Here's our summary of key economic events overnight that affect New Zealand, with news the global economy is clearly splitting between the US-oriented economies, and Chinese-oriented ones.
First, the giant American economy is ending with mixed economic signals, but consistent with the easing inflation pressure the US Fed is trying to manage consistent with a 2023 soft landing. Certainly the American economy is in far better shape that most analysts and pundits had assumed, both at the start of 2022, and even just three months ago. The resilience is impressive.
US durable goods orders however came in much lower than expected. They were down -2.1% in November from October and their worst month-on-month result since the 2020 pandemic shock. However they are ending the year +6.3% of year-ago levels and keeping up with inflation. Capital goods orders were up +4.6% on that same basis and not quite keeping up.
Meanwhile inflation's impulse seems to be moderating there. Their widely watched PCE price index was up +5.5% in November, a notable reduction from the +6.1% rate in October. "Better" still the month on month rise was at an annualised +1.5% rate, the least in four months and well below the annualised +5% rate in October from September. In November, incomes are still rising at a +5% annualised rate, so faster than expenditures. Overall, these trends are positive.
Also positive was the rise in new home sales in November, up +5.8% from October when a fall was expected. But that can't hide the fact that they are running substantially slower than year ago levels, about -15%. Still, there was an unusual boom over the pandemic, so they are really just lack to pre-pandemic levels again.
And the final University of Michigan consumer sentiment survey not only confirmed the rising mood, it came in above their flash result. Although it is not back to year-ago levels, it seems to be on its way. Helping are the American petrol prices which continue to edge down. And at this time of year heating oil prices are important for many families and they too are now well off their June highs and back to February 2022 levels. Administration management of these pressures seems impressive in hindsight.
The massive spending bill just approved by Congress (8% of GDP) will flow through their economy in 2023, much of it in local industrial production, not insignificantly because to get Republican support, an outsized part was for the Pentagon. There will be international flow throughs however, not the least being enhanced support for Ukraine's defence.
Across the Pacific, Japanese inflation rose to 3.8% in November, its highest in more than 40 years. Their price rises are broadening and will pressure the Bank of Japan to ease off on its long-running and massive stimulus. In fact the Janapnese government bond yeild turned solidly positive today and a building trend that markets see a change in policy coming.
In China, they reported foreign direct investment growing less than +10% from November a year ago, which is a fast reducing pace. They are calling it 'stable".
They also reported (in released minutes, which differs from their official reporting) that more than 30 mln people are being infected daily there, and nearly ¼ bln people contracted the virus in the first 20 days of December. City streets remain empty as the economic toll builds. This is going to be bad and have global consequences. It will hasten the disengagement of the Chinese economy from the West as even more firms re-orient their supply chains away from the Middle Kingdom. Authorities are hoping this pandemic surge will peak in "early January". But upcoming travel around Chinese New year in late January is likely to turbocharge the spread.
Taiwanese industrial production is under pressure from the full-court press by the Beijing team, and came in down -4.9% from the same month a year ago. Beijing's economic freeze is taking its toll, and now China's natural demand pull is softening fast too.
Taiwanese retail sales are losing out too as their citizens grow worried about the China grip. They are now barely above year-ago levels and not even making inflation's expansion now.
In Germany the mood is brightening as we have reported earlier in the week. But there remain questions about whether this will translate into higher personal spending in the face of threats on their borders. The German savings instinct may crimp their economy.
We should also note that insurers are now pulling back from covering ships that trade with Russia, and this is likely to roil oil and gas markets.
The UST 10yr yield started today at 3.75%, and up +9 bps from this time yesterday. A week ago it was at 3.48%, so a substantial +27 bps rise since then. The UST 2-10 rate curve is little-changed at -58 bps. But their 1-5 curve is noticeably less inverted at -81 bps, while their 30 day-10yr curve has moved back positive, now at +4 bps. The Australian ten year bond is up +1 bp at 3.83%. The China Govt ten year bond is down -2 bps at 2.89% and a one-month low. And the New Zealand Govt ten year will start today unchanged at 4.40%.
Wall Street is in its Friday session up +0.7% and reversing some of yesterday's drop. For the week it will end down about -0.5% and still on track to be almost -20% down for all of 2022. Overnight, European markets closed in a range of +/- 0.2%. Yesterday, Tokyo fell -1.0%. Hong Kong was down -0.4%. And Shanghai fell -0.3% in its Friday session. The ASX200 ended down -0.6% and the NZX50 ended its Friday session down -0.3%. You can find much more detail on the NZX50 capitalisation, financials and share price movement in our unique resource here.
The price of gold will open today at US$1798/oz and up +US$3 from yesterday and up +US$8 for the week.
And oil prices start today up +US$2 from this time yesterday at just under US$80/bbl in the US while the international Brent price is just over US$84/bbl. A week ago these prices were US$75 and US$80 respectively.
The Kiwi dollar opened today at 62.9 USc and up almost +½c. But that is almost -1c lower than a week ago. Against the Australian dollar we are little-changed at 93.7 AUc. Against the euro we are firm at 59.2 euro cents. That all means our TWI-5 starts today at 71.3. A week ago it was at 72.6.
The bitcoin price is now at US$16,836 and up +1.2% from this time yesterday. But we have ended almost exactly where we were a week ago. Volatility over the past 24 hours has again been low again at just under +/- 1.0%.
We are taking a short break. The next update will be on Wednesday, December 28, 2022. Enjoy your Christmas celebrations.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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