Here's our summary of key economic events over the weekend that affect New Zealand, with news some unexpected optimism is creeping back into financial markets.
This week, the spotlight will be taken by US retail sales, producer price inflation, several housing indicators, and earnings reports for some large companies. Also, fresh inflation data will be released for the UK, Japan, Canada, and South Africa and monetary policy meetings will be held in Japan, Norway, Malaysia, and Indonesia. Finally, investors will be waiting for Q4 GDP growth, Industrial production, and retail sales data from China.
We should also note that tomorrow is Martin Luther King Day in the US, so many markets there including the NYSE will be closed.
But first, China said its exports were -9.9% lower in December than the same month a year ago, a slightly worse result than anticipated. Its exports to the US were little-changed in value terms. It bought a lot less from Australia and a little less from New Zealand. But its exports to Australia were up strongly, and even more so to New Zealand. Electric cars (Teslas and BYDs) drove those exports. Overall China's car exports are up +57% from year-ago levels.
Looking ahead, investors are turning bullish on China, looking past the immediate pandemic hurdles to the longer term benefits of opening up. The best indication is that commodity prices are rising. The iron ore price is its highest in six months (and China isn't happy about that).. There have also been recent heady rises for tin, aluminium, zinc, and especially copper. Interestingly neither nickel nor lithium have benefited from these rises recently, but this may be more about copious new supplies coming on line.
Elsewhere in the region, South Korea raised its policy rate from 3.25% to 3.50% late Friday. This was as expected, and they say is necessary to combat high inflation.
In the US, and in an unexpected surprise, the closely-watched University of Michigan consumer sentiment survey recorded much sharper gains in consumer sentiment in is first January reading that was anticipated. A small gain was expected, but a big rise was recorded. Although the overall level remained low from a historical perspective this was a lift for a second consecutive month. Financial markets took note.
The countdown to a budget crisis has started in the US because they need to raise their debt ceiling. However with a Republican-controlled House of Representatives, it is unclear that a necessary Budget resolution can be passed. It is a political fight that will last most of the year however. Economists expect the Treasury will run out of cash around August if the debt ceiling isn’t boosted. In the end, as markets know, it will get increased, despite the game of chicken to be played out. It has become a tiresome battle, but it does play well to far-right voters and will become cause celebre in media like Fox and RT. (Larry Summers calls it the "dumbest debate in Washington".)
Separately, the US Fed is steadily shrinking its balance sheet. It has sold off US$456 bln since its peak in April 2022, taking it down to US$8.5 tln, a -5% reduction so far. Prior to the pandemic, it was at US$4.2 tln, so there is a very long way to go to 'normalise'.
In Germany, despite all the pressures on them, they have wrapped up 2022 with a +1.9% expansion in their economy. That might be slightly less than 2021, but it is another expansion greater than their ten year average.
Meanwhile, EU industrial production came in better than anticipated, rising +2.0% in November from a year ago when only +0.5% was expected. The expansion from October was better than expected too.
Turkey's inflation rate is falling now, up only +1.8% in December from November, and down to just a +64% annual rate. However, Argentina suffered a +5.7% rise in prices in the month, taking its annual rate to +95% pa!
In Australia, lending for housing fell again and more sharply than expected. The November data makes it the 10th consecutive month of decline and is now -26% down from its January 2022 peak. Lending to owner occupiers fell faster than for investors, but overall, it is now at a ten year low. Lending for construction dived substantially more in November from October as the sector shudders.
The sharp decline in American inflation might mean we are approaching the end of the rising interest rate cycle. Certainly, local wholesale rates are now retreating, mirroring American rate trajectories. But with the prospect of a 2023 recession still being expected by most professional analysts, rate curves have turned negative. The New Zealand rate curves are now at record 21st century inversions.
The UST 10yr yield starts today at 3.50%, and little-changed from Saturday. A week ago this rate was 3.57%. The UST 2-10 rate curve is unchanged at -72 bps. But their 1-5 curve is less inverted at -109 bps. Their 30 day-10yr curve is little-changed at -95 bps. The Australian ten year bond is up another +7 bps at 3.61%. The China Govt ten year bond is holding at 2.94%. And the New Zealand Govt ten year is starting today at 4.09% and unchanged.
Equity markets might be closed, but the S&P500 futures are up, and back to levels last seen mid December.
The price of gold will open today at US$1921/oz and up another +US$4. For the week that is a +US$56 gain, or +3%.
And oil prices start today +50 USc higher than Saturday's levels at just over US$80/bbl in the US while the international Brent price is just under US$85.50/bbl. These levels are about US$6 higher than last week.
The Kiwi dollar has changed little, now at 63.8 USc. Against the Australian dollar we are holding at 91.5 AUc. Against the euro we are a little firmer at 59 euro cents. That all means our TWI-5 starts today at 70.7, and unchanged since Saturday.
The bitcoin price is on the move higher, now at US$20,878 and up a very strong +8.5% from where we left it on Saturday. Recall, it was US$16,846 a week ago, so that is a +US$4000 rise since then, or +24%. Volatility over the past 24 hours has been modest however at just +/- 1.2% with most of the jump happening Saturday afternoon. This comes after the US-SEC charged crypto heavyweights, the Winkelvoss twins' companies with market manipulation.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
80 Comments
Although the overall level remained low from a historical perspective this was a lift for a second consecutive month.
A slow pick-up is better than none at all. Personally I am hoping for gradual increases, and not the boom bust cycle.
Hope based on what exactly? Hope is for gamblers, and all these surveys do is provide fuel for gamblers to keep running the Ponzi scheme.
Unabashed consumerism is just a story, and a mightily flawed narrative at that.
Unavoidable though Scarfie. Everybody expects their opportunity at the trough, and can you really blame them? Humans have always tried to predict the future with a degree of accuracy better than an outright guess. Plus there is the human psychological aspect that some things are self-fulfilling prophecies. It's just a small part of a bigger picture that feeds the denial myth. Another big contributor will be Sweden's discovery of better than one million ton deposit of rare earths. People will look to that with hope that it will help stave off global warming as it is mined and processed into batteries and electric vehicles. They' either ignore the bit that says Sweden's consenting process will mean the mining cannot occur for 10 - 15 years, or they will pressure Sweden to cut corners to make it available a lot sooner. Hope is a big thing that most live on daily, and to be fair some of it does pay off.
Didnt work saturday night for Lotto....
The one thing certain about the future, at a psychological level, is that people will try to predict the future :-)
Scarfie's law of stories - "Most of what we believe is just stories. Most of those stories are untrue". I think Ray Dalio has made a great contribution by finding out that 80% of people don't like their opinion stress tested. Yes denial.
Greed is fairly predictable.
I hate to say it, but God consistently had to put rules in place because people would always fail to understand the moral foundation behind a rule. In this case we are talking about greed. Again the real lesson in the bible stories is that human behaviour, including greed, is somewhat predictable.
I think you can place blame for greed, it is a breach of the moral foundation. I've been saying here for years that unearned income, such as capital gains, is no different to theft at a base level. The theft perceives others have more than him so his actions are acceptable, I dealt with hundreds of them as a Police Officer (Burglary and Robbery are still thefts).
Where there is a real disconnect is failing to understand the consequence of actions taken now. Parasitic actions. If you rent a house out to a stranger it is at a base level no different to renting a house to your brother, sister, child, grandchild. By playing the profit from property gain you automatically profit from your own children and deny them the opportunity (by speculating and putting prices up) for your children to own a home. Come back to the criminal element, you are acting like a criminal if your actions harm someone else.
What is forgiveable is the hunt for security. But what is security? Again just a story people tell themselves to excuse their actions. But it is only forgiveable if it doesn't harm someone else.
When people see a system in place that doesn't suit them the first thing they want to do is change it so it does.
There is no way that the capital gains on your house should be taxed bro. You have already paid income tax, GST and interest on the borrowed money to buy it. Any gains are a risk, there could also be losses, no way it should be taxed.
CG isn't real anyway. But Scarfie has a point behind his tale. Do no harm. A lot of people gained by accident when their house values rose. But the whole market rose so the relative value to other houses remained more or less the same. It is when people are clearly profiting from that the tax should come in. A change in value is not profit or loss until it is realised.
CGT won't bring NZ out of its housing obsession, especially when the two largest party in opposition intend to double-down on the obsession.
Labour made several attempts to discourage housing investments and push Kiwis to put money elsewhere through R&D tax credits, social housing, ringfencing losses, making interest expenses non-deductible, immigration reforms, etc. Not arguing that these were done will but takes years and decades to shift people's mindset.
Unfortunately, whatever the vested interests haven't forced Ardern to backtrack on already will simply be repealed by Luxon.
Interesting soil moisture deficit map compared to same day last year, which one are we blaming on climate change, can't be both!
It all depends on the path of the cyclones. If correct, we are under la niña where weather patterns come from north east.
Been la Nina last three years.
... been climate change for the last 5 billion years ...
... that graph , those 175 years , represent about 0.0000035 % of the planet's time line ...
* 0.0000035%.
Yours eternally,
P. Dantic, Esq.
... cheers ... all those "0's" made me eyes boggle... will correct above 🙂
Some ex-cyclones ended up tracking eastward last Jan and Feb. And that could have been a good thing for some rain soaked areas on the east coast. Thats why I said it depends
I only had two water tanks last year and saw all of these 2022 systems slide past east cape. Now I have three tanks they are all hitting us. May move a tank from house to new stables, can always pump water back.
It certainly can be both.
There's a lot more moisture in the air
Meteorologists go hunting for anything that can be blamed on the climate change narrative. They are not to be trusted in my view.
2022 was once again the hottest year on record, an extraordinary coincidence...
Hottest year on record based on accurate calibrated temperature readings since the 1970s. Before then the instrumentation and calculations simply weren't accurate enough to prove these "On record" claims.
Right on! Yes science and accurate recordings are only recent.
You underestimate our predecessors, they were fastidious record keepers. Stevenson screens were developed in the 1880's by the father of the Robert Louis. Weather station location averages are strong cross-correlated, so we are able to statistically estimate the likely average temperature and the associated uncertainty around the measurement. Temperature records are the 1880's onwards are sound, the myth otherwise is perpetrated by climate change deniers who have their own personal agendas.
Lies, damned lies, and statistics...
There are many reports highlighting the low quality of data, if you care to have a good look at the subject.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1653928
Not to mention the various "adjustments" made usually adjusting data in the one common direction. If interested, compare NASA USA published historical data from 1999 vs. 2019 and see for yourself.
"statistically estimate the likely average temperature"
Summed it up right there. It is all estimates, based on averages with statistical modelling and assumptions thrown over the top.
If people want to focus on the science, then they need to focus on the real science, particularly when talking about things being measured in decimals of a degree.
One example, about 20 yrs ago they decided to change the location of where the temperature was monitored in Wn because the previous location at the airport was deemed not representative... They wanted Wn to appear to be a warm balmy city.
Also notice how when hot temperatures are mentioned, they target a few specific locations.
However I am not saying that the earths temps are not slowly rising overall. Its just that certain people and that includes the media go looking for anything that reinforces their narrative.
Wow so it looks like the climate is changing!
... I'll alert the Minister ... see if he can have this sort of thing stopped ...
Was thinking the other day about the supposed increase in catastrophic events.
Where I'm living the last five years have been the most benign I've known. I've almost always lived beside rivers and of course had them flood over the property. The last five years have seen zero flooding from the main river and nuisance flooding from a small stream. Dry periods have been relatively short as well. I guess I'm lucky so I'm not in stuffs headlines.
I've almost always lived beside rivers
Here I was assuming you’ve always lived under a rock.
You could delete that comment....?
He could but it’s rather on point when someone uses n = 1 evidence to dispute the increase in extreme weather events.
A quick look at the number of cyclones and their energy doesn't appear to indicate either a increase or decrease in that area of weather. Maybe you know of some storms that the meteorologists missed.
Really my comment was more directed toward media and our/their obsession with hyping events and wishing for one easy answer while ignoring others. In the case of the east coast, easy to blame the our changing the the weather but maybe the fact ever photo I've seen has suspicious looking exotic plants in, mostly dead, has as much to do with the catastrophe.
Change it to "River Stone" bro.
I live by a river and I'd say the opposite, flooding, particularly during times of the year where traditionally there is no rainfall at all. Last year I had to bite the bullet and put some effort into digging in some more intensive irrigation trenches.
its the under sea volcano near Tonga, read about it on NIWA
Its a win-win for climate alarmists. If there's a severe drought its climate change. if there is a severe flood its climate change.
How is that a win for anybody?
... it keeps climate alarmists in the headlines ... would anyone listen to Greta Thurnberg , otherwise ...
That doesn't answer my question.
those with such an agenda win.
Win what?!
... notoriety ... a place in the warm glow of our media ...
the internet.
GHG warming of the atmosphere is a thing.
Man adding GHG to the atmosphere is a thing
The rate at which this is happening is the big thing.
What the outcome will be for humanity in the future is an unknown thing but considering past events in the Earth's history it's not considered to be a good thing.
Anyone who denies this is saying nothing.
But how much of this thing is Man adding to, is it something, or a lot of thing?
If you look at the map closely, you will notice the North is a lot wetter than average but on the South island there's lots of areas (Alps, South and East coast) which are still drier than average DESPITE all the rain we've been getting!
Full retreat by June
So, Turkey is reducing interest rates and inflation is falling, whilst Argentina is hiking rates and inflation is rising. Perhaps other factors are more important?
Argentina and drought?
And oil prices start today +50 USc higher than Saturday's levels at just over US$80/bbl in the US while the international Brent price is just under US$85.50/bbl. These levels are about US$6 higher than last week.
This is where the future trajectory of inflation is decided - if oil prices go north, it's all back on.
Apparently used Tesla prices are falling off a cliff in the States. Reasons cited:
- Tesla's customers are on the liberal spectrum and Elons acting more like Trump
- Interest rates
- The designs are tired and other manufacturers have caught up/passed Tesla by
It'll be an interesting year for TSLA shares.
& the recent widespread USA blizzards demonstrated their significant battery power inadequacies in cold weather
DP
I don’t think those reasons are particularly valid at all and aren’t specific to Tesla. It’s still the gold standard for EV (range, tech, charging time).
Used car prices are down for all brands.. likely due to the new car pricing structure which was recently cut.
Perhaps it’s more to do with them being a tech company masquerading as a car company and the shine has worn off TSLA!
Tesla cutting new prices 22% has an impact on used.....
These are reports from even before the recent new Tesla price decreases. So expect them to drop even further.
they were offering discounts towards the end of dec (those ones had to be delivered by 31st Dec) of around 7k i think* to clear stock and get it into the quarter. tesla owners always seem to think that their car won't devalue as much as it should (i.e. the std 20-40% per year) and a big amount of the US customers swap out every year or two.
tesla went ahead and dropped pricing further in the last week after first doing so in China (a Chinese spec model 3 starts at around NZ 52k)
i think it is more simple - supply is exceeding demand as they have what four factories and geared so that production increases at least 50% a year? and the demand in china just isn't there. they are far behind the Chinese competition now domestically.
*matched to the incoming rebate
The 7k discount was to get people to buy then and not wait for the federal subsidies of $7500 that kicked in Jan 1st IIRC. Ie to stop people delaying buying till the subsidy/rebate kicked in.
Or maybe the demand for the 3 isn't there?
Or that they want to discourage other manufacturers to engage in such a market. plus to target the cheap Chinese competition.
Where the action is.
"Half of the additional GDP generated from 2000 to 2019 came out of 3,600 micro-regions.
These 3,600 micro-regions were scattered across 130 countries yet cover just 0.9 percent of the world’s land mass.
Half of the 1.5 billion people added to planet Earth from 2000 to 2019 lived on just 1.1 percent of its surface."
https://www.mckinsey.com/mgi/our-research/Pixels-of-progress-chapter-1
Minister of transport Michael Wood has started the 6'th year of his government's reign by yet again blaming the Gnats for the state of our roads ... he claims that the 2010 decision to allow heavier trucks to have resulted in the potholes which are bedevilling motorists ...
... head of the NZ Transport Forum , Nick Leggett , says this is balderdash ... put more money into fixing the roads ... and , less into cycleways which very few people use ... up until October last year NZTA had received 550 complaints from motorists who's vehicles were damaged after running through potholes ...
Except that in Helen Clark's time, her then Labour government admitted that more than 95% of the damage to roads is done by trucks, and then bigger/heavier trucks were approved. this is how the trucking industry is subsidised. they don't pay the cost of their damage. the rest of us do!
Why can’t we expect good roads and cycle ways like every other modern country? Everyone whinges about traffic but nobody has options for alternative transport..
Did a few roadies over the holiday break (mainly around the mid/lower South Island). Cannot believe how crap some of the roads are. As I mostly bike around town or fly for work, I hadn't paid too much attention in the past. Never mind an EV, you need a Landcruiser or something like that with the way the roads are going.
... the seal on the scenic route from Geraldine to Glentunnel is so munted you need a Hummer to traverse it without damaging the vehicle or rupturing a kidney ...
We ticked off bucket list item, drove from Rotorua to Wairoa via Lake Waikaremoana. Beautiful road, will do it again with more time to stop and support the ventures Tuhoe have been working on. Didn't see @Te Kooti sadly. Also drove the just opened pekpeka to Otaki life saving highway, please continue this to north of Levin. What a country we have. Not easy for roadbuilding. Bring back roads of national significance.
... a lovely 92 y.o. lady was killed walking across SH1 Woodend last week ... the townsfolk had lobbied for years for a bypass ... National had it on their roads of national significance programme ... costed & shovel ready ... then , we had a change of government & the whole programme was cancelled .... sigh !
Imagine if the Gnats had got the win in 2017 ... the 4 lane motorway from Orc Land to Whangarei would be well underway by now ... plus the 4 laninig from Chch to Ashburton ...
Yes, sad, just down the road from where we are.
Knowing that there is a reactive formula(not a proactive one) the NZTA use for prioritizing an upgrade of a deadly road, I think they should be asked after every unnecessary dead, 'Are we there yet.' As after every death, we must be getting closer to qualifying for an upgrade.
Is there any way we could hurry it along a bit, like get the local politicians to have to walk back and forward over the course of the day? Or if it's just them it may not be seen as much of a loss, more a public service.
The critical question to ask is to what standard where our roads originally engineered?
If you put 55 tonne trucks on roads engineering for 35 tonnes then the repair story is BS. You have to rebuilt the entire road to a higher standard, which is really most of the roading network.
Massive chunk of Wainui road slumped away. They have patched it about 4 times over the last year. They will now need to do a full repair job. It's a real mess, willing to bet that the massive trucks that are building Milldale have something to do with it.
Well he’s right it is the big trucks causing the damage and they are in no way paying for it. We already spend many billions on road maintenance every year and bugger all on cycleways, blaming cycleways is pretty lazy. If you want pristine roads then I assume you are happy for a big fuel tax increase? Or should it come out of general tax with the people using the roads the most being subsidised by those using them the least? And if so why?
Well crypto certainly surprised me. A complete reversal of the FTX fall.
I wonder if I will regret being mostly in cash this year.
Still the (small) holding I have is up 60% since my re-entry in the collapse last year. So can't complain.
Illiquid markets Wolfie. These kind of movements could happen on the way up and down. Short squeeze.
While I am sure much of the debate will be dumb, it remains that the USA debt ceiling is a fundamental issue.
Grant Robertson is borrowing $70 million today. (as he also did yesterday and will again tomorrow).
The mokos are screwed.
... it costs alot to hire consultants these days ...
The German housing market is facing a major split. While prices of new buildings still rose 5% last year, old buildings slumped almost double-digit This is b/c there is a risk of stranded assets due to the multi-billion euro energy refurbishment. https://welt.de/finanzen/immobilien/plus243201751/Immobilien-Wertverlust-des-Eigenheims-Diese-Neubewertung-sollten-Sie-kennen.html?cid=socialmedia.twitter.shared.web via @welt Link
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.