Here's our summary of key economic events overnight that affect New Zealand, with news all eyes are on whether the global economy is heading for a hard or soft landing.
In a closely watched speech yesterday, Fed boss Powell said the US Federal may scale back the pace of its interest rate hikes in December. "It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting". However, Powell added that the "terminal rate," is likely to be "somewhat higher" than the 4.6% indicated by in their September projections.
Markets are now sure the December 15 (NZT) rate change will now be +50 bps, rather than the 75 bps previously assumed. Their higher end point will probably keep pressure on the RBNZ to stay ahead of them.
Layoffs in the tech sector are starting to mount, and this has pushed the layoff data to nearly a two year high. Still, in the grand scheme, the numbers at 77,000 are really very low still.
US jobless claims came in lower than expected at just under 200,000 taking the total on these benefits to 1.26 mln and still +0.9% of their workforce. It was surprising that this labour market data didn't rise given the anecdotal job layoff reporting.
Analysts are still expecting payrolls to have grown just +200,000 in November, which will be the lowest level in nearly two years. This data will be released tomorrow morning.
The PCE inflation measure came in at 6.0% in October, its lowest of the year and another indicator price pressures are easing the in US. Meanwhile personal income rose faster, at a rate exceeding +8% pa, while personal spending rose even faster, at an annualised rate exceeding +9%. The core drivers of consumption are not showing any sign of stress yet.
All these labour market signals may be remaining upbeat, and point to a soft landing, but things have turned lower on the factory floor.
The widely-watched ISM PMI contracted in November, its first since May 2020. And the internationally-benchmarked Markit PMI is contracting too.
And American construction spending las fattened right off. But to be fair, it remains at a high level at +9% higher than year-ago levels.
In their housing markets, mortgage interest rates dropped their most in a month in November since 2008.
The FT is reporting that Blackstone is now limiting withdrawals at its US$125 bln property fund as investors rush to exit these exposures.
In China, Beijing is set to announce an easing of its pandemic quarantine protocols in the coming days and a reduction in mass testing, a marked shift in policy after anger over the world's toughest curbs fueled widespread protests.
Meanwhile, another factory PMI report shows China's manufacturing sector contracting, confirming the official data.
Trade activity is softening fast now. South Korean exports fell -14% in November from a year ago. That is a big move for a big exporter.
Japan's factory PMI slipped back into contraction in November.
And the downturn intensified in the EU.
In Australia we are seeing a deceleration rather than a contraction in their factory sector. But a separate local PMI already has them in contraction.
And with all this retreat in trade, as you would expect, container shipping rates are still falling fast, down another -5% last week alone to be -75% lower than year-ago levels and -15% lower than ten year averages. Outbound rates from China are the weakest. Bulk cargo rates are little-changed however.
International air cargo volumes are sagging again too, down -5.6% globally in October, down -8.0% in the Asia/Pacific region. Things would have been worse if it wasn't for the +10% rise in air cargo volumes out of North America.
But there is a recovery of sorts evident in passenger air travel, although it is still a massive -28% lower than pre-pandemic levels. Again, these global averages would be worse without the North American data that is almost back to pre-pandemic levels.
The UST 10yr yield starts today at 3.55% and down -22 bps on the Powell speech. The UST 2-10 rate curve is little-changed again at -74 bps. But their 1-5 curve is more inverted at -97 bps, and their 30 day-10yr curve is also more inverted at -35 bps. The Australian ten year bond is down -12 bps at 3.46%. The China Govt ten year bond is down -1 bp at 2.92%. And the New Zealand Govt ten year will start today unchanged at 4.12%.
Wall Street has opened its Thursday session soft again, with the S&P500 down -0.2%. Overnight European markets all closed up about +0.3% except London which was down -0.2%. Yesterday, Tokyo ended up +0.9%. Hong Kong was up another +0.8% and Shanghai closed up +0.5%. The ASX200 ended its Thursday session up +1.0%, while the NZX50 ended up +0.9% with another late surge.
The price of gold will open today up a USD-induced +US$49 to US$1802/oz.
And oil prices start today up another +US$2 from this time yesterday at just over US$82/bbl in the US while the international Brent price is up much less at just over US$87/bbl. These shifts are also induced by the falling US dollar.
The Kiwi dollar will open today at 63.7 USc, and up almost +1½c since this time yesterday. Against the Australian dollar we are +¾c firmer at 93.6 AUc. Against the euro we are also up +¼c at 60.7 euro cents. That all means our TWI-5 starts today at just over 72 and up +60 bps from this time yesterday to a three month high.
The bitcoin price is now at US$16,973 and up +0.7% from this time yesterday. Volatility over the past 24 hours has modest at just +/- 1.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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104 Comments
I happened to glance at a few online auctions Yesterday. Auckland region
1 was offered on site passed in no bid
16 where offered at a 10am session 3 sold 7 passed in no bid
5 where offered at a 2pm session all passed in no bids on any of these
1 was offered at a 5pm session passed in, there was a bid
1 sold in Whangarei from 1 offered
So 4 sold out of 24, 13 got no bids, again the ones that are selling seem to have been held for quite some time, so we are seeing falling prices here but it does not look like forced sales yet.
In my recent experience there are a LOT of people waiting to buy. Every time the media tells them to expect a drop over 12 months they decide to wait it out a little longer or ask for that discount today. Still good clearance rates in Canterbury. Over 50%. It never got over the top crazy here and you can still buy a near new house well under the cost of building it.
For sure its the rush to get back to the Pre Covid waterline Nov 2019 levels. Those who put the most on will move back the most, Lower Hutt is leading the charge. Auction is an expensive way to buy a house for a young couple, having to do the valuations report for bank / building report for bank etc, vs making an offer conditional thats conditional on these things being satisfactory. There is no urgency now with half getting no bids.
I am not sure why people are still choosing to sell via auction vs price by negotiation, its clearly not working right here and now.
Well presented good house in decent location are still being sold at decent price (not premium but not very low) and it is this properties (one out of fifteen or twenty ) that attracts few bidders is avoiding complete whitewash.
Still too much money in the system and social pressure is at peak, with those who are able to stretch even with rising interest rate are going all out - Memory of FOMO still lingers with them.
Yep, and if there are no bites 'by negotiation' the seller finally shows their hand with a declared price. And if still no interest, the next step (I just got an email today to testify) "price reduced by $xx,000". And then it's just a slippery slope for desperate sellers from there.
Willamonte. In other words, pent up demand. We know how that turns out, a trickle turns into a stampede
ItGuy. I think its obvious the auctions, and the whole market regardless of the process used, are slow. Do we really need to state the obvious every day multiple times. Dont forget the advice of smart buyers to look at it from the other side angle. By the way I did hear that Set sale date is a better way to sell than PBN.
"Willamonte. In other words, pent up demand. We know how that turns out, a trickle turns into a stampede"
This works both ways. My experience from the GFC in the US was that it took a while for people to realise prices were falling, and the number of people trying to sell and get out of the market went from a trickle to a stampede.
It got to a point where people couldn't get rid of/sell their investment properties fast enough.
The 'pent up demand' didn't exist because everyone knew prices were falling (as is now common knowledge in NZ) - and humans experience loss aversion (they hate losing money) - so collectively they wait until they think prices have bottomed before buying (but nobody knows where that is...). It can take months or years to find the bottom when this happens.
How many times have I heard you say "my experience from the GFC in the US"
To you it is yesterday and relevant and the only thing you know. At least now, your massive one way gold bet is paying off with the price of gold up today. Pity the nzd/usd exchange rate though. And pity the last several years. Thanks Talebi /sarc
Agree HM. Probably vital to watch for the synergies between whats happening here now and the GFC and/or Irelands property crash.
We know humans take a long time to accept change regardless if its good for them. Suspect this is a mix of acceptance of change combined with some herd mentality and media. It would be very interesting (and very rewarding next time) to try to model the process (both from an opportunistic perspective but also from a reserve bank perspective)
I think that most of all our issue and the need for endless discussion is driven by this lack of understanding combined with the NZ issue of majority fixed mortgages. I am not sure the ocr shifts work effectively here because as they change the rate it takes so long to affect people.
It would probably be worth the rbnz to reward banks for switching say 75% if their books to a floating rate.. that way as the rates change we would see immediate effects. Ideally (for a small country) we would measure spending effect of ocr changes in near real time (wages, house prices etc too) and be able to really control our local inflation.
As it is everything kind of lags and its real easy to over or undershoot and get massive fluctuations.
One day the old skool economists will see the light, use tech and get strategic. For now they need a good long xmas break to spend spend all their mage buck earnings.
by HW2 | 2nd Dec 22, 8:40am 1669923650
How many times have I heard you say "my experience from the GFC in the US"
To you it is yesterday and relevant and the only thing you know. At least now, your massive one way gold bet is paying off with the price of gold up today. Pity the nzd/usd exchange rate though. And pity the last several years. Thanks Talebi /sarc
Living through the GFC in the US and watching people in negative equity lose their jobs (and some their homes) as recession hit and the associated stress of that experience lives strongly in my mind. I'm sure it would do in yours as well if you were to have the same experience.
New Zealander's don't appear to understand how difficult it was for many people during that time - likely yourself included based upon your views and lack of appreciation of the risk (and potential hardship) that faces many New Zealand households right now.
Once you have lived through something like that, you don't want to experience it again. But then you see people like yourself, TTP. P8, CWBC all promoting ever higher house prices for your own personal financial gain - with no appreciation of the damage it could do if it all turns bad - which was exactly what happened in the US prior to their bubble bursting. I.e. from my perspective you are promoting something very bad - which to me is a very foolish thing to do.
On gold - I own some gold and gold mining stocks, but it is a very small % of my portfolio and it is owned in multiple currencies to reduce risk. So I don't have a 'massive one way gold bet' like you suggest. Any other false accusations you would like to make to try and belittle me?
by HW2 | 2nd Dec 22, 11:16am 1669932987
Have you ever called out an extremist dgm?
HW2 I am very interesting in your thought process on this one. Where is the line where one crosses from a moderate dgm to an extremist dgm?
As a spruiker do you cut the moderate dgm's bit more slack on here?
Where on this spectrum do you see yourself?
I am genuinely concerned that you may be triggered once the mainstream media starts reporting on the empty auction rooms and days with no bids at all. At that point you may have an Ashley Church come to god moment and realise we mere dgm's have been right all along.
This event and the eventual lack of posting will be a sign that the bottom of the cycle is close.
Yip - what HW2 doesn't see is that he's my bellweather to know when it might be a good time for FHB's to buy.
To me, he represents the delusion of those who have overextended themselves against the housing market.
If he loses faith then I know the bottom is getting close - while he's still this chirpy, I know there is still quite some distance to go to the bottom.
But I know the process has started because the CWBCs, TTP's, P8's etc are mostly quiet these days.
Similar patterned happened in the GFC in the US.
by Independent_Observer | 2nd Dec 22, 2:18pm
Yip - what HW2 doesn't see is that he's my bellweather to know when it might be a good time for FHB's to buy.
To me, he represents the delusion of those who have overextended themselves against the housing market.
If he loses faith then I know the bottom is getting close - while he's still this chirpy, I know there is still quite some distance to go to the bottom.
But I know the process has started because the CWBCs, TTP's, P8's etc are mostly quiet these days.
Similar patterned happened in the GFC in the US.
I'm glad to be of service. Tweet. Lets see where this goes
IO, a good read you may enjoy (broken into 5 parts as there’s a bit there). He goes into a lot of what you mention here as far as historical financial crises’ and the current debt loading in the global economy with possible ramifications to the US dollar as a world reserve currency.
https://docs.google.com/document/d/1552Gu7F2cJV5Bgw93ZGgCONXeenPdjKBbhb…
Thanks - some great charts etc in there.
Love the Thomas Jefferson quote on banking in there. Still true a few hundred years later.
https://th.bing.com/th/id/R.b1b95e3385ccf3977f0317d71ea2260f?rik=ELUW74…
Independent_Observer ........for the benefit of HW, TTP et al , I can add to your comments about the GFC and the property market in the USA at that time, as I bought these bank owned "distressed" properties, as the owners just had to walk away from their mortgage debt, and of course the house itself....then not being able to get credit in any shape or form (unless it was a "hard money" lender)
The reason I choose to do this, is you could buy these properties for cash, at the cost of a 20% deposit on an Auckland property at the time. While they had great rental returns on the capital spent to purchase and renovate them ie around 12-15% gross ....plus the capital gains when I recently sold (yes, I did pay a capital gains tax and had no problem at all doing so, as I wasn't "nickle and diming" it , like so many landlords here do) While it used to make me sick, seeing the prices in Auckland just keep rising and rising for that Mt Roskill, south facing, damp sh*t box
So now, when I hear the likes of HW etc who have so much tied up in the NZ market, I can hear the "desperation", as they are all finally realising that NOTHING on this planet can be determined by the way YOU WISH IT TO GO .......so they resort to the "doom & gloom" etc jibes and "blanket"comments to suit their narrative .....because at the end of the day, they are SCARED that the "altar of NZ property" they have been worshipping, could possibly just "turn to custard" or even just go off in another direction, that does not suit their lifestyle, capital returns or cashflow.
NB** I have also had residential rental property in Auckland, so I have a good handle on the market here
Agree and thanks CH - I guess you need to experience something first hand in order to take from it the necessary lessons.
Trying to explain what could happen based upon the conditions and similarities of past events, isn't enough to persuade them on the potential risk of history repeating.
No, it got to the point where mostly single home buyers were upside down on their houses and walked away. Interest rates were jacked up, banks don't lend (NZ now), and banks retained ownership or hedge funds bought them for cash at a very discounted price. You will own nothing and be happy.
Yes the evidence says it is quite slow, its now taking an average of 203 days to sell a property in Auckland.
The evidence I see each day at auctions also presents a picture of decent family houses selling close to cv and lots of old tired houses selling 15% ish below.... but the biggest takeaway is the number that are not even getting a low ball bid.
Perhaps the smart buyers see no point in bothering to bid yet, this has a way to go.
Another sign that the market is sick is the total collapse on spruiker posts on this site. Spruikers seem like Maui Dolphins now, very rare, in fact almost extinct. We need to take great care of them to make sure that the biodiversity on this site is maintained for future generations to be able to see spruikers in the wild.
From Davids closing brief on this site last night - I am merely quoting what Interest.co.nz is saying - do you think David needs to correct that number or do you have other Evidence. Are you accusing David our host of being an Antispruiker?
link
What happened Thursday | interest.co.nz
AND THE PROSPECTS GET TOUGHER
Property listings point to a cool summer for the real estate market. The housing market is heading into summer with a big and rising stockpile of unsold listings, according to realestate.co.nz data. The average days to sell is now up to 29 weeks in Auckland, the longest in a November since 2010 (when it was 41 weeks!)
Housemouse 6% would be nice but we may not get it, especially if we are approaching the 'pivot' and as you have mentioned there may be an element of jawboning or theatre from Orr. Many may be happy with 5.3 or so, especially if they are back in the 4s in 18 months time.
Didn't they add another $50,000,000 worth of Debt to the bottom line a few weeks back? Someone's got to pay that off. I mean, we can't have the share price falling below 67.5 cents, after all. Some people with the ability to price airfares might lose out, otherwise.
by HW2 | 2nd Dec 22, 7:55am 1669920927
Forecasting a hard/soft downturn, unsure which one. Not even suggesting a depression or world recession. Could have asked a DGM instead.
If you study the past financial crisis over the last 100 year and look at the newspapers in the years before the crash, it is normal that 95% or more of the population and media fail to forecast a hard downturn, depression or world recession. Bad news doesn't sell well and society and its collective mindset is too overwhelmed with euphoria of becoming wealthy to be aware of the risk ahead. Anyone who thinks otherwise or disagrees with the herd is a fool who should be laughed at......much like those calling others here 'doom gloom merchants' in recent years.
Because there is two sides to the situation. Its best to describe that and make others aware
Why do you always take the contrarian view. I ask a fair question, if someone is envious and you get all snotty. How about let them answer for themselves instead of launching in
Someone could take an isolated example from my dealings and skew that one way or another. So I am defending someone not here to defend themselves
by HW2 | 2nd Dec 22, 10:10am 1669929059
Because there is two sides to the situation. Its best to describe that and make others aware
Why do you always take the contrarian view. I ask a fair question, if someone is envious and you get all snotty. How about let them answer for themselves instead of launching in
Someone could take an isolated example from my dealings and skew that one way or another. So I am defending someone not here to defend themselves
The more you call people envious of your risk holding multiple properties in a falling housing market, the more delusional you appear to a lot of people (not a personal attack HW - just helping you to see/give you awareness of how you come across from a different perspective).
That is the key issue - you assume people are envious of you because you own a lot of properties - when in reality 99% of people don't care about your wealth (they just want one house to call home and to raise a family) - but your claims that everyone is envious of you and your success is crazy, most people will just think that you are greedy and delusional - especially when there is a housing affordability crisis and a housing shortgage - nobody thinks your the hero, they think that you're the greedy guy that has taken more than he needs from society.
by HW2 | 2nd Dec 22, 11:23am 1669933402
Regarding gold it sounds like you did not have the courage of your convictions. IO in other words you are a spruiker. Shame
On the contrary, I'm not foolish enough to have all of my eggs in one basket. I diversify across investment classes and currencies and dollar cost average to reduce risk.
Not sure how that makes me a shameful spruiker.
If you are more courageous than me by being all in with all of your money and another 50% with the banks on the NZ residential property market when prices are 10x household incomes, well good for you.
The only shameful spruiking of an asset class appears to have been coming from you (and your over exposure to that one asset class).
HW2, I feel you're now in a constant state of unrest. You seem to belittle others at every opportunity.
https://www.youtube.com/watch?v=A_zlNwO2vl0
Once you chill, go back on your comments and re-read them. Hopefully you'll discover what I mean. Those who are happy with where they are in life don't behave this way.
Haha
I think some parts of the economy will have a hard landing - residential construction and related sectors, real estate, hospo, domestic tourism.
But some won’t be too bad.
Hence a landing somewhere around the middle. For me edging towards hard given the importance of the above sectors to the domestic economy.
I have been thinking that the RBNZ & economists are going to get caught out because they think the markets will act in an efficient way
but what if the markets are rigged with cosy cartel like behaviours and a complete lack of "price" competition
think building suppliers, food and grocery, your local mechanic and the MTA, banks....oh and real estate
Yet average wholesale prices over the last week have been $0.005 / kWh.
That's quite a markup Contact are making on their retail customers.
https://www1.electricityinfo.co.nz/download/new_attachments?id=13080
We aren't in the UK though.
'Could be worse' is how we end up tacitly accepting a lot of the ticket clipping and gouging that goes on in NZ. We could live in Sudan as well, but that doesn't mean I'm going to be happy with armed gunman on every corner every week instead of every day, does it?
Wonder what Friday's BLS payroll report is going to reveal? ADP's November estimate was bad for a bunch of reasons beyond just being the worst in almost 2yrs. Major layoffs, manufacturing and *cyclical* industries offset by waiters and bartender jobs. https://youtube.com/watch?v=Wfeunr Link
I love this property talk about houses not selling, properties passed in at auction.
Its quite simple really, the asking or reserve price is too high.
Unless stats are kept on whether the property that passed in is put up for sale again at a lower price later on, it is difficult to assess what's really going on. I suspect these stats are not available unless an enterprising individual monitors all auctions and house offers. Doubt if realestate obtain this level of detail.
The widely accepted metric of the market is the settled price of a sale, all offers and bids that don't result in a sale are merely posturing and should be ignored.
I comment on no bids as it implies that the type of people who like to make low ball offers are not even going to the auction. It's not a functional market, it's a bunch of sellers. The number of successful sales seems to have declined in Auckland this week vs last, let's see. Quite a few where withdrawn as well due to no registered bidders.
The price of gold will open today up a USD-induced +US$49 to US$1802/oz.
Reflects a lack of will to raise real interest rates to stop governments inflating away our collective debt.
The US Treasury Inflation Protected 5 year Securities yield collapsed from a recent 1.82% high to 1.19%.
I'm going to use the 'not necessarily something I was aware of' line next time I want to get out of trouble ... if it's good enough for the "never told a lie" PM it's good enough for me:
https://www.stuff.co.nz/national/politics/130623964/jacinda-ardern-atte…
They are all Donkey Deep in this ! But none more deep then Nanaia Mahuta.
(A rural expression, defined below, for the City Spruikers benefit)
INFORMAL•NEW ZEALAND
seriously or heavily involved, especially in something considered controversial or undesirable.
Some would see this as Karma
“The Prime Minster has some explaining to do. How was it that this was discussed in caucus, but she claims she wasn’t across it? Why didn’t it go to Cabinet for consideration despite 7.78 of the Cabinet Manual and how was it that her Senior Minister Nanaia Mahuta was so across this, even saying in Parliament that it “may not pass the constitutional threshold” and yet Ardern was blind to it.”
The Senior Whip is Duncan Webb. An extremely high bar required here to think that the man who literally wrote the stage one legal textbooks used by most law students in this country was not aware of the ramifications of what was being proposed.
At some point, you have to question whether the power structure of the Labour Party itself has been usurped by a faction prepared to act against the wishes of cabinet or without the knowledge of senior leaders to get what it wants.
And oil prices start today up another +US$2 from this time yesterday at just over US$82/bbl in the US while the international Brent price is up much less at just over US$87/bbl. These shifts are also induced by the falling US dollar.
Other factors are taking the lead - increasing oil consumption away from the West will be settled in any currency pair except USD/GBP/EURO - which is subject to forfeiture by US authorities.
‘Not a choice, but necessity:’ Iran, India recalibrating ties amid geopolitical shifts
Following a drop in trade brought on by US sanctions, New Delhi and Tehran - boosted by their mutual strong relations with Moscow - are set to revamp ties in a new era of Eurasian multipolarity.
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