Here's our summary of key economic events overnight that affect New Zealand, with news it will be all about CPI inflation today.
First, Stats NZ will release our December inflation figure at 10:45am (markets expect 7.1%). Then at 1:30 pm NZT the Aussies will release theirs (markets expect 7.5%). Misses from these expectations could well move financial markets.
Internationally last week, American retail sales grew their slowest on a year-on-year basis for same-store trading, and that wasn't enough to keep pace with inflation and was the weakest result since early 2019 (excluding the pandemic twists).
The Richmond Fed factory survey wasn't flash either and reported some deterioration in business conditions in January. New order levels and order backlogs were notably weak. Price pressures are still high even if they are falling away quite quickly now.
More generally, activity in both service and manufacturing sectors fell at a slower pace in the US in January according to the internationally benchmarked Markit PMIs for both their factory and services sectors. These are out on a 'flash' basis for this month.
Overall, companies are shedding temporary jobs faster now, in what can be an early sign of a labour market contraction.
In Japan, the small steps are going the other way. Japan's factories contracted slightly slower in January, and their services sector expanded slightly faster to a good moderate pace.
In Europe, the start of 2023 saw business activity rise marginally, according to their flash PMI data, showing a tentative return to growth after six successive months of decline.
Backing that up, the German GfK consumer sentiment survey improved yet again (that is, got less negative). The latest reading was the highest since August 2022, pointing to the fourth straight month of improvement in consumer sentiment.
The New Zealand service sector might only be expanding modestly, but at least it is still expanding. The Australian services sector is contracting. The best they can say is that it contracted less in January than in December. And the Aussie factory PMI has dipped slightly from a tiny expansion in December to a small contraction in January.
The NAB business sentiment report in Australia 'improved' in a very marginal way in December from a small negative in November. This was disappointing because it was expected to shift into positive territory. But it didn't. NAB is claiming inflation has now peaked in Australia.
But Gulf airline Emirates said travel demand is growing faster than expected and is reintroducing pre-pandemic service levels to Sydney and Melbourne and restarting services to Christchurch via Sydney. Services to Auckland had been restored earlier.
The UST 10yr yield starts today at 3.48%, and back down -5 bps from this time yesterday. The UST 2-10 rate curve is more inverted at -75 bps. But their 1-5 curve is little-changed at -109 bps. Their 30 day-10yr curve is also more inverted at -110 bps. The Australian ten year bond is down -8 bps at 3.41%. The China Govt ten year bond is unchanged of course at 2.96%. And the New Zealand Govt ten year is starting today at 4.14% and up another +3 bps.
Wall Street has started its Tuesday session slightly lower with the S&P500 down just -0.1% in late trade. Overnight, European markets were mixed, bookended by London down -0.4% and Paris up +0.3%. Yesterday, Tokyo ended up another strong +1.5% in its Tuesday trade. Of course both Hong Kong and Shanghai are closed for holidays. The ASX200 ended up +0.4% and the NZX50 shed a minor -0.1% yesterday.
The price of gold will open today at US$1931/oz and up +US$8 from this time yesterday.
And oil prices start today down -US$2, at just over US$80/bbl in the US while the international Brent price is down to just over US$86.50/bbl.
The Kiwi dollar has firmed slightly overnight, now at 65 USc. But that is the highest of 2023 and a +2.4% appreciation. Against the Australian dollar we start today little-changed at 92.3 AUc. Against the euro we are firmish at 59.8 euro cents. That all means our TWI-5 starts today at 71.9, and firm from yesterday but up only +0.7% for the year.
The bitcoin price is marginally lower, now at US$22,867 and down a mere -0.2% from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 1.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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84 Comments
NZ dollar is showing strength against the other currencies. Does this mean precursor to a high inflation number?
The market forecasts that high inflation will have an increase in interest rates and make NZD a good investment.?
Good insight though we have dropped against aud over last 4 days from 93 to 92. Both currencies up against usd
It means the lag to our own pronounced slowdown hasn't properly kicked in yet... or in layman's terms: we are relatively in less sh*t, for now.
Traders banking on higher exports to reopened china. Weaker US economy
Australia just reopened with China, the coal shipments are starting again. Clearly Australia cares a lot about Climate change. Remind me again why we are worrying about a few cows running about in paddocks ?
To use an old fashioned buzz word if the expectation of NZ’s at 7.1% is realised could it then be said that our inflation has “plateaued?” If so then it has done so at a reasonably high altitude. Still undoubtedly, the powers that be will readily point out that there are many other nations who are living on a plateau much higher, up in the mountain range and somehow that solves the problem.
What does "inflation slowing" mean? It means prices are still going up.
Yes the old rate of change issue that so many struggle to grasp.
And if it comes in at 6.9% when 7.1% was expected, markets will suddenly be risk-on again, and there will be dancing in the streets to celebrate victory over the inflation beast.
Meanwhile, inflation will still be at 30 year highs.
And, using the venerable 'rule of 72', any official inflation figure around 7% implies a halving of value every decade.
And that's if one insists on believing that 'official' rate.....
"And that's if one insists on believing that 'official' rate....." - do you think stats NZ makes it up?
Going up on an annual basis but the month on month is more relevant, same with house prices.
Not necessarily, if Q4 prices were exactly the same as Q3, inflation would be around 5.3% on an annual basis.
Does that mean if that egg carton has increased from $5 to $10,then it's ok to keep it priced at $10 and keep slowly increasing at $1 per quarter?
It makes no sense. We got to bring the prices down to where they are affordable and not keep increasing every year, quarter or day.
Food prices are not coming down (perhaps some fruit will due to weather this year) but if inflation slows the rise from here will slow.... Food is never going to be cheap in NZ again.
Did I say that?!?
We need to be realistic here though. If importing a litre of diesel costs us X, then it will be sold in NZ at X plus the cost of distribution / retail and a margin for the company involved. That's what a free market economy looks like.
Agreed and i just asked a question and apologize if it looked like a statement.
My question is wider to just NZ and mostly on the economic model we are living in.
How can prices be stable when we expect an organization to show profits every quarter?
The model is flawed to its core and i don't see it being better in near future. Just my opinion
Yes, our economic model is completely ill-suited to the challenges we face!
How can prices be stable when we expect an organization to show profits every quarter?
By importing more consumers into NZ and increasing sales volumes. Rapid working-age population growth through migration has allowed businesses/investors (supermarkets, landlords, energy, telco, banks, etc.) to grow their consumer base without market innovation or having to differentiate their products.
On the contrary, the rapid increase in aggregate demand without similar increase in economic capacity has disproportionately empowered these businesses in price setting.
We got to bring the prices down to where they are affordable
Prices are not coming down ngutira, we're aiming at the rate of price increases to slow down.
If you think prices are too expensive now, well... they will be more expensive next year. We just hope/aim they will be "only" 2-3% more expensive.
The only thing worse than inflation for a central bank is deflation.
But the same should apply to wages too, they should go up not down, but not up quite so much.
we live in a debt cult - the growth ponzi needs to -err- grow. Keep feeding the beast or it might get restless and realize the bars on it's cage are rusted.
Here is a fascinating old article, just for interests sake 🙂 Profiting from fear no new thing. You might say the new scarfie rule is that if you see fear being peddled then someone is profiting.
https://www.smh.com.au/national/farce-mask-its-safe-for-only-20-minutes…
Why is an article from 2003 relevant to this thread on inflation or finance?
Suckers are universal, in markets and in medicine. My interest has been in human behavioural science for a long time, since Police College really where 30% of the curriculum covered that topic.
Plus the overall death count is up, miscarriages also, and birth rate down. Seems that a certain medical intervention is a common factor. But whatever the cause, the events are most definitely an economic factor. Excess deaths in the 20-45 year age bracket of most concern, those are a loss to the economy in the way calculations are done. Most people would be banking on these people contributing to consumption, well they won't be.
You also have to factor in disability. For every 20-45 that dies how many more are permanently disabled and taken out of the workforce to become a liability than an asset.
Have you completely discarded the idea the Covid itself may be a contributing cause? Long Covid seems to have a lot more substance to it than the vaccine fears.
There was a study put out a year ago that demostrated people with underlying cadiac disease are more likely to catch covid. Of course such people are more likely to be vulnerable to long covid. I would also say they'd be more likely to suffer side effects from the vax.
Never god covid, backed myself not to get it and was vocal enough about that on here.
I also published advice on here about lifestyle to prevent sickeness. In fact you go back and find my comments from 10 years ago you will find they are consistent on that front. I walk the talk.
But I mention in response to IT Guy below the work of Professor Fenton who has dismissed the false, and actually unstudied, claims by authorities of long covid causing the excess moretality. The professor found the statistics point mostly likely to the vaccine as the causative factor.
Sounds a lot like you are selling fear
It was quite interesting though. Plus the morning briefing comments don't need to be confined to just inflation or finance
20 years is a long time in science and facts..
No such thing as fact really, just theories. Hence the need for civil rights. But you are right, 50% of scientific studies are found to be not true 5 years later. Cuts both ways.
Duh... All articles from our financial past are relevant to our financial present. The only people who seem to learn from our financial history are those who profit from knowing that history. I expect to be bidding at the end of the year at the mortgagee auctions. Is profiting from other people's obvious stupidity wrong?
Food price inflation running the highest in 32 years, 11.3% year to Dec.
Just start eating personal electronics instead and you'll be saving money.
Qu'ils mangent de la television - to paraphrase Marie Antoinette
"let them eat microchips" haha. Maybe not microchips actually we are running low on those still from memory.
Just eat plastic - it'll end up in the food chain eventually anyway
When you have farmers taking tax deductible drives to the city in their six-figure tractors to protest being called out for environmental mismanagement, or spending a day or so ploughing "the end of an error" into their fields, maybe food price inflation is due to farmers skiving off all the time?
Farmers these days just don't have the same work ethic, etc.
https://www.nzherald.co.nz/nz/end-of-an-error-auckland-farmer-mows-trol…
Farmers work hard. Inflation is the result of poor monetary policy.
Most farmers don't have time to comment throughout the day on interest.co.nz Nzdan
I think the number will be high due to the weather impacting food and our new normal wrt egg prices.
Reserve bank will ignore all nuance and increase by a decent chunk, thus passing the buck back to Chippy, and turning the ski slope we are on from a blue run to a double black diamond.
Yes I also think it will be high, and agree the RBNZ will lack nuance and won’t ‘look through’ the seasonal factor.
I think it will be 75BPs today, but potentially 50 if it surprises on the low side
I think it will be 75BPs today, but potentially 50
CPI is being released today, not the OCR, HM
About as accurate as he gets.
Clearly continues to make il-informed baseless guesses. Anyone with a bit of nous would have been been waiting on today’s CPI result before making an informed assessment of OCR announcement due 22 Feb.
Wow, what a nasty and bitter comment. A simple mistake on my part.
Btw I have no intention of engaging with such attitudes. So if you think I am going to engage with you any further, then you are mistaken.
And btw I was right - inflation came in higher than market consensus.
Have a good life.
Ha, you just engaged. You tend to make mistakes when your verbosity comments come thick and fast on here ten to the dozen.
HouseMouse
Don't let your ego get triggered yet again.
What? According to you you inflation was going to be gone by the end of the year - which you later clarified to no more than 3 to 4%. :(
And remember the OCR wasn't going to go over 1.75 to 2% - that was when you were calling ANZ fools earlier in the cycle when they suggested that it as likely to go to 3.5%. :(
At the time, your rebuff was time would tell . . . well that time is now, so suck it up.
You were adamant on these at the time suggesting $5k wagers . . . . and offering apologies if you were wrong. So stop throwing a tantrum especially as you are prone to slag-off others - just the other day slagging QV (who use CoreLogic as their basis for data crunching) as not objective.
Oh, I'm happy to post your comments if your memory fails you, but it might be even more embarrassing. :)
Well his government is barrelling down the slippery slope. Why not everybody else too.
Indeed:
Meantime he is appointing as deputy PM someone whose record is this, despite the grossly overheated labour market. https://kiwiblog.co.nz/2023/01/welfar Link
Failing upwards isn't just for clipboard management types, it would seem.
WOW, the increase in numbers of people on the benefit since Labour came into office is shocking. If we want a productive economy, we have to vote Labour out!
But would not all those numbers of beneficiaries vote for Labour? Is that not part of the grand scheme? Folk that are dependent on a hand to feed them aren’t likely to vote for it to be taken away. Add the the burgeoning bureaucracy to that and the bloc is of quite some voting power.
l
I doubt many beneficiaries are out campaigning for Nats or ACT. But I'm guessing many beneficiaries are too busy in one way or another to actually vote. The burgeoning bureaucracy will be voting labour.
"The burgeoning bureaucracy will be voting labour." No they won't. GR banned pay rises for Government workers for three years. This is a total shafting of frontline Govt servants. Unless Hipkins changes this, very few will vote for Labour.
🇸🇻 El Salvador just paid off $800 million in debt despite mainstream media saying they would default because of #Bitcoin
https://twitter.com/bitcoinmagazine/status/1617967004815880192?s=46&t=s…
In the past year, almost every legacy international news outlet said that because of our “#Bitcoin bet”, El Salvador was going to default on its debt by January 2023 (since we had an 800 million dollar bond maturing today). Literally, hundreds of articles
"When their lies are exposed, they go on silence mode." - President Bukele
Bearing in mind that Bitcoin allows for highly illegal trading and money laundering then all I'm thinking is where exactly did that 800 million come from ?
All Bitcoin transactions are traceable - its an open ledger unlike cash. Problem is you rarely think when it comes to BTC.
Come on Carlos67, surely with how much you hate on Bitcoin, I would expect you to at least know some basic things about it 🤦🏻♂️
Meanwhile in the UK
https://www.dailymail.co.uk/health/article-11671587/Massive-spike-exces…
To be honest I first identified this a year ago, people are only just catching up. Some don't want to catch up, still in denial. It is worth looking up the word of Professor Norman Fenton from the UK.
So where's everyone meeting up at for the 10:45 CPI release?
Bottomless brunch options sound good to me. Think we might need it
I'll be in the waves surfing by then. Living life, not watching it.
Meh it will be slightly under what everyone is predicting, so Mr Fix It will already have Fixed It on the first day and we can all get on with spruiking and reinflating the bubble etc.
I'll probably take the dog for a walk to be honest.
Well, I was wrong.
Guess the dog ain't getting a walk after all.
Dec Roy Morgan poll: Labour falls to 27.5%
https://www.roymorgan.com/findings/9152-nz-national-voting-intention-de…
Far out 14th Oct could be brutal for Labour.....
... that reflects the carnage they've wrought upon their nation in a mere 2 & a quarter years ...
Good grief ..
Worst government ever ....
Far out,that's nearly as bad as National in 2020...
Well it's clear why Ardern resigned. I do think that Hipkins will regain some of the Labour votes, how many? Well that's the million dollar question.
mmmm 7.2% not really slowing
That is bad news. More interest rate hikes to come.
We only need one more, and get it out of the way. So the question is "How much?"
No we don't we need multiple rises but the RBNZ will not do it. They are going to tell you its under control, just wait a few more months for it to come down we do not want to overshoot. I think anything is possible in Feb, cannot call it because it now all depends on the spin they come out with and not the facts.
Or good news, if banks increase their TD rates again.
So 7.2% is suddenly "Good news" because its under the forecast ? Well its 7.2% if you choose to believe it that is.
Wasn't the forecast 7.1%? The fact that it's .1% over will have economists proclaiming gloom and doom, all the while looking at their own interests to see how to make money off it.
...not really growing,plateaued?
Ahh the nest egg is whittling away... Comeuppance for their greed while younger generations are left with nothing.
SMG.
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