Here's our summary of key economic events over the weekend that affect New Zealand, with news we are ending the year with some very mixed signals, and it isn't clear one way or the other whether the widely-expected recession will actually eventuate in 2023. Markets are no longer in 'fear' mode.
However, in China the pressure on property developers is never-ending. Now, to bail them out, Beijing has ordered its top four state-owned banks to issue offshore loans to help developers repay overseas debt. And to encourage buyers to return, mortgage interest rates for first home loans have been dropped by over one percentage point since the start of 2022. As of the end of November, the average first home loan rate in China stood at 4.17%.
In Japan, births among Japanese nationals totaled 798,500, according to official data for 2022, and down from +811,000 in the prior year. This is the first time the 12-month figure has dipped below 800,000 births. That is far below replacement levels and the Japanese population is shrinking fast now. Earlier, the Japanese population was forecast to shrink to less than 100 million people in 2053, but now there is a strong likelihood the milestone will be reached much sooner. Of course, this isn't just a Japanese 'problem'. It is equally true for South Korea, Italy and China
In Europe, producer prices are now falling, and quite quickly after a heady, uncontrolled run-up induced by Russia's invasion of Ukraine. They fell -2.5% in October from September (or falling at an annualised -30% rate), but they are still +31 higher than year-ago levels.
In the US, their labour market has again outperformed analysts expectations with a headline seasonally adjusted rise of +262,000 non-farm payroll jobs in November when a +200,000 was expected. The labour market expansion hasn't stalled yet. But as regular readers know, we also look at the raw, unadjusted data, and that shows payrolls actually rose +574,000 to 155 mln* and a new record high. That is +4.8 mln more employed than a year ago, and almost +2 mln more employed than the peak pre-pandemic. That is a lot of extra payroll cascading through the giant American economy. It is no wonder that some analysts think a softer landing is possible.
The same data shows that US hourly earnings rose +5.8% in the year to November, and weekly earnings were up +4.9%. Hourly earnings are rising at a faster annualised pace in November from October, up at the rate of +8.1% pa. Workers seem to be keeping up, and that demand-induced gain is consistent with a tight labour market.
Wall Street seemed under pressure after this data was released, now unsure whether the US Fed will ease back in the way that was signaled earlier in the week. Clearly wage-push inflation is a policy 'thing', and the much larger expansion of the overall workforce is providing the currency to sustain higher prices for longer.
That's not to say it's all roses. It isn't. The Fed's Beige Book surveys show that businesses expressed greater uncertainty and increased pessimism for the American economy as prices and interest rates continue to rise.
Canada's labour market also turned in a better-than-expected result in November too. Total employment was little changed in November (+10,000), but that follows a big increase of +108,000 in October and the November data shows the prior month's result was not an outlier.
In Australia, it is becoming clearer that sharply higher prices for coal and natural gas (thanks to Russia's Ukraine invasion fallout), and continuing good iron ore prices, are delivering a substantial windfall tax-take for Australian states and their Federal government. They have a direct financial interest in raising carbon-emitting outputs. These increases, along with the ending of some substantial tax deductions available to miners, are enough to push their budget balances into surplus. That is a huge turn-around from what just last year seemed like persistent long-term deficits.
Meanwhile, global food prices eased slightly in November, continuing a downward trend since the peak in March. Prices for both meat and dairy contributed to the easing. Overall prices are -15% below their March peak, and now back to year-ago levels. But they remain +40% higher than their pre-pandemic levels, so the core pressure is still there.
The UST 10yr yield starts today at 3.49% and down -4 bps from where we left it Saturday. A week ago it was at 3.69% so a -20 bps drop since. The UST 2-10 rate curve is slightly more inverted at -79 bps. And their 1-5 curve is more inverted too at -103 bps, while their 30 day-10yr curve is little-changed at -32 bps. The Australian ten year bond is down -4 bps at 3.34%. The China Govt ten year bond is unchanged at 2.92%. And the New Zealand Govt ten year will start today unchanged at 4.03%.
The price of gold will open today up at US$1797/oz. A week ago it was US$1753/oz, so a +US$44 gain since then, mostly exchange-rate induced.
And oil prices start today down -US$1 from this time Saturday at just over US$80/bbl in the US while the international Brent price is down to just over US$86/bbl. These are about +US$4 higher for the week as the US dollar sank.
The Kiwi dollar will open today at 64.1 USc, and up to it highest since August. Against the Australian dollar we are firmer at 94.4 AUc and an eleven month high. Against the euro we are firm at 60.9 euro cents and a two month high. That all means our TWI-5 starts today at 72.4 and a three month high.
The bitcoin price is now at US$17,013 and down -0.3% from this time Saturday. A week ago it was at US$16,496. Volatility over the past 24 hours has low again at just +/- 0.7%.
* = or to 158 mln if you use the other LNU02000000 data series. It is usual to use the lesser CES0000000001 data series, which forms the basis of most reporting, including ours. There is minor controversy over these different series because they are diverging, but the upstart promoters forget their preferred set delivers a larger employed workforce even it the changes are smaller.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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