Here's our summary of key economic events overnight that affect New Zealand, with news markets seem more convinced of a 'soft landing' ahead, and investors are buying on that basis.
The latest American survey of consumer inflation expectations shows how embedded these are - not disastrously, but quite sticky. In the short term, inflation expectations continued to decline but are only down to 5% for the next year. They were unchanged over the medium term at 3.0%. But longer-term inflation expectations edged up slightly to 2.4%. All of them remain above the policy goal of 2%. And when polled about household income growth expectations, that rose sharply to +4.6%, a new high since this survey started in 2014. That is probably the more revealing trend than just asking about 'inflation'.
The total value of building permits in Canada jumped more than +14% in November from October, rebounding after two consecutive monthly losses. It was an unexpectedly strong jump; no-change was expected, and it comes after their labour market also delivered very strong and unexpected gains.
An updated look at the impact of Chinese factors on global supply-chain pressures shows them worsening in December, against the overall 2022 trend of prior improvement. It is a factor that will speed the separation of many companies from reliance on China as a supplier. The per-unit cost penalties are being judged as less than the costs of disruption. Supply reliability has real-world benefits, as many companies are finding out. Essentially the cost of 'time'.
But we probably should also note that copper prices hit a six month high earlier today, and that is all to do with optimism over the intermediate implications of China's 'reopening'.
In Australia, their building permits jolted sharply lower in November. They fell by -9.0% in November from October to be -15% lower than year-ago levels. The month-on-month retreat included a -2.4% decline in approvals for houses and a -20% decline for multi-units. Overall, the market expected a -1% monthly slip so what they got was a shock. This comes as builders have now worked through much of the large pipeline of work that existed in May 2022. These very much lower level of approvals will drive a contraction in capacity as layoffs start or builders fail. The expectations effect of higher interest rates are biting homebuilding hard now.
The Australian parent of New Zealand's dominant general insurer IAG has said it has been able to get most of its reinsurance cover in place now. IAG owns the NZI, State, and AMI brands, among others like Lumley and Lantern. They provide insurance product through ASB, BNZ and Westpac. That reinsurance provides for cover of up to AU$10 bln for two catastrophe claim events, and a cascading series of smaller events. But they are still negotiating on a small final portion with Hannover Re, they say affects the last 2.5% of reinsurance cover. The bottom line is that all this catastrophe cover will cost almost +NZ200 mln more in 2023 than 2022. So premiums at IAG are going up. The same is happening at Suncorp (Vero and AA Insurance here, and for ANZ customers).
About 1500 kms "east of Australia", a PLA warship is patrolling to test the Chinese navy's refueling and supply capacity at sea. It is a vessel being closely tracked by French jets from New Caledonia. The excursion is seen as ‘testing the waters’ for voyages further into the Pacific to protect China’s strategic interests. If it refueled at one of its "new friends" in the Pacific, it has been done very quietly.
In November, international air travel expanded sharply, up +85% from the same month a year ago and taking total activity to 75% of pre-pandemic levels, itself a quick upturn.
However, air cargo activity turned lower in November, mirroring ocean freight trends as supply chain pressures ease generally in the face of some slower global economic activity. After matching the pre-pandemic levels in the 2022 year to October, the -10% fall in November on that same basis is quite a pullback.
The UST 10yr yield starts today at 3.53%, and down -4 bps from yesterday. The UST 2-10 rate curve is still inverted at -68 bps. But their 1-5 curve is much more inverted at -106 bps. Their 30 day-10yr curve is also more inverted, now at -76 bps. The Australian ten year bond is little-changed at 3.69%. The China Govt ten year bond is still at 2.91%. And the New Zealand Govt ten year is starting at 4.37% and down -1 bp.
On Wall Street, the S&P500 has started their week up +1.0% on a rally driven by a rising conviction the coming slowdown will only be a 'soft landing' despite the Fed's hard-nosed tilt against inflation. Overnight, European markets rose about +1%, except London which only managed a +0.3% gain. Yesterday, Tokyo ended with a +0.6% gain, Hong Kong was up +1.9%, and Shanghai rose +0.6%. The ASX200 ended its Monday session up +0.6% as well, but the NZX50 could only manage a +0.2% gain.
The price of gold will open today at US$1876/oz and up +US$10.
And oil prices start today +US$1 higher than yesterday's levels at just under US$75/bbl in the US while the international Brent price is just under US$80/bbl.
The Kiwi dollar has stayed up, now at 64 USc and a +½c gain. Against the Australian dollar however we are softer at 92.1 AUc and about -¼c lower. Against the euro we are soft at 59.5 euro cents with -¼c slip. That all means our TWI-5 starts today at 71.3, unchanged from this time yesterday.
The bitcoin price is now at US$17,332 and up +2.3% from this time yesterday and back to month-ago levels. Volatility over the past 24 hours has been low at just +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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76 Comments
Britain is losing the will to stand up to Vladimir Putin
France, Germany and the US are sending tanks and armoured vehicles to Kyiv. And the British? The cheerleader seems to have lost her voice
The rest of the world should have never got involved in the conflict in the first place. The Ukraine was clearly promised support from the USA before the war even started, had they not been given this their whole attitude would have been different and perhaps they would have negotiated their way out instead.
Negotiated their surrender? It was the only option at the time. So utter rubbish.
The "surrender" should have come long before the war started.
Years ago Ukraine should have stopped shelling Donetsk and Luhansk.
The Donbas War began in April 2014 after these groups (separatist paramilitaries) seized Ukrainian government buildings in the Donbas, leading the Ukrainian goverment to launch its Anti terrorist operation against them. Russian far-right groups were heavily involved in recruiting for the separatists, and many far-right activists joined them and formed their own volunteer units.
The separatist paramilitaries were supported by, and were proxies of, the Russian armed forces.
Why would you use the term far right to describe the Russian supported paramilitary groups fighting against the Ukrainian government, who were persecuting the Russian majority parts of what is at present the Ukraine? Check the MSM headlines before the Russian invasion. Every one of them lambasted the evil Ukrainians for being so mean to these people. The MSM changed their tune, and reversed their opinions, as soon as they were told to, about five minutes after the invasion. Very tragicomical. The Ukrainians are not a very nice people, as shown during the 2nd World War.
Sadly Camel, you misinterpret. It's a nasty evil ethinc conflict. Essentially unsolvable other than to just stop. No right answer.
Best not to pick a side as you have.
Thanks for your advice KH
Best to keep your comments to yourself then.
People have rocks in their heads if they think Ukraine can win the war. Yep they should have taken up negotiation. The possibility was not surrender but just agreement that the Ukraine would never join NATO. All well and good for the armchair warriors on here to chime in but I don't see you rushing over there and picking up a gun.
If Ukraine joined NATO they would still not be a threat. As is well publicised now, there are a number of NATO members on Russia's border without including Ukraine, and now two more. Ukraine had applied to join NATO but had been rebuffed as the country did not meet the requirements. So in the short term at least they were not going to get into NATO, but Russia's actions have likely made it a certainty. Russia's justification was rank BS at best. Russia will be stopped and pushed back as the rest of Europe now realises that with strongmen in the lead they can never be trusted, so must be pushed back behind their own borders.
The Ukrainians would say they did not start the war anymore than they are going to lose it. There is bad history here. Holodomor before and after WW2. The Ukrainians have not forgotten. Some today, still alive, survived it. Nobody in Ukraine is under any illusion that Putin will be any softer than Stalin. Therefore the incentive to carry the fight is simply indisputable.
You mean the rest of the world should have just stood back and left Russia invade a sovereign nation?
What exactly do you think negotiation would have solved? How has appeasement and deference to strongmen worked out previously?
"Submit and extinguish your national identity" seems to be a very easy thing to type form the other side of the world.
Agreed. We cannot let 'Might be Right' - consider the many countries with border disputes: Falklands, Belize, Kashmir, Eritrea, many islands in the South China sea. That's a subset.
Ukrainians and Russians have a close history - maybe like England and Scotland - Putin should have chosen love not war and persuaded Ukrainians that their future was brightest with Russia. Instead of the many common feature of their history he has refreshed memories of Stalin and mass starvation.
Australia shouldn't invade NZ but simply persuade Kiwis they would be better off becoming a new state of Australia.
The real secret is that the "appeasement" narrative in WW2 was utter nonsense.
The Czechslovakean state was being pumped full of weapons by the British and French governments trying to create a trap for the Germans. The Czech state collapsed from internal ethnic strife, dysfunctional government and the political pressure of all sides. Its worth remembering the Sudetenland Germans were an oppress minority within that state, aligned with the Hungarians and Slovaks against the Czechs.
The British government and French government were the warmongering party if you read any of the high quality historians of world war 2.
Just read Churchill's War by David Irving and the War Path by David Irving. He is the platinum standard of WW2 historiographical work.
Just read Churchill's War by David Irving and the War Path by David Irving. He is the platinum standard of WW2 historiographical work
Is this the same David Irving who is the platinum standard for holocaust denial? No thanks.
Irving is a brilliant researcher and author. For example his biographies on Goering & Milch are outstanding reads. However by the time you get to Hitler’s War & the Churchill counterpart, it seems to me that he had seduced himself, the sheer power of the Nazi hierarchy had had by then, an almost mesmerising affect him and he willingly immersed himself up to the neck, in it. Facts are facts certainly but they are easily distorted by the omission, emphasis and selectivity of the same. The problem is when great natural talent, such as Irving certainly possesses, departs from impartiality, then the result is nothing short of being machiavellian.
ps : for a better balanced account of that period suggest “The Deadly Embrace” co-authored Read & Fisher.
“You cannot reason with a tiger when your head is in its mouth”
Totally absurd.
The implication is Ukraine curtail to the demands of Russia under the threat of war. It’s akin to paying a mobster protection money. Otherwise your legs might get broken.
In context before the war, Russia already annexed Crimea, poisoned an ex-president and actively trying to destabilise their government (over a prolonged period). Putin is quite transparent in what he wants. He wants to unite all Russian people and former Russian lands. He has written a 7000 word essay rewriting history.
the morally correct thing is to support Ukraine. Likewise whoever Russian threatens with overtures to take their land (which is a quite long list given the breakup of the USSR)
Given the many absurdities he has spouted to describe and justify war (Gay and lesbian, Satanist, nazi, terrorists). His desire for “one Russia”. His past history. I find it bizarre anyone believes Ukraine could ever negotiate with Russia (Putin) in good faith.
Boris was the British cheerleader for Ukraine/Zelensky rushing off at the drop of a hat when domestic issues reared their ugly head. Sunak realising the economic chickens of failed unreliable energy policies have come home to roost. In any event UK only had a low %, less than 10% I think of energy from Russia.
I thought Germany would be the first to crack and obtain Russian energy via the back door.
That 6th para scenario of building industry negatives in Australia looks ditto for New Zealand, and likely worse. Basing that on a couple of well established and successful builders in our neighbourhood who are more worried about prospects than they ever have been. Have dropped off good staff and reduced from usual annual number of builds. Cannot get guaranteed good supplies nor prices for same, meaning no fixed price contracts and few customers prepared to take on the alternative. Suck it and see, they say, no choice.
Yes it is grim, I work in a supply industry and the pipeline is nearly empty. Most developers are content to sit on their plans for the moment. The other issue is that with the cost of building supplies having not changed, the actual cost of development will be above a serviceable purchase price. Until the supply costs come down alongside land prices they are going to suffer.
I had some work done recently on a (time charging and material ) + markup basis.
Never again.
Things would happen (ballsups) which under normal circumstances would be at builders cost. Alas, I ended up paying 100% for most of those. Most would be kept quiet. One example, excess material were bought. Which I paid in full when delivered. (Didn't know excess had been procured). Later, a choice: either to rely upon the supplier buying it back from the builder (presumably at a lower price) or me ending up with it for some future project. Cluttering up my garage.
The overall cost of the job was huge.
Anything straightforward makes sense to be done on a price. Anything that's finicky or a Reno/restoration is usually going to be quoted with a lot of buffer, or underpriced, so sometimes labour and materials is the only way to go.
Everything's irrelevant if you have bad tradies. At least it's over.
An updated look at the impact of Chinese factors on global supply-chain pressures shows them worsening in December, against the overall 2022 trend of prior improvement. It is a factor that will speed the separation of many companies from reliance on China as a supplier.
Reality for western corporations: BMW will continue to deepen cooperation with its Chinese partners due to China's market and strong innovation capability. Link
It is still a high-capacity, low cost manufacturing state so they will continue to be a manufacturing hub. The Germans cannot compete on price.
In addition I think the US is betting the house on their continued processor-fabrication leadership, this will turn the screws on the Taiwan decision (where some of the most advanced fabs are based) for China, not a great strategy.
According to Statista, from 2019 to 2020, manufacturing labor costs per hour for China increased from $5.78 to $6.50 USD, while Mexico experienced a much smaller increase from $4.66 to $4.82 USD over the same time period. Of course, it’s necessary to take into account the level and wage differences between jobs in both countries when making a comparison.
Consider Cost vs. Value Between the Two Countries
In addition to lower labor costs than China, the value of the workforce in Mexico makes nearshore manufacturing an alluring strategic move. First, Mexico recognizes greater productivity with a 48-hour workweek compared to the usual 40-hour workweek before overtime pay is considered.
Second, the regional government in Mexico invests in and promotes education and training programs specifically in technical industries to support the skills necessary to excel in manufacturing in various types of roles. There are over 2,500 higher education institutions, some of which partner with U.S. and other foreign companies for projects, that teach and train the local workforce specialized industrial skills.
Thanks, that is interesting information, it seems logical that there would be continued investment in Mexico.
They have been a major US vehicle manufacturing area for some time now but the reliability of the supply chain there would be something to focus on, organised crime in Mexico is on a different scale the the US and certainly China.
The construction of mobile phones etc is another level of investment again, also the number of suppliers located in China mean it has advantages there.
My concern re Taiwan relates specifically to the US's restrictions on chip technology export to China, some of the word's most advanced chip fabrications (TSMC) sit just off-shore and this must make a take-over bid more appetising for China.
But if China did invade Taiwan their imports would heavily restricted..own goal and they know this. China imports pretty much everything to keep the current population alive.
In addition I think the US is betting the house on their continued processor-fabrication leadership, this will turn the screws on the Taiwan decision (where some of the most advanced fabs are based) for China, not a great strategy.
The answer is simple. Read this (in Russian).
Российский литограф 7 нм от ИПФ РАН! Литограф от НЦФМ за 2-3 года! Понеслось!
Translation: Russian lithograph for 7 nm from Institute of Applied Physics of Russian Academy of Sciences. Lithograph from National Center of Physics and Mathematics in 2-3 years. Off we go! Link
Can't even make cars with airbags in 2023.
Practically all cars, practically all the time, don't actually need airbags to function in some manner.
From the link. This must have been written tongue in cheek "......Russian Ministry of Defense is well supplied (due to cannibalizing of washing machines, I guess)"......
Christ. It was already hard enough following the morning dump of links and quotes, and now they're in Russian?!
Peter Ziehan has followed up his book with a Joe Rogan podcast (episode 1921). Those interested in geopolitics, demographics and China might enjoy a listen.
His outlook for China is grim.
Apropos of absolutely nothing at all, why do I keep seeing Harry and Meghan everywhere I look? Did something happen? It's like being stuck in the latest issue of Women's Day.
They have a contractual obligation to release content, and now is when all that content is getting dropped. Their payday is in the 10s (maybe 100s) of millions, so their publishers/promoters will be doing what they can to get some headlines.
Fair enough. Even Stuff's latest Jeff Bell cartoon is of Harry, one can only assume he's being spoon-fed topics of "interest" as well.
Possibly a new definition of "over-share" being written up, it's almost like he has a book to plug.
Over share and a spare, probably.
A distraction for the masses... it's unbelievable how strongly people care.
I'm so glad that the chap is spare.
So not really uninterested then?
Considering the political history of the royal family, I tend to believe Harry over the propaganda coming out of Windsor.
How about neither?
You cant shriek about overbearing media whilst seemingly courting them with endless bombshell interviews and books.
End of the day - they're all continuing to get filthy rich off the plebs who for whatever reason care about them. It's ironic given the hardships people are going through with cost of living etc...
He's just turning their own weapons against them. Silence is considered acquiescence. He refuses to be silent. I'd suggest he is also extremely aware that anything short of the absolute, provable truth would quickly get exposed by the UK tabloid muck rakers. Where as for Windsor, silence can be a weapon as much as acquiescence.
In the end this is ripples in a pond that just doesn't really matter.
He chose to leave and this is the only marketable commodity he has.
His main weapon appears to be that he himself has never done anything wrong, or what may be construed as wrong, only because others made him do it.Wouldn’t be surprised though if the tabloids now find an ex fellow combatant and pay him enough to debunk Harry’s military recount of his exploits. Bit like the Bush junior clan was able to discredit both McCain & Kerry.
I've been bingeing on Harry & Meghan YouTube analysis over the last week. Blame the algorithm. A fascinating human-interest story, a modern Greek tragedy.
Lol oh dear... YouTube analyst's...
YouTube is an amazing treasure trove of content. I've finally bitten the bullet and gone Premium. I highly recommend it and will never go back to the free version. I'm not sure why you would think YouTube analysis is deserving of ridicule. It's streets ahead of anything the MSM puts out and on every topic under the sun. Plenty of MSM stuff there too if that's your schtick. Plenty of bona fide experts. Obviously there will be rubbish mixed in with the gems but it's up to the viewer to decide and that's great.
The answer to Harry can be found misquoting Will Scarlet in Robin Hood, Prince of Thieves:
Once a boy from Buckingham
Tried to cross the river
What a dope!
He slipped on a rope!
Now look at him shiver!
He made his bed, now he has to lie in it.
The Chinese warship that far south is a concern considering China recent history of belligerence. Pretty sure they're not that far south to ensure shipping lanes remain open for cargo vessels. Possibly looking for uninhabited islands to claim and build secret military bases on?
Would think most reconnaissance nowadays by air/satellite and this s a bit of a tit for tat for the US warships transversing the Formosa Strait etc. But you remind me of Richard Frank’s epic Guadalcanal book, the placement of a significant Japanese personality, well prior to 7/12/41. Inevitably after the Marines surprise landing, and they had swept through the village he was amongst the deceased.
Interesting. Can you remember who the celebrity was ?
Regret can’t help on that detail. ChCh eqs, burst water pipe, took out most of my book collection, so can’t look it up for you.Actually might now look for a copy on Ebay, worth reading again.
Thanks, just ordered it from the library.
You are welcome. I had to read it three times, over a period of time, to get any sort of grip on the entire battle .In the meantime, have been fiddling around on the web. Believe the spy identity is Terushige Ishimoto known colloquially as Mr Moto. There is though a lot of contradiction about his character and I can’t recall either if that actually is who the author Frank is referring to in his book.
My father has been through the Formosa straight in a New Zealand warship, might have been HMNZS Pukaki. He has talked of the US "Tin Cans" that were in the fleet. Massive seas and the US ships were doing it pretty hard.
Aye, that’s one of the natural defences for Taiwan. The sea surrounds are treacherous, only a two to three month window of opportunity, even then conditions can freak out in a matter of hours. The Japanese legend of Kamikaze is thus relevant. No weapons of war match the fury of mother nature.
Filling a gap?
'Freedom-of-navigation operations' by US Navy through the South China Sea, the fewest in six years... 'The shift by the U.S. also comes as ties with China have improved since a meeting in November between Xi and President Joe Biden...' Link
This business of "betting" on a soft landing is actually quite accurate. Question that might be worth asking is what are the factors behind that bet, who is making those bets, are the qualified to make the bet, and have they considered everything?
Might it be like they haven't realised that all the aces have been removed from the deck of cards?
How to recover lost capitalisation and replace it with wealth generating alternatives?
Great example!
For gaming the system they were..... https://wolfstreet.com/2019/11/12/swiss-national-banks-monetary-racket-…
Investor - My ARRSE!!
The Swiss National Bank is an active investor in stock markets, unlike most other CenBanks. SNB balance sheet trades in tandem w/FANG Plus Index. Link
In the short term, inflation expectations continued to decline but are only down to 5% for the next year.
Inflation expectations - the indicator that refuses to die! Everyone knows that expectations basically reflect what people understand inflation is at the current time - the Fed have published papers on it. A simple comparison of NZ inflation expectations vs what actually happened confirms the same (expectations track the current almost perfectly but fail miserably to predict the next result).
But, as with so many economic theories, what matters is not whether they work in real life, but whether economists believe in them enough.
I read somewhere that construction is similar in GDP to agriculture.
Eep.
by Audaxes | 19th Nov 19, 10:32am
For all of the above reasons, 3.09% is the correct value of dairy’s contribution to the New Zealand economy. Link - https://www.interest.co.nz/rural-news/102177/nzier-takes-issue-keith-woodfords-view-gdp-understates-economic-contribution
As a non-economist can I conclude that bank lending to the agricultural sector is underwriting land banking rather than productive enterprise that qualifies for inclusion in the GDP calculation algorithm?
Westpac NZ CEO:
Some heavily indebted dairy farmers are barely covering their interest payments despite relatively strong prices for several seasons, Westpac NZ chief executive David McLean says.
"The ones who've got more leverage, most of those are still covering their cost of production but some of them are close to the edge," he says.
"Their interest cover isn't that great – there are a lot of farmers who are doing it tough and there's not a lot of buffer." Link - https://www.nzherald.co.nz/the-country/news/article.cfm?c_id=16&objectid=12282488
Is this really relevant without the numbers, both financial and number? My response to this interest payment struggle is. The farmer overpaid for the farm. Sell up and get out.
The construction slump was the kind of forecast that people should be able to make in their sleep. Don’t think that it won’t happen here, it will and it’s on its way.
Going to be pretty ugly in 2023. As Nktokyo alludes to, big part of our economy…
There will be a whole heap of completions between March and May, then a big fall away.
watch rental property supply in Auckland surge in April/May.
You've been promising me a break for a while now and my quote inbox is still full 😵💫
I thought you were commercial focussed. Also out of Auckland?
Last time round I was in Auckland, and everyone kept their jobs.
Adapt or perish.
We will see. So you think the residential construction sector will be ok?
come on guys these are last years predictions
By the middle of 2023 boomers with money will be bored and itching to buy something - they will already have two ev's in the driveway to impress the joneses
Banks will be happy to lend
and interest rates will be looking to have peaked and Tony will be talking up FOMO again
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