Here's our summary of key economic events overnight that affect New Zealand, with news its New Year's eve for 1.4 bln people, about 20% of the global population
However, first, American resales of existing homes fell in December, continuing housing's current funk. The fact that they came in slightly better than expected isn't much of a positive when you realise this level is their lowest since 2010. In fact, sales in 2022 ended down by -18% from the prior year and down by a third in December on that same basis. The industry is expecting the sales rate to bounce off its bottom because mortgage interest rates are falling now.
Canada retail sales rose in December after falling in November, but the shifts are pretty modest. Year on year sales rose in nominal prices (+5.1%) less than their inflation rate (6.3%), they they are seeing volume declines.
Japanese inflation hit a 41-year high in December, up +4% and above their central bank 2% target for a ninth straight month. It is up from +3.7% in November, the sharpest rise since 1981. Prices of electricity increased +21%, while grains rose +9.6%. Last year the overall level was up +2.3%, so a rising pace. "Core inflation" which excludes food, was also up +4.0%. The rise from November to December was at an annualised +3.5% rate, so perhaps there is some moderation coming.
The Chinese central bank reviewed its loan benchmarks yesterday and left them unchanged. This wasn't a surprise and is the fifth straight month they have been untouched. The one-year loan prime rate (LPR), which is used for corporate and household loans, was held at 3.65%; while the five-year rate, a reference for mortgages, was held at 4.30%. Lower mortgage rates are not inducing more house sales in their struggling housing markets, so a change would make no difference.
The gigantic Chinese New Year (Year of the Rabbit) travel event is starting, which will see more than 900 mln people move around internally and externally, probably extending Covid to every corner of their country. Some 2.1 bln trips are expected to take place during the 40-day Spring Festival period, double the number of treks from last year.
China's financial markets and government departments will be closed for all of next week, returning on Monday, January 30, 2023.
But when they return, there is some optimism that the restart to their economy will be stronger than we have seen it for a while, and that should drive a counterbalance to an expected slowdown in the US economic engine. (Optimism about China's prospects is not universal however, even in China.) It's been a long-talked-about American slowdown, but there are few real signs of it yet. However, it will be no surprise if one comes. Most analysts expect it to be a mild retreat, and if inflation also retreats and stays down, then a more sustained rise may follow.
The key to watch is the American labour market. Their tech industry retrenchment is gathering steam, with Google the latest to announce very large job cuts. But so far, the wipeout by the tech titans has had little overall impact on overall employment.
German producer prices fell again in December from November at about a -5% annualised rate. But this fall was less than the month-on-month fall in November and still leaves their PPI +22% higher than a year ago, which wasn't as much of a pullback as markets were expecting.
In Australia, a record-breaking year for wheat production has brought down international prices driven up by poor weather and the war in Ukraine, drawing attention from China and other Asian buyers. The USDA says Australia will produce a record 37 million tonnes of wheat in the current season. High wheat prices were a driver of 2022's excessive inflation in many countries, prompting warnings of a global food crisis. Now, market pressures are easing in part to this strong Aussie harvest.
Followers of the NZ carbon price will have noted further falls and it is now down to NZ$72.50/NZU. But in Australia, the opposite track is unfolding.as demand surges. But it is off a much lower base and their price is still only up to NZ$42/tonne (ACCU) even if it is rising fast. Markets expect it to hit NZ$65/ACCU soon and the current scramble to get hold of credit is because there are expected to be building shortages later this year and through 2025. Prices exceeding New Zealand levels are highly likely as their official 'ceiling' level is NZ$80.
Despite China being on holiday, it will be a busy data week ahead. It will end with the US releasing its first estimate of 2022-Q4 GDP growth, on Friday and a +2.6% rate is expected. At the same time a +2.5% rise durable goods orders is expected. Before all that flash PMI data for January for the US, Japan, Europe and Australia will be released. We will also be following the Canadian policy rate decision on Thursday (+25 bps expected to 4.50%). The big data for us of course will be our December CPI release on Wednesday, quickly followed by the same data from Australia. Both have the potential to be market-moving. Markets expect the NZ CPI rate to come in at 7.1% and little changed from the September 7.2%, and for Australia at 7.5% and up from the prior 7.3%.
And of course, markets will be jostling ahead of the next US Fed meeting on February 2, 2023 (NZT).
The UST 10yr yield starts today at 3.48%, and up +6 bps from yesterday and back nearer last week's 3.51% level. The UST 2-10 rate curve is still inverted at -70 bps and little-changed from a week ago. And their 1-5 curve is less inverted at -113 bps. Their 30 day-10yr curve is more inverted at -108 bps. The Australian ten year bond is unchanged at 3.43%. The China Govt ten year bond is up +1 bp at 2.96%. And the New Zealand Govt ten year is starting today at 4.05% and up +6 bps. This time last week it was at 4.09%.
Wall Street has started its Friday session with the S&P500 up +1.4% from yesterday's close in late trade and heading for a -0.2% weekly slip. Overnight, European markets were all up about +0.6%. Yesterday Tokyo closed up +0.6% for a strong +2.8% weekly rise. Hong Kong ended up +1.8% so they managed a +1.0% weekly rise based on that. And Shanghai closed up +0.8% yesterday to lock in a +2.1% pre-holiday weekly gain. The ASX200 ended its Friday session up +0.2% for a modest +0.7% weekly gain, and the NZX50 ended higher too, up +0.7% on the day for a good weekly rise of +1.9%.
On the NZX50, the key mover was F&P Healthcare (FPH, #1) which was up +11% for the week. Good gains were recorded by Restaurant Brands (RBD, #49) up +9.4% and Auckland Airport (AIA, #2) up +3.6%. Going the other way both Pacific Edge (PEB, #41) was down -9.3% for the week and Serko (SKO, #48) fell -7.6%).
The price of gold will open today at US$1927/oz and up +US$6. A week ago it was at US$1917/oz.
And oil prices start today little-changed, up +50 USc at just over US$81.50/bbl in the US while the international Brent price is just over US$87.50/bbl. These levels are about +US$1 higher than a week ago.
The Kiwi dollar has firmed overnight, now at 64.6 USc and back up +½c. Against the Australian dollar we are also up almost +½c, now at 92.9 AUc. Against the euro we are up +½c at 59.6 euro cents. That all means our TWI-5 starts today at 71.7, and up +70 bps since this time yesterday and to its highest of the year so far. A week ago it was 100 bps lower.
The bitcoin price is up, now at US$21,359 and a rise of +2.0% from this time yesterday. Volatility over the past 24 hours has been modest however at +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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.