Here's our summary of key economic events over the holiday that affect New Zealand, with news that now the rules have been eased, Chinese travelers are rushing to travel internationally.
But first up, American retail sales in the week before Christmas were good, being nearly +10% higher than the same week in 2021 on a same-store basis. That probably means there was real, inflation-adjusted growth.
However the residential real estate market in the US is showing no reals signs of recovery, with November pending homes sales down again, down -4% from October when no fall was anticipated. That puts them still -38% lower than year ago levels.
But away from housing, the factory sector is mixed. In Texas, their manufacturing surveys are weakish. But in the Mid-Atlantic states they show unexpected improvement, even if it was modest.
However, both districts also reported on their service sectors, here and here, and neither had outlooks that were particularly flash. Not bad, just blah.
Japanese industrial production dipped in November, but only down by -0.1% from the prior month. However this was the third straight month it retreated and has now turned negative on a year-on-year basis, down -1.3%. Machinery and other capital goods are the weak sector. Still, the forecast for December is positive, although less so for January.
And an influential but informal adviser to the Bank of Japan's governor says the unexpected decision to raise its ceiling on government-bond yields could be the first step toward a long-awaited monetary-policy normalisation, despite official statements to the contrary. After all, there is good reason to think that their inflation will remain above target in 2023
And staying in Japan, their police have broken the grip on some ransomware blocks, enabling companies to recover access to all their data without paying the ransom.
In China, the number of people intending to buy homes in the next three months has dropped to a six-year low as those who believe prices will fall outnumber those who think they will rise, according to the findings of a quarterly central bank survey.
The change in lockdown policies has sharply increased the demand for foreign travel there. But many countries are now racing to place restrictions on travelers from China. One flight to Europe reported that more than half the passengers had Covid when they landed in Milan. Let's hope Chinese travelers don't see this.
Internationally, ship insurers said they are cancelling war risk cover across Russia, Ukraine and Belarus, following an exit from the region by reinsurers in the face of steep losses. (Also here.) It may not get easier for the giant Russian gas exporter whose CEO said their exports are down -40% in 2022. Such admissions can have consequences.
In Turkey, the financial pressures are building and their currency has reached another record low. Their central bank has informally instructed its banks not to process fx transactions until next year. Turkey has an inflation rate of 84% pa.
The UST 10yr yield started today at 3.89%, and up another +4 bps from yesterday. The UST 2-10 rate curve is less inverted at -50 bps. But their 1-5 curve isn't noticeably less inverted at -75 bps. However their 30 day-10yr curve has moved even more positive, now up at +24 bps. The Australian ten year bond is up a sharp +21 bps at 4.05%. The China Govt ten year bond is little-changed at 2.91%. And the New Zealand Govt ten year will start today also up sharply, up +16 bps at 4.57%.
And while we weren't looking, we should note that local wholesale swap rates are also racing higher again. The 2 year swap rate has raced up to 5.42% today. The one year swap rate is now over 5.50%. These are levels we last had in November 2008, fourteen years ago. Gulp!
On Wall Street, the S&P500 is down -0.8% in Wednesday trading. That makes it -21% lower for the year so far. European markets ended about -0.6% weaker although London came back online and was up +0.3% in catchup mode. Yesterday, Tokyo ended down -0.4%, Hong Kong ended up a strong +1.6%. But Shanghai fell -0.3% on the day. The ASX200 resumed trading and slipped -0.3%. And the NZX50 was also back and posted a +0.4% rise.
The price of gold will open today at US$1806/oz and down -US$8 from yesterday.
And oil prices start today down almost -US$3 from yesterday's levels at just over US$78/bbl in the US while the international Brent price is just over US$83/bbl.
The Kiwi dollar opened today at 63 USc and up -+½ from this time yesterday. Against the Australian dollar we are up almost +½c too at 93.5 AUc. Against the euro we are up a similar amount at 59.4 euro cents. That all means our TWI-5 starts today at 71.4 and up +40 bps.
The bitcoin price is now at US$16,621 a mere -0.2% lower than this time yesterday. Volatility over the past 24 hours has again been modest at just under +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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61 Comments
many countries are now racing to place restrictions on travelers from China
Chinese travel demand but limited choices. NZ tourism sector investments will be worth a look in 2023
I wouldn’t get too excited. Lot of hype, let’s see?
East Asian people are very conservative with travel, for things like pandemics. If they do travel it might tend towards closer to home.
And they aren’t just contending with a pandemic either, there is less money to splash around.
There aren't many Chinese tourists in the country, its yet to take off. Watch out for a "suckers rally"
Not this government - it will be like last time, let the chinese virus in then when its established shut the doors. I think the government is qiuet happy if a few oldies peg it
It is not the oldies that 'peg it'. It is the obese diabetics whose poor lifestyle choices and failing health that are the most vulnerable. Government should just stay out of people's 'health', as they are clueless to what 'health' truly is.
You know that we have allowed that type of situation to become a race issue. The death rate statistics highlight that more of a certain ethnicity are disproportionately dying. Then it blows up in the media
Aussie media already on the spruik:
These apartments will be the first to gain from China’s reopening
Australia’s beleaguered off-the-plan apartment market could get a boost in the first quarter from China’s decision to loosen travel restrictions, as it will allow project marketers back into the country, the country’s largest real estate agency group says.
“There would be a lot of project marketers heading over to China now that they can get over there,”
https://www.afr.com/property/residential/these-apartments-will-be-the-f…
Lol
desperate!
Market warnings about November have proven accurate. Again.
The inventory cycle is now really starting to drive home. Market curves had warned in real time that economic deterioration stepped up in November, now the hard data comes behind to validate the moves. Imports crashed, retail inventories slid for third straight month. Both not seen since either pandemic 2020 or late '08/early '09.
Resilient NZD!
Indeed and I have to admit that me feeling NZD about a month ago in anticipation of it going down has been wrong… so far
Do you mean selling not feeling
Yep, overseas investors love our high yield Govt bonds - non-residents now own $64 billion of them (about 60% of the total available in the market).
Unenthusiastic amateur here but nonetheless, as a wet thumb in the wind, does not the last CPI percentage recorded, food prices a 14 year high hike, coupled with the fast ascending swap rates, signal a bonza of an inflation rate for NZ next time round?
Bonza observation , young Master F ... it does signal that business insiders are rattled by our economic direction ... not exactly off the cliff edge , the Russian businessman's nightmare ... but down a slippery slope for sure ...
... thankyou Robbo ... cheers Adrian ... we appreciate the Christmas gifts you've given us , but ... why are the parcels ticking ?
Things will return to normal. Just last week I noticed wrapping paper prices through the roof. This week, some have fallen back by up to 75%. Ditto ornaments and string lights.
Not sure about the CPI food price impact but as an amateur as well the "fast ascending swap rates" will concentrate Orr/RBNZ minds with maybe a 0.75% increase in the OCR in Feb23.
That, and the record spending through the holidays. We have a ways to go still, but that’s just my opinion
... apparently , if you adjust for inflation , it wasnt record spending through Christmas ...
Were they giving eggs ? ... our New World has completely empty shelves , where the eggs once were ...
Some hilarious comments on the net about it being farmers fault for not adapting to changed regs. Well you foolish consumers, they adapted alright, by getting out of the industry. Careful what you wish for.
It's ok though, we can just import eggs, from the countries with way less regs and more caged hens. Just like we do with pork.
Another govt ballsup to add to the growing list.
Why are you blaming the government. It's what the voters wanted? Perhaps the supermarkets should have secured the required supply. Perhaps someone should have informed the consumers in no uncertain terms that the hens take holiday's in both summer and winter as a matter of course.
Also please note the regs predate the current government
... just back from the NW ... fresh eggs again ... well , some ... looks like Henny Penny & the girls are back on the job , thankfully ...
A computer programmer's wife says to her husband, "Honey, could you please run down to the shops and pick up a loaf of bread? And if they have eggs, get a dozen."
So he jumps in the car and comes back a while later with 12 loaves of bread. "What the hell?" says his wife as he plonks them down on the kitchen table. "Why'd you buy so much bread?".
"I only did what you asked for", the programmer replied with a shrug. "They had eggs."
Love it ! .. the logical brain at work 😂
Artificial intelligence in a nutshell. Maybe the modern version of the joke should start with "Hey Siri..."
Not all voters wanted this, but it is a testiment to the wider NZ sentiment. Demand better animal practices, then refuse to pay the resulting increases caused by said demands, followed by importing the same product from overseas to keep the price where the market demands it. Agriculturally we will end up demanding ourselves out of our own produce
You can say this argument about almost every welfare related bill we pass.
We want 40hr weeks, 3 breaks a day, sick pay, maternity leave, subsidised health and education, reduced emissions and pollution.
But we can't really afford it, so we'll export as much of the offending manufacturing and jobs as possible.
Out local Pak n Save here in Napier had eggs this morning. There were about a dozen packs left when I got there. 60 seconds later they were all gone.
I hope the hoarders are not putting them all in one basket
The hangovers sure are!
I would make the suggestion that egg consumption will also increase due to food prices increasing significantly. Eggs are still a very cheap protein source, I can do 4 meals out of a dozen eggs and $8.50 will not even buy me a decent steak for one meal.
$ 8.50 will buy a very big chicken breast , or two small ones ... a little chicken goes a long way in a big casserole or curry ...
GBH. get a young chick and she may lay a few.
I got a young chick ...but there are no eggs .... she spends all my money on shoes & handbags ...
A long time ago Dylan sang “now I got a woman and she’s so mean she sticks my boots in the washing machine, calls me honey, likes my money.” There is potential peril at every point of the compass.
But the market Oracle: TA, says again to the huddled masses", hanging off his every "Independent Economist" word, that the mortgage rates have likely topped out now.......
As we all know now - take the opposite view and you are more likely to be right!
TA will again know he made another cluster call, as the Swaps head north at a rate of knots! I wonder who will hire TA for his nugget soothsayer speakings on the housing market in 2023??
He may need a profession change, as the rates go higher and the NZ housing market drops another 20%+ South in 2023......
Maybe someone more savvy than me should put up a TA reverse ETF on the NZX50, like the Jim Cramer one.
A crazy RBNZ rate hike in Feb 2023 was always on the cards. Its the perfect storm, FED still raising rates, months between reviews, FLP ended in December, inflation still rampant, RBNZ pretty much promised slow hikes for the whole year of 2022. This all now comes to a sudden end so we now have the possibility of a 100bps rise end of Feb. You have been warned.
Could the second scroll be accurate? Once you remove the religious nutbaggery of course.
I would be surprised if RBNZ go above 50pts in February - and they should do nothing.
In your dreams you wish.
Happy to put money on 50pts or less.
what is the prediction for demand from China for our primary production? - I would have thought it would be lower than usual given their market turmoil so not good for the likes of Fonterra - and so a further deterioration in our BOP
Perhaps but usually the first to decline in demand are the high end, niche if you like, categories of food.The basic commodity as a source of protein remains in demand, people have to eat.To put it another way a family accustomed to dining on steak might find themselves relying on mince instead, thereby increasing consumption demand for the latter.
"The 2 year swap rate has raced up to 5.42% today. The one year swap rate is now over 5.50%. These are levels we last had in November 2008, fourteen years ago. Gulp!"
This will spray weed killer on those "green shoots"
Ouchy Ouch
Tesla stock is going to tank, its already down 70%.
Is there some sort of logic behind this prediction, or just another Carlos "EV bad" random neuron firing?
Let me guess Carlos...going to zero?
The price of everything from housing to commercial property and stocks and shares, buoyed by more than a decade of essentially "free money", no longer looks like the one way bet it was. Already, parts of the commercial property market are crashing. Stripped of low cost leverage, much private equity activity has stalled. Nobody's asking for a return to the double-digit interest rates of the 1970s and 80s; yet there is at least some reason for believing that the era of zero interest rates and seemingly endless central bank money printing has gone for good. The insanity of it all came to be seen as "normality". Yet in truth it was a terrible aberration that significantly widened social inequalities, created dangerous distortions in the capital markets, and most certainly added to current inflationary pressures. Good riddance. (Telegraph. today)
Bonds at the short end of town,only have one direction,as expectations of equities will see EPS and valuations decrease.
Central banks are also now focused on reducing liquidity,be decreasing balance sheets with the fed reducing at 95 b$ a month (as well as reducing m2) and the ECB having reduced by 497 b as banks repay TLTRO loans.
https://fred.stlouisfed.org/series/ECBASSETSW
If Japan essentially the worlds creditor,sees return of funds onshore (to both negate hedge costs and expectations of policy changes in April) the competition for debt will increase here.
If Japan essentially the worlds creditor,sees return of funds onshore (to both negate hedge costs and expectations of policy changes in April) the competition for debt will increase here.
Consistent with how I see things as well. Ignore the possibility of future strength of JPY at your peril. I'm far from an expert on this. Just a hunch.
New lawsuit in the FTX debacle:
FTX pledged to segregate customer accounts and instead allowed them to be misappropriated and therefore customers should be repaid first, according to the lawsuit filed in U.S. Bankruptcy Court in Delaware.
This is very interesting. If this legal argument were to stand, it would mean that FTX customers have more claim to funds than a regular NZer keeping money in a bank account. Would be an interesting precedent, despite the fact the customers are unlikely to receive their funds back.
https://www.reuters.com/legal/ftx-customers-file-class-action-lay-claim…
Repaid with what ? The "Funds" probably never existed in the first place and what did exist was syphoned off and vanished.
Exactly. In other words, FTX customers would have more of a claim to thin air than NZ bank customers do.
Repaid with what ? The "Funds" probably never existed in the first place and what did exist was syphoned off and vanished.
That obviously went over your head. The point is about customers having higher priority than creditors. Whether there are funds there or not is irrelevant. Just so you understand how these exchanges work, there are two ways for customers to fund their accounts for trading: 1. Funding accounts with fiat transfers; and 2. Transferring other digital assets to the excahnge for trading.
Nothing is going over my head mate, that's why I was not on FTX in the first place. One massive con job of epic proportions, the only question everyone should be asking themselves is how many other "Exchanges" are basically setup the same way as FTX.
Lest we forget our own homegrown crypto storage company " Cryptopia " which traded out of offices in Colombo St , Chch ... it was liquidated in 2019 after hackers stole $US 16 million of its Bitcoin ... never heard if investors got anything back .... you'd have to doubt it ...
Agreed. I'm following the FTX tokenized shares which SBF admitted weren't backed 1:1.
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