Here's our summary of key economic events overnight that affect New Zealand, with news that markets are ignoring weak Chinese data and focusing on the positives today.
But first, there was another dairy auction earlier today. However this one isn't about the auction prices - which rose +2.4% in USD terms. It is really all about the exchange rate, because in NZD, the auction prices fell -3.1%, and in local currency that means prices have now fallen for four consecutive auctions and wiping out all the good September rises. Year-on-year prices are down -7% on that basis and down -18% in USD terms. Analysts may give up on some of their 2022/23 season payout forecasts now. The NZD has risen +5.6% since the prior auction. Prices in USD rose +3.1 for both SMP and WMP, but to have just broken even they needed to rise about +10% and back to those September levels.
In the US, retail sales last week rose only about the CPI inflation rate from year-ago levels, so that is a noticeable slowing of sales volumes heading into their holiday shopping seasons.
Gradually, some of the heat is going out of American producer price inflation too. It was up +8.0% in October from a year ago, but only up at an annualised rate of +2.5% on October from September. "Core' rates rose even less on that same basis. Perhaps 'transitory' is arriving, finally.
Perhaps the heat is going out of American factory stresses, but not everywhere. The New York "Empire State factory survey" rose in November to record a better expansion, with activity and employment indexes high. But new order levels were unmoved. This survey is coming out of a three-month dip.
American consumers are loading up on more personal debt, after many years of relative restraint - and especially credit card debt. US household debt climbed at the fastest annual pace since 2008 in the third quarter, with credit-card balances surging even as the interest rates that lenders charge to consumers hit a multi-decade high. Households added more than US$350 bln in overall debt last quarter, taking the total to US$16.5 tln.
Canada reported that their house prices continued their slide for an eighth month in October as buyers and sellers adjusted to an environment of higher interest rates. Prices are now down more than -10% from their peak and lower than year-ago levels.
The Japanese economy unexpectedly contracted -1.2% on an annualised basis in Q3-2022, missing market forecasts of +1.1% growth and shifting from an upwardly revised +4.6% expansion in Q2. This Q3 result was their first contraction in a year.
China's industrial production rose +5.0% year-on-year in October according to their official dat, less than market estimates of a +5.2% increase and after a +6.3% growth in the prior month.
But electricity production barely reached year-ago levels (+1.3%), so unless the Chinese are undergoing a large productivity gain, it is hard to see how these official figures are what is really going on in their factories.
Chinese retail sales fell, according to official data, slipping -0.5% year-on-year, hurt by foodservice sector which dropped more than -8%. In fact, without car sales, the decline would have been almost -1%. Even after all this the fall was -¥202 bln (NZ$50 bln) in the October month alone.
We should note that not only did Chinese President Xi meet with his US counterpart in what was a positive exchange, he also met with the leaders of Australia and South Korea, also positively. And the background wolf-warrior talk suddenly was dialed back. China's alignment with Russia isn't working out for them, and trade is more promising with countries it previously tagged as rivals.
In Germany there was something of a surprise in consumer sentiment. While it is still deeply negative, it was recorded as much less so in a widely-watched November survey. The 'improvement' certainly took analysts by surprise. Perhaps perceptions that the Ukraine war might not drag on unresolved for many years are helping.
The UST 10yr yield starts today at 3.84% and down half the 6 bps it rose yesterday. The UST 2-10 rate curve is more inverted at -56 bps. And their 1-5 curve is also a little more inverted at -65 bps. Their 30 day-10yr curve is less positive at +16 bps. The Australian ten year bond is little-changed at 3.72%. The China Govt ten year bond is down -2 bps at 2.83% but still high. And the New Zealand Govt ten year will start today down -6 bps at 4.28%.
Wall Street has opened its Tuesday equity session stronger with the S&P500 up 0.8% in late trade. Overnight, European markets rose on average another +0.3%, except London which fell -0.3%. Yesterday, Tokyo closed up a mere +0.1%. Hong Kong closed up a very strong +4.1% on Chinese lockdown easing rumours and 'facts' in Beijing. Shanghai gained +1.6% on the same sentiment. The ASX200 ended its Tuesday session little-changed (-0.1%), as did the NZX50 (up +0.1%).
The price of gold will open today little-changed at US$1771/oz. This is back up +US$2 from this time yesterday.
And oil prices start today little-changed from this time yesterday at just on US$85.50/bbl in the US while the international Brent price is just over US$92.50/bbl.
The Kiwi dollar will open today at 61.7 USc and +¾c stronger. In fact, that is an almost 3-month high. Against the Australian dollar we are unchanged at 91 AUc. Against the euro we are also firmer, up +½c at 59.5 euro cents. That all means our TWI-5 starts today at 70.4 and up +40 bps.
The bitcoin price is now at US$16,938 and up +3.0% since this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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65 Comments
China & Russia cooling off a bit, as pals? Hard to say but Xi is as canny as he is inscrutable and Biden was present, but Putin wasn’t. Don’t think Putin can afford to be too far away from his desk & protection these days.
If you're interested in geopolitics and US-China competition, this is absolutely THE video you need to watch today. That's Evan Feigenbaum, former Deputy Assistant Secretary of State and VP of major Washington Think Tank Carnegie Endowment. Here is what he says Link
China's alignment with Russia isn't working out for them, and trade is more promising with countries it previously tagged as rivals.
Still posting links to that disgusting blog?
... when your best buddies are Russia , North Korea & Iran , you really are a long way up sh*t creek without a paddle ...
Don’t know about that exactly GBH. The CCP has been rather adroit at collecting their dominoes and arranging them. Myanmar, Pakistan, Iran, Syria, Afghanistan recently, Iraq & Lebanon work in progress. A huge swathe of land under their influence and patronage from the sub continent to the Mediterranean. And now that Russia has drastically weakened itself economically & militarily there is a bit of opportunity on offer elsewhere. Trumps brief advisor General MacMaster was convinced the CCP was in mind to reclaim & rebuild its empire of centuries previous. These things take time though but it’s just over 100 years since Mongolia walked out, that might be a good starting point.
As per report only 3% of houses were sold at a loss and in next quarter it should go up to 25%. Also Capital Gain in house is Still $400000 in Auckland.
So one can understand that it is a long path before reaching the bottom though pace of fall should be deep and fast from here.
https://www.newshub.co.nz/home/money/2022/11/vendors-may-need-to-adjust…
In Canada after decline average house price is $665000 and is suppose to be high and one of the worse in world. If Canada with 665k is worse what do we call NZ with 965k
https://www.cbc.ca/news/business/crea-house-data-october-1.6651867
RBNZ has failed in the past and will fail in future as they too know worse scenario is now inevitable.
Till now RBNZ only solution was to print and supply easy and cheap money.......too much intoxication of money, will not be without withdrawl symptoms.
End of cheap money era will have its impact not only on housing but also companies specially tech companies.
https://www.cnbc.com/2022/11/15/tech-leaders-reckon-with-higher-interes…
Fasten your seatbelt for the rollercoaster ride.
Funny how some of these companies are masquerading with shiny titles such as “fintech” and with early backing from top tech VCs have got a seat next to the likes of Intel and Nvidia on NASDAQ.
The markets are starting to piece together that the actual business models sitting behind the technology facade are the age-old invoice discounting or payday lending.
Inflation? What Inflation!
Home and Contents invoice hit the inbox this morning. Increase on last year? 19.8%.
The biggest component? Earthquake Levy, up 60%
I just received mine (Wellington) last week; approx 40% increase (Vero). I've obtained a Tower online quote which was the same as last years so have advised broker I will be moving insurers.
During our bare knuckle fight with EQC I found on the web a thesis or similar detailing the history & working of it, the national disaster fund etc. Thought had saved but can’t find it. It revealed how successive governments had dipped into these funds for use in non related expenditure. The Lange/Douglas reallocated all the then funds onto the “government’s book.” These funds are collected directly from all household insurance policy payments and they should remain dedicated and directed for that purpose. It is private money. Recall Muldoon in parliament sharply pointing out the problems for the Abbotsford slip in Dunedin due to the previous Labour government having run off with funds. So now the levy has been increased yet do not think there is any new measure to prevent it being similarly run down, pilfered as it has before.
https://www.stuff.co.nz/the-press/110674808/plunder-how-the-bill-for-th…
The reason why I'm so nervous about our minister of finance deciding how to recalculate government debt, and now include the super fund as an asset.
Extraordinarily untrustworthy the lot of them. The people of Canterbury, and subsequent areas, were persecuted by some of the most appalling punitive actions by government agents all because the government had stolen the money that the people had paid to protect themselves. The hypocrisy is staggering. Same as the party donation rort. They sit in parliament and legislate and then walk out the door and immediately set about defeating that same legislation.
Mr F : were you aware that seafood company Sanford reported a super excess profit of $ 55.8 million for the financial year , nearly $ 40 mill up on last year's $ 16.2 million ...
... there's a cost of living crisis you slippery buggers ... wheres Megan Woods / Com Com ! ... I demand an investigation into their super snapper profits .... darn , this makes me crabby ... we would tear up their social license , leave them floundering ... 🐟😡🐬
Yeah as if the spiralling wage inflation isn't bad enough, there is also circumstantial inflation (for lack of a better term) such as the EQC levy, and in Auckland I think Watercare were planning to put prices up by 9% per year to pay for more water storage well before the current inflation (just because of one drought year and Hosking turning it into a Watercare beat-up).
It was incredibly stupid for the RBNZ to use low interest rates to create high local inflation just because we had low imported inflation over the last 15 years (and this is not just Orr but Bollard and Wheeler too). Its coming home to roost now. Also stupid for finance ministers to not have changed the RBNZ mandate accordingly (again not just Robertson but also English and Joyce).
Great comment. China is witnessing sustained falls in export demand and could soon undergo a deflationary spell that will be passed on to the rest of the world.
However, the current bout of high local inflation could run hot in the months to come due to an acute skill crunch and infrastructure shortfalls.
Yes, insurance is a key driver of current increases in the cost of living, as are local Govt rates (average 7% increase), and, of course, mortgage payments! Usually we absorb these rises (and wage increases) by relying on near-zero price increases on imported goods. Those days may be over.
Was the sum insured increased due to the increased costs of construction?
Yes - just checked, thanks to your question. $30k, which is negligible in the grand scheme of things. It didn't cost much less than that to get the place painted outside a year odd back. So maybe it's to cover the 'improvements'! The price for the next re-paint in a +5 years time will be interesting.
You have to wonder how much these trades make eh! How many houses a year could one person paint, 12 maybe? Paint and materials is a tiny fraction of 30k.
Glad I'm not the only one! Mine was only up 14.3% though, and they increased the Sum Insured by 10%.
Similar numbers here for my house insurance and car insurance.
The dog's pet insurance has gone up a whopping 25%. I've actually decided to 'self-insure' her now because of this.
Paid my insurance through Internet banking yesterday, had to do it in two transactions because I have a $10K payment limit. Insurance up 38% YoY. Went shopping for alternatives, couldn't find anything cheaper. Admittedly my situation is slightly different to most on here as I also have to cover farming equipment, and things like statutory and public liability, but can you guess where those costs will be passed on?
Whew - expensive.
I count myself lucky then - renting, so no house insurance, and haven't bothered with contents in 20 years. I'll take my chances.
Out of interest, do most the crypto guys here use an exchange similar to FTX or can you just do it all yourself? Can any of these exchanges be trusted? FTX was run by kids who didn't know the difference between good luck and good management, I get the feeling it isn't alone.
Easy Crypto..NZ based..buy and sell only, FTX held people's funds/crypto which hate to say it was foolish of them.
The entire segment is potentially in the same boat. Stability and security had been pitched as a marketing angle but we're seeing realities that are anything but.
well 5 weeks later my $50 test buy of cyrpto is still wondering around the interweb after leaving easycrypto and never arriving in my jaxx wallet. But is probably worth $40 or so now anyway. Good luck JJ
Easy Crypto is the easiest/simplest option in NZ. You pick the crypto(s) you want (they don't have the more obscure stuff, but BTC, ETH etc are all on there) and then do an auto-payment of $50 or greater. Put in your wallet address and it gets sent to you, not stored on an exchange which is much safer.
I've been using EC since the service started and never had any issues.
...in thoery. Guess I'm an exception.
Are you 100% sure the wallet address is correct? What happens if you view the transaction on a block explorer?
The number was generated by following the steps, I didn't make it up. I'm sure someone could sort it out who knows these things, but for a novice it's daunting....srceeds of numbers and addresses when I look at the thing. Maybe I'll have another crack but wasted enough time of late on it.
A block explorer. Oh gawd..somehting else i need to learn.
Thanks for your interest though,
Must be Jaxx at the Interweb rastus, got her number? Maybe a fax will clear it up?
It was run a lot more cynically than you make out.
I'm not a kid, but to protect your crypto, you need to remove it from your broker (like FTX) and transfer it to a hard wallet, ie CEX to DEX.
I do the same with shares, ie I direct register them (DRS) with the company's transfer agent (like getting a paper certificate).
Now that auctions are failing left right and centre, real estate agents have come with a different narrative to spin (have to) about conditional and unconditional offer - Though partly correct but most auctions are failing not only because of unconditional offer but for no buyers at reserve / asking price.
My friend received below email when no one bidded at auction. If justification is that 90% are failing as most buyers are conditional, why go to auction. Also MOST buyers that are being talked about can be one or two for that property and that too at right price unlike last year.
Email from real estate agent below :
That lovely property ........... has passed in at auction today. This is not surprising as about 90% of the properties that go to auction pass in as most buyers in the market are conditional buyers.
Auctions are pushed because they're the quickest, easiest way for an agent to get a sale, sellers like them on the hopes of a rogue offer, and buyers are wanting a deal.
Also often if there is bidding, and the auction fails to meet reserve then there's a precedent set as a negotiation point.
It's not common for auction sales to be overwhelmingly final on the day of auction.
Russian Missile guidance systems looking a bit shoddy and may well have just unwittingly escalated.
While that explanation fits in nicely with the popular "bumbling idiot" narrative, it's far more likely to have been the remains of a missile shot down by Ukrainian armed forces.
I agree, it is unlikely to be a direct strike. But the fact the Russians were constantly attacking so close to the Polish border was always a risk for them. It was inevitable that something was eventually going to cross over.
Poor risk analysis, questionable tactical decisions, shoddy strategy, and failed execution. The "Special Operation" is now into month 8 with any sort of Russian victory looking highly doubtful.
It's hard to disagree with the "Bumbling idiot" narrative.
Looks like it may have been 2 missiles.....
The blatant Russian lies would tend to confirm it was their missile or missiles; I don't think Russian cruise missiles would be that limited , if they can hit targets all over Ukraine
State news agency Ria Novosti quoted a Russian "military expert" who claimed that Russian cruise missiles “would not have been able to reach Polish territory, but Ukrainian S-300 [surface-to-air] missile systems, functioning abnormally, could”.
Several pro-Kremlin Telegram channels published similar claims.
The old "we are so inept it couldn't have been us" defense.
Even the Russians are going along with the Narrative now.
The thing with False Flag operations, is that they only work if they are believable.
Had Russia stuck to only attacking eastern Ukraine, a random attack on Poland would not hold the same credibility.
and these are the same people who shot a Malaysian airplane out of the sky - and continue to deny it despite the evidence
How much longer do they get to call the shots
In before Audaxes links to some Zerohedge comment thread saying it's all a false flag designed to drag NATO into the conflict.
I always appreciate the alternative insights, but this particular article seems like someone who can't see the forest for the trees. If that same author had access to accurate Russian and Chinese data I imagine his predicted outcome would be somewhat different.
To be fair the odd US cruise missile went astray during the Gulf wars. Seven went off course in 2003 and landed in Turkey and Saudi Arabia. They didn't explode though.
It was worse in the Vietnam war. Unfortunately, the countries that were impacted didn't have many alternative options, so just had to take it.
Imagine sending a missile barrage against one country and ending up hitting three (Ukraine, Russia and Poland).
NATO have the pretext to escalate as much as they want now.
.. aren't we glad that Biden is the current US President ... imagine if Trumpy was still in control ... he'd be in the big room , punching red buttons , screaming " die , you commie b'stards " ...
Until someone whispered in his ear " Mr President ... this is McDonalds ... and the kids want you out of their play zone " ...
In USA many buyers are approaching their lawyer not for due deligence but to know how to come out of the contract
Also is correct that effect of rising interest rate will be felt not now as much as in future when it will start to hurt the pockets along with sentiments.
Yesterday's US news was the US Govt deficit reducing by tens of billions of dollars, today's US news is private debt exploding. Maybe readers would like to know that the latter is a direct and inevitable consequence of the former?
It is the same here of course, if the NZ Govt reduced its $60bn (ish) net debt by $10bn, private sector debt would increase by around the same amount.
$NZ gaining on US should help reduce that inflation for q4 nicely.
Expect 6% inflation or less for Q4, no need for 100bp jumps, 50 bp if you have to but I think 25bp is about enough.
The curve is bending in the right direction now.
Ask yourself, "What will happen to asset prices if the RBNZ goes +0.25% on the 23rd?", followed by, "Is that what they want?"
I'll suggest the OCR rise also has a lot to do with the broader objectives of the current Monetary policy settings.
Is it to "tame CPI Rises", which hopefully will be a short term thing, or is it to "restructure the economy" to provide a longer term balance to what is, by any measure, a distorted being. i.e. allow lower asset prices to take the strain of Inflation Taming rather than wage demands?
If there's one thing we should have learned over the last 15 years it's "Never let a good crisis go to waste" and perhaps, this time, the RBNZ isn't?
Exactly. Orr has taken a lot of grief over his decisions in the past.
If they come off the gas early and indicate rates will level off then NZ will go on a property buying binge and big xmas spend up.
If it happens we will sell the house quick as prices will rebound faster than Orr dropped rates in the pandemic... and watch the whole ship sink over a couple of years.
The sink wouldnt be down to a wealth for the rich, quite the opposite.. the rich would prosper at the expense of the poor and middle classes -> smart young kids would exit on planes in droves. We couldnt attract any more bus drivers teachers, police, nurses doctors (they couldnt afford to live here and wouldnt want to). Rents would rise, poor would barely be able to eat, crime would rise. infrastructure would be shot.
Be the worst place on the planet to reside. low salaries, high prices, crap infrastructure. Oz would gain a million smart kiwis.. we would import a million dumb unskilled fruit pickers.
Orrs legacy would be in tatters.
So no. He and other reserve banks are gonna keep blaming ukraine and rise quite a bit i think.. til employment drops and house prices fall and dom.inflation is back in the range
Fair points bw. The challenge here in my view is trying to achieve two opposing objectives with one lever. Hiking rates to the moon is not going to bring down the CPI without crashing demand in the economy and destroying thousands of lives, but, as you say, softening the stance now would quickly lead to an uptick in house prices (might have already started). Surely the answer is to prioritise not destroying lives by holding interest rates where they are (go 25 pts if you must), but guard against asset price inflation by dialing up other controls at the same time (e.g. LTV)? We can deflate the housing market by controlling the supply rather than the cost of credit.
Plenty of fallout from FTX. A lot of leverage and derivatives trading going on within crypto that will spill out onto the stock market over time. Tokenized Securities Offerings.
https://www.theblock.co/post/187228/crypto-lender-salt-halts-withdrawal…
Crypto lending platform Salt paused withdrawals and deposits, according to a company email sent to customers.
The firm said in a message attributed to CEO Shawn Owen that "the collapse of FTX has impacted our business." However, the full extent of the exposure was not disclosed in the message.
"Until we are able to determine the extent of this impact with specific details that we feel confident are factually accurate, we have paused deposits and withdrawals on the SALT platform effective immediately," Owen wrote.
https://www.coindesk.com/business/2022/11/15/crypto-lender-blockfi-prep…
Crypto lender BlockFi is preparing a potential bankruptcy filing because of its "significant exposure" to bankrupt crypto exchange FTX, the Wall Street Journal reported on Tuesday.
Some small companies that all adds up over time considering how intertwined a lot of these markets are.
And then look at Independent Reserve in Australlia,
Does not lend, trade or reinvest client assets.
Maintains 1:1 reserves of all client assets and keep the vast majority of these in offline cold storage vaults. Automated jobs continually monitor client assets on the blockchain and compare these to client liabilities on the platform.
They maintain segregation of customers’ holdings.
Books are balanced, and there is no debt on the balance sheet.
They engage external auditors to undertake an annual audit of financial statements in accordance with Australian Accounting Standards. The audit includes verification of all client asset holdings. Both fiat and crypto.
When you keep things simple, doing the right thing isn't that difficult
When you keep things simple, doing the right thing isn't that difficult
Yes but I don’t think the execs at FTX were interested in doing the right things.
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