Here's our summary of key economic events overnight that affect New Zealand, with news inflation may be transitioning lower, but investors seem uncertain what that will do to the level of economic activity.
But first up today, there was another dairy auction this morning, and not especially notable. Prices dipped -0.1% in USD terms. Only cheddar cheese showed any life, up +4.0%. The rest of the components moved very little. For example the core WMP price was up a mere +0.1% and SMP was down -0.3%. However even though these prices were little-changed they were undermined by a rising NZD. In local currency, prices fell -2.9% from the prior event. That takes them, in local currency terms, down to the lowest they have been since February 2021. Not helpful.
The New York state factory index turned in a shocker of a result, falling hard. In fact (apart from the pandemic halt), it was their weakest result since the depths of the GFC. Apart from lower inflationary pressures, there are no positive indications here.
In Canada, inflation is easing too. Their December CPI slipped to 6.3%, the least since February and below market expectations of 6.4%, compared to the 6.8% in November and further declining from the 1983-high of 8.1% reached in June. Lower petrol prices drove this latest result. Will it be enough for the Bank of Canada to ease off its rate hikes? We will know when they next meet on Thursday next week.
Meanwhile, Canadian housing starts fell away quite sharply in December and by more than expected. It wasn't a huge miss, but it is their lowest level since January 2022.
Canada is also taking "aggressive measures" to free up its borders and build its immigration levels in the face of serious skill shortages.
China said its economy expanded +2.9% in Q4-2022 from the same quarter a year ago. This was nearly double what was expected. For the full year, it claims +3.0% real. At the same time it said industrial production rose just +1.3% in Q4. Retail sales fell, down -1.8% (an -8% fall was expected. And electricity production was up +3.0% they said. All this key data is far more positive than almost any analysts was expecting. One reason was that their rural sector brought in record harvests.
China also said its population shrank -850,000 to 1.41 bln people by the end of 2022. It's an historic switch lower and is the start of an "irreversible" decline, demographers say. They recorded 9.4 mln births and 10.6 mln deaths in 2022. Now 20% of their population is over 60 years. (In New Zealand, that same ratio is 21%. In Australia, 23%. In the US, also 23%.)
In Japan, investors are bracing for a potential big policy shift by the Bank of Japan as soaring inflation may force the end of its ultra-low rates pledge. The Bank of Japan is meeting now and we will know the outcome of its policy deliberations later today. Certainly speculation is high and investors are on edge.
Singaporean exports fell sharply in December, down more than -20% from the same month in 2021. That is much tougher than the -14.7% pace they reported for November.
For the first time in almost a year (that is, since the Russian invasion of Ukraine), German investor sentiment turned positive, and in a quite spectacular way. It is now net-positive. Driving that has been the expectation that inflation is being brought back under control. And in turn driving that has been the unexpected success the EU has had insulating itself from Russian energy blackmail. And they now think they will avoid recession in 2023. All good reasons for Germans to be optimistic to start the year.
Australia said that even though it has -5% less land in agricultural production in 2022, it generally produced a lot more from what was in production. Wheat production was up +14%, canola production was up +43%, sheep production was up +3%, and beef production was up +1%.
And we should also note that a new front seems to be opening up in the trade wars. Led by a big new program in the US, nations seem to be dangling taxpayer cash to incentivise local businesses to adopt green tech. The EU, who think they led the push to green tech, are particularly unhappy, and are adopting their own taxpayer incentives.
The UST 10yr yield starts today at 3.54%, and up +4 bps from yesterday. The UST 2-10 rate curve is less inverted at -67 bps. And their 1-5 curve is still inverted at -109 bps. Their 30 day-10yr curve is little-changed at -97 bps. The Australian ten year bond is up another +4 bps at 3.66%. The China Govt ten year bond is down -2 bps at 2.94%. And the New Zealand Govt ten year is starting today at 4.13% and up +2 bps.
Wall Street has started back after their long weekend holiday with the S&P500 down just marginally. But that is mainly due to lower bank profit results. Overnight, European markets were all up about +0.3%, except London which slipped -0.2%. Yesterday Tokyo closed up a strong +1.2%. But Hong Kong ended down -0.8% and Shanghai slipped -0.1%. The ASX200 ended its Tuesday session little-changed, but the NZX50 ended stronger, up +0.6%.
The price of gold will open today at US$1912/oz and down -US$9.
And oil prices start today up +US$1.50 at just under US$80.50/bbl in the US while the international Brent price is just under US$86/bbl. Moving the dial today are improved demand indicators.
The Kiwi dollar has firmed overnight, now at 64.3 USc and its highest in a month. Against the Australian dollar we are firm too at 92 AUc. Against the euro we are up +½c at 59.5 euro cents. That all means our TWI-5 starts today at 71.2, and up +30 bps since this time yesterday.
The bitcoin price is marginally higher, now at US$21,201 and up +0.9% from this time yesterday. Volatility over the past 24 hours has also been modest at just +/- 1.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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60 Comments
Take anything The CCP say with a grain of salt.
Xi certainly seems willing to let ideology and life-time status and power stand in the way of improving the condition of the nation.
Who would have thunk it.
Not much different from SCOTUS
Canada, yet another country taking active and aggressive steps to shore up skills shortages.
This could be the big force that sustains inflation longer than the markets predict. China, Japan, Canada, Australia... they're all shifting into coping with major shortages in people. A lot of folks retired, birth rates traditionally decrease as a country becomes more affluent and literate, and for 3 years people haven't moved around the world very much.
Is it just NZ that imports fruit pickers and labourers, while other nations have systems and processes set up to actually bring in people on a nuanced skills-required basis?
I still think the inflation surge will decline in most sensible economies and faster than pundits say (the same as the increase). This is more of a long term trend.
We have 97,000 able bodied individuals currently receiving an early govt pension, though officially defined as unemployed. Its a strange phenomenon when employers are short staffed. Free money couples with low motivation to work
Yes that is something i struggle with. I'm firmly in favour of a decent safety net, but feel that were there are job opportunities people should be compelled to work.
There needs to be a difference between the dole and minimum wage to make it worth while and the transition off the dole shouldn't penalise people. A big one is that the jobs need to be available locally to where the people are. We can't just say you have to work, but to do so you also have to move.
It can be a complex problem.
I struggle with the idea of foodbanks handing out free food. Why are people able to collect free food or free money without any obligation to do something in return.
It is also good for mental health and well-being
why are we the only organisms on the planet that have to pay to live here?
EVERY species works towards it's own survival. One of the things that separate man from the animals is that we improve efficiency by creating structure and then trade between us. So every thing "pays" to survive in one way or another.
This seems like an odd statement to make. Clearly we are the only organisms who use money as a form of exchange system but all organisms on this planet work. Bees in their hives, Ants in their colonies have their designated roles and lone wolves or sharks all put in the required mahi to survive. Maybe you can clarify what you were meaning? Cheers.
Try Kipling then. Something like - in nature, in the wild, there is no right and wrong, only life and death.
Well put Hemi, obviously Zen20 wants to live without contributing to his/her own life.
The human race has more needs, hopes and ambitions which create opportunity for the entrepreneurs amongst us.
Here is someone living for free... I wouldn't do that to my kids
'No electricity until I was 6': The Kiwi boy who grew up two days hike from the nearest town
https://www.newstalkzb.co.nz/lifestyle/chris-long-the-kiwi-boy-who-grew….
We are certainly the only species forced to pay someone else to live here.
I have no issue with food banks. When parents find themselves in a bad situation the kids go without.
I have a big issue with paying the equivalent of a week's grocery bill per ROOM per NIGHT to loads of motel operators with no end in sight.
I'm not sure how you obtained this statistic. When my wife in her fifties had cancer and was unable to work, she had a choice between 'job-seekers' with the job search suspended or joining me on superannuation. She took the super. So she would be classed as 'receiving early pension' but when the chemotherapy ended and she went back to work and has done so for 6 years.
NZ probably has more people of pensionable age working than any other developed country. Good for them and good for NZ.
"Early retirement" is obviously a euphemism as many unemployed are gen x y and z. I am not referring to those in the same category as your wife
"Early retirement" - "There has been a 20 percent increase in average future years on a benefit over the last five years. Right now, that expectancy totals 4.43 million years."
"In real terms, total incomes after housing costs of people supported by main benefits were, on average, 43% higher in 2022 than in 2018. ......there are still reasonably poor financial incentives to increase the level of hours worked for many low-income families. This is because when earnings increase, their income support payments are withdrawn relatively quickly."
https://lindsaymitchell.blogspot.com/2022/10/average-future-years-on-be…
When the first thought is whether the govt financially incentivises you to get up, then there's a problem.
Why isn't there an obligation to achieve something or contribute something or learn something
Effective 9 November 2020, if you have a partner and they don’t qualify for NZ Super (or Veteran’s Pension), you won’t be able to include them in your payments.
https://www.findex.co.nz/insights/article/changes-to-nz-super-for-non-q…
Apparently none of the 97000 unemployed can drive either
https://i.stuff.co.nz/dominion-post/news/wellington/130989034/100-overs…
Benjamin Franklin once said that "if you want something done, ask a busy person."
There's truth to that very old comment
If you want it done quickly ask a lazy person.
If you want it done right, don't ask a busy or lazy person.
"There's never enough time allowed to do a job properly but there's always enough time to do it twice".
When I was a manager I used to say "if you want something done well ask a busy woman" (the men spent too much time debating how, what & why)
In May 2021, immigrants accounted for 36.3 percent of all core-aged employment in accommodation and food services; 37.8 percent of transportation and warehousing workers; 34.1 percent of those working in professional, scientific and technical services; and 20.1 percent of construction employees [in Canada].
Every country is competing for medical personnel, but Canada also has large inflows of low-skilled same as NZ. How else do you keep wages down and house prices high?
That's true. However, Canada benefits from US' broken skilled migration policies.
The US is often spoilt for choice on global talent, but their immigration dept has an upper limit of 65k H1B visas a year (12% set aside for Singaporean and Chilean nationals). US companies often transfer skilled migrants with rejected visa applications to their Canadian offices. Many are able to backdoor into the US as Canadian citizens after a few years.
Singapore is another backdoor that many US companies use.
No NZ started the idea of a points-based system for permanent immigration. Just gave it to INZ, our most incompetent govt dept to implement it. NZ is over-flowing with 'skilled' chefs and tourist guides.
Our fruit pickers are temporary visitors; if they stay under 12 months they are not even counted as immigrants in the stats. Fruit pickers are a win-win for NZ and for their Pacific island country of origin. It is the endless flow of staff into nail and massage salons, fast food, liquor outlets that are the trouble.
Win win you reckon?
Way to common a article to call it win win.
https://www.stuff.co.nz/national/300785629/woman-came-to-nz-expecting-1…
Thanks for the reminder. Exploitation is rife with foreign fruit-pickers. Absence of an active labour inspectorate - our govt (both Lab & Nat) prefer to sweep it under the carpet. However if done properly it would benefit NZ and country of origin.
That applies to work visas and applications for permanent residency too. NZ is slowly losing its reputation - there have been articles printed in the Philippines and India warning about exploitation in NZ.
There was/is plenty of pick staff in Central Otago this year.
I suspect it’s not just the systems that is seeing migration to Aus and Canada surge, compared to NZ.
I suspect cost of living and wages is a big factor too. Slow hand claps for NZ’s housing policy last 20 years…
We shouldn’t forget too that Aus and Canada are not insignificantly closer to the home countries of migrants too.
Yes we tend to forget that NZ is located at the south east end of the line. Frustrating for travel certainly, but personally I rather like it down here all the same.
ps, courtesy Mr Twain. “All people think New Zealand is close to Australia or Asia, or somewhere, and that you can cross to it on a bridge. But that is not so. It is not close to anything, but lies by itself, out in the water.”
Yes our isolation is a nice thing, in a way. But just saying it might be a deterrent for a significant number of potential migrants.
Understood. Wasn’t intended as criticism of your point. Just an expression, attempted in a whimsical sense, so to speak.
'You name it and there’s a shortage' says stressed hospitality owner | Stuff.co.nz
https://i.stuff.co.nz/business/prosper/130991358/you-name-it-and-theres…
"no one is ready to buy in a high interest rates market. I don't want to make any profit, but I don’t expect to sell the business for less than what I bought it for.”
That's a familiar quote used by homeowners too
China retirement age is 60 for men and 50-55 for women. They are going to have to increase this sharply and significantly ramp up their healthcare systems for the future. If they are smart, they could turn such a plan into some real GDP growth, all internal.
Good to see populations stabilisng. Constant increase would not have ended well.
Vladimir Putin is set to make a very important announcement tomorrow on the ongoing war in Ukraine, according to a pro-Russian official. The Russian leader will reportedly make a statement during 80th anniversary celebrations for the siege of Leningrad in World War Two.
"Iron ore futures jumped almost 60% from the end of October through last Friday, before slumping Monday on fears over action by authorities to quell the rally. The steel-making material has surged on hopes that infrastructure and construction activity will rebound this year as China’s economy expands faster."
https://www.bloomberg.com/news/articles/2023-01-16/iron-ore-s-sharp-gai…
And oil prices start today up +US$1.50 at just under US$80.50/bbl in the US while the international Brent price is just under US$86/bbl. Moving the dial today are improved demand indicators.
India’s breaking all records for buying Russian oil, but who is the surprise buyer?
Re immigration debate, both my oncologists are Asian (Hong Kong and India) along with many of the nurses (mainly Phillipines and India) and others (stroke, GP and Urorology) are the UK's NHS refugees, with the latter being pretty good in terns of their thoroughness and attitude to patients - as opposed to the younger female doctors who make it very obvious that they really do not like dealing with the Male, Pale and Stale.
Re the work/benefit debate, I am 77 (male, pale and stale) with advanced prostate cancer but work as a ride share driver out of both choice and necessity. I can not get any benefit other than my pension, even when, because of health problems, I can not work as I have no Maori blood and have some money in the bank.
Still I guess I can not grumble as I type this while looking across the Hauraki Gulf to Waiheke Island and the Coromandel Penninsular on a sparkling day.
I can not work as I have no Maori blood and have some money in the bank. - what does this even mean?
Sorry. It should read "and have no Maori blood". I stopped going to WINZ quite some time ago as this is one of the first questions they ask of you - also as when filling in an on-line questionnaire regarding government assistance with on-line businesses in which case it is the first question.
Pass that money to a friend or relative or at least buy an expensive car. Or take a foreign holiday and dump it in an overseas account. When my daughter had her child she didn't have much money but we would have given her some except for the accommodation benefit. With $8,001 she would get zero but keeping it below $8,000 meant she received $375pw. What a truly arbitrary (polite way of saying half-witted) benefit. They never reward the frugal savers amongst us.
Is she still renting
Yes. You can have money or you can have kids but not both. She has two children but has returned to work so doesn't qualify for accommodation benefit. But accommodation benefit doesn't distinguish how many children you are housing. It is a random benefit invented by wealthy politicians while they drank a small coffee. When I suggested to my MP that a return to a universal child benefit would be cheaper to administer and harder to rort I was told that 'targeted benefits' are proven to be more effective at tackling poverty.
Sorry to hear of your problems, but what's the no Maori blood business. AFAIK, there is no benefit only available to Maori???
LOL
Government agencies need to ensure that at least 5% of the number of relevant contracts awarded are to Māori businesses.
A Māori business for government procurement purposes is one that has at least 50% Māori ownership or a Māori Authority as defined by the Inland Revenue Department.
This procurement policy applies to mandated government agencies that are required to follow the Government Procurement Rules.
No Maori blood?
Lucky you, if you had you wouldn't have made it as far as the oncologist. You'd be looking at the view from the urupa.
Redcows. A surgeon mate was told to rearrange his list to put Maori first. He struggled with that as he had arranged his list to put need first.
"Business confidence has sunk to its lowest level since the New Zealand Institute of Economic Research began surveying sentiment in 1970, on a seasonally adjusted basis, the research firm says."
https://www.stuff.co.nz/business/130987717/worst-of-all-worlds-why-busi…
China said its economy expanded +2.9% in Q4-2022 from the same quarter a year ago.
Michael Hudson: ...There is only one part of the world that is not able to go it alone, and that’s the United States and Western Europe. They de-industrialized.
In their class war against labor, looking for lower-priced labor abroad, they have cut their own industrial labor force, but they’ve also shifted the center of manufacturing, technology, agriculture — everything has shifted to Eurasia and the southern hemisphere.
The United States turns out to have left itself alone [i.e. isolated itself]. The problem that is frustrating American diplomats is: How are they going to dominate the world without industrial leadership, with debt deflation, with a debt that is much higher than other countries. How on earth can they lead, in a weakening position, without any military? ...Link
The question of how they are going to dominate the world is likely through their currently very capable military capabilities of themselves and their Western European allies. The "without any military" bit of this makes zero sense, the US probably has the most capable military ever to exist and will continue to have this for quite some time. They have NOT de-industrialised their military, most of it is still built in the US and its an increasingly important part of their economy.
I suggest you have a read of Peter Ziehan. The US can go it alone ...it has the landmass, geography, the demographics and natural resources to be self-contained. It needs no one - unlike almost all other countries.
I doubt it. Most of the world still wants to move to the US. The bulk of the young graduates certainly do not want to live under Russian or Chinese govts. The advantages of the US are immense, both in human capital, geographically and resource wise. No one else comes close.
Do central banks cause recessions by over-reacting? An unpopular opinion maybe, but have been looking at some of the last ones and seeing indications that this one maybe the same. For instance, it appears inflation is being reined in, in the US, by raising rates quite significantly. There is a definite time lag between raising rates and the inflation reaction. Partly because raising affects the future, while inflation is reported as what has happened in the past, and roughly quarterly, so you get up to a 6 month difference on the inflation reaction.
The Fed has indicated they are going to continue raising to 5.1%, however it looks like they are getting inflation under control with their current settings. Raising even further is likely to cause an over reaction. I get it, they don't want stagflation, but do they seem to suffer from extreme recency bias in all aspects. You can see this when they denied inflation to start with, then accepted it, then decided to act aggressively. Now they are biased towards the aggressive mindset, so will continue to act aggressively, even if they are having the desired effect, and even though they claim to know about the lag effect, all they want to do now is act aggressive. And exactly the same thing with the RBNZ appears to be playing out.
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