent is moving the sales process along in such a way the vendor gets what they need.
6-7 weeks to xmas, Its going to get hard to sell now unless you have a lot lower price, then everyone is away til Feb, two months at 1.5% per month.... market going to open the new year 5% lower min and even then you probably chasing it down
Just saw a development property that is for sale near us. They have ripped down the existing house, got plans for 6x townhouses, it looks like they laid a couple of slabs so I think they were going to do the whole development. I can only assume they ran out of money. I wonder if anyone will buy it?
5 Trillion dollar cash in American society, up from 1 Trillion in just over a year or two and now .....
Positivity will remain till economy is completely screwed with so much money pumped in the system and is a long road ahead.
https://www.bloomberg.com/news/articles/2022-11-11/stimulus-checks-left…
Rates follow nominal growth, which was boosted dramatically & artificially by massive money creation for consumption in 2020, on purpose,by policy makers, causing the present massive inflation. Rates follow, they aren't leading indicator. For latter, need to see credit creation. Link
Which reminds us of the uncertain time we live in. 10% in a month? Uncertainty at both ends.
The US$ becomes 'less attractive' as others follow them and raise % rates. That's happening, and the monetary pressure is relieved on the US economy and transferred to...ours, and others.
What would happen to everything if the next US Inflation figure is just a tad higher, at 8%?
I’m still calling for it.
USD fell on a CPI number that was still over 7, because it was a few decimal points lower than expectations. ARKK up by 14% in a day. It’s all the same trade - absolute monkeys who think the Fed will start lowering interest rates with CPI still at these levels. Possibly not even human traders, just algos trained on the particularly stupid data points of the last few years.
Fundamentals for the NZ economy are still garbage. Risk off will return shortly, and with it, the flight back to the USD.
Oh I agree. But it’s just that everything is volatile and ‘laggy’ right now. I suspect the NZD is laggy too. Some were calling an imminent collapse of the NZD 4-5 weeks ago.
If US data really started to weaken then perhaps the NZD will be resilient for a while longer.
But whether it’s the NZD or the domestic economy, I suspect the really hard times are coming in 2023
Its not been hacked, its been blatantly ripped off. Come on guys the company is registered in the Bahamas for Christ sake, how stupid are crypto users ? They just stole your money Bro. FTX basically turned into a central bank which was everything Crypto was trying to avoid and the bank turned out to be like one in Afghanistan or Lebanon.
https://cointelegraph.com/news/plaid-suspends-ftx-us-access-to-user-dat…
Plaid suspends FTX.US access to user data after ‘concerning’ reports.
On Nov. 12, Twitter users began reporting that FTX.US had attempted to access their accounts through Plaid. Reports so far only suggest that the users’ data has been accessed, and no reports so far suggest that any funds have been removed.
"But not so positive was an unexpected fall in new car sales in India."
I would say this is positive news. Spending money on an unsustainable transport mode that is in inevitable decline is a positive for their economy. It means transport investment can be directed to more efficient modes.
I wonder how the Trump donors are feeling today - especially as he sits on a huge mound of funds intended for his next campaign?
‘Don’ of a new era: the rise of Peter Thiel as a US rightwing power player
The Paypal Mafia’s lynchpin is putting his vast tech fortune to work for candidates aligned to Trump’s agenda in the midterms
Don't worry FTX's CEO won't be too vulnerable - he is Biden's second biggest donor. He will be more protected than Hunter's laptop or a Ukraine gas firm.
What is unravelling now about FTX and its relationships with the ruling elite are fascinating, disturbing, and revelatory.
- SEC Chair Gary Gensler has been engaging with SBF to develop a regulatory framework for the industry. He's seemingly under seige right now.
- What exactly has been going with Congress and FTX? It appears that things were moving towards giving FTX strong power and influence in the industry.
- FTX is noted as being a partner of the WEF (for which Cindy is a pin-up model). Despite all the brouhaha, the WEF has not even bothered to remove FTX from their website or distance themselves.
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