Here's our summary of key economic events overnight that affect New Zealand, with news the IMF says the world is back on a rising expansion track, even if it is pretty modest by past standards.
But first, remember all local eyes will be on Statistics NZ at 10:45am this morning and the December labour market stats. Our jobless rate is expected to remain at a very low 3.3% but jobs growth is expected to be a minimal +0.3% in a very tight labour market. Any significant changes from these levels could be market-moving.
In China, according to their official survey, their factory sector bounced back to an expansion in January. It was an unexpected improvement.
Better yet for them, their services sector survey recorded a very large improvement, one that indicates the non-manufacturing sector is expanding its fastest in seven months. This was also very much better than anticipated. Most analysts had expected both sectors to struggle for some months yet as they reopened.
Both indicators, if they are confirmed in the private surveys, will probably light a fire under commodity prices in the days and weeks to come.
Japanese industrial production was weaker in December however, but only marginally so, and nowhere near as weak as expected.
Meanwhile, Japanese retail sales rose +3.8% in December from a year earlier, better than expected and following a +2.5% gain in November which was considered very good at the time. This was also the tenth straight month of growth in their retail trade, as domestic consumption continued to recover from the pandemic slump.
While it is still depressed, Japanese consumer sentiment rose again in January, its best reading since the turnaround started in September last year.
South Korean industrial production however is struggling, down sharply in December and by much more than anticipated.
American retail sales picked up a bit last week on a same-store basis but are still expanding barely higher than US CPI inflation, which has been the case all January.
The next American sentiment indicator, this one from the Conference Board, is little-changed but holds the positive outlook it has had for the past six months.
In the factory sector, the Chicago PMI was also unchanged, but remained in contraction, and for its fifth month in this heartland area. It's not a great start to the year for them.
German retail sales turned in a very poor December result, far worse than expected. Although they were up +4.2% in December from a year ago, if you remove inflation, their real retail sales fell an eye-watering -6.4%. To be fair to them, they are one of the few countries that highlight their 'real' retail sales result. This time, it isn't good.
But German labour markets eased back only a minor extent in December, and probably not statistically significant. They like many other economies have tight labour markets with widespread skill shortages.
The EU managed to eke out a minor expansion in the overall Q4-2022 result, which took their annual growth to +1.9% and slightly better than expected. Markets were expecting a small overall contraction in this last quarter.
In Norway, their sovereign wealth fund, one of the world's largest investors, posted a record loss of -1.64 trillion crowns (-NZ$250 bln) for 2022, bringing to an end a three-year run of soaring profits, as their stock and bond holdings were hit by the Ukraine war and inflation.
Meanwhile, Australian retail sales fell sharply by -3.9% in December from November, surprising markets. Although strong Black Friday sales and a shift to travel spending in late 2022 put downward pressure on December retail sales, the extent of the fall suggests households have started to cut back on discretionary spending.
Through all this data chatter and changes, the IMF says global growth is projected to fall from an estimated +3.4% in 2022 to +2.9% in 2023, then rise to +3.1% in 2024. These are higher estimates than those made in October, especially for 2023. They also see inflation easing. A lot of this will be led by a Chinese recovery they say, although the 2022 result found the EU outperforming both China and the US.
The UST 10yr yield starts today at 3.53%, and down -2 bps from this time yesterday. The UST 2-10 rate curve is inverted at -69 bps and little-changed again. And their 1-5 curve is still inverted at -105 bps. Their 30 day-10yr curve is still inverted at -101 bps. The Australian ten year bond is down -5 bps at 3.59%. The China Govt ten year bond is little-changed at 2.94%. And the New Zealand Govt ten year is starting today at 4.21% and up +4 bps.
Wall Street has opened it Tuesday session with a +0.8% rise. Overnight, European markets rose a minor +0.1%, except London which slipped -0.2%. Yesterday, Tokyo ended its Tuesday session down -0.4%. Hong Kong fell heavy again, falling -1.1% on the day. Shanghai was also down -0.4%. The ASX200 dipped -0.1% yesterday while the NZX50 ended down -0.6%.
The price of gold will open today at US$1927/oz and up a mere +US$3 from this time yesterday.
And oil prices start today down another -50 USc at just under US$78.50/bbl in the US. The international Brent price is now just on US$85/bbl. The continued fall in the natural gas price is something to behold, now back below long term averages.
The Kiwi dollar is softish at 64.6 USc. Against the Australian dollar we start today at 91.7 AUc and unchanged. Against the euro we are softish at 59.5 euro cents. That all means our TWI-5 starts today at 71.4 and down -20 bps from yesterday.
The bitcoin price is now at US$23,111 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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83 Comments
Another downpour, but realistically not a big one, that has yielded the same outcomes and flooding around Auckland.
The scary thing is this isn't a huge level 'event' like a whack from a full strength cyclone, more in line with the Tasman Tempest but this time coming from the other direction. We are going to get back-to-bay days of rain, our city needs to be able to cope with it.
What effect does intensification have you reckon? Where I am in the SI all the old 1 acre properties are now subdivided….leaving less grass area to soak up water. Does make me wonder how much of this flooding is influenced by it.
I've been wondering about that too. In West Auckland, especially near the areas that flooded in Henderson/Ranui, huge chunks of the area have been intensified and I'm guessing that must have a table-raising effect when it comes to the flood plain. Some of the houses that were marginal before will be effectively red-zones now, but those houses have been there a long time, so that's pretty rough. I would think they should have been given some consideration at a zoning level, rather than run-off being assessed at a site-by-site basis.
Wonder how many similar issues will pop up across Auckland as whole areas go through the same intensification process - you know, except the well-heeled bits that don't think they should take on any more housing at all.
Wairau Valley and the commercial area have been flooding for decades. A big fuss at the time and "something must be done"
The following year - gone and forgotten.
The greenies in the Council want to do away with the concrete lined water courses with ones with plants growing in them. What a disaster that would be!
There will be lots of problems which the government, in rushing through the mandates, didn’t even think about. Although quite a few people raised concerns in the submissions and hearing process.
Most of the issues we have today will stem from things approved under Unitary Plan passed in the mid 201xs, the proposed reforms are still out for feedback (there's a yarn or two about the Auckland Council town planner response too, but that's for another time). So we've been baking in whatever these problems are for a while now.
The rules are baked in. The government mandated that you can only require a minimum of 20% of a site area to be landscaped surface, as compared to 35-40%.
Welcome to paved paradise.
From what I have seen the new developments are better off as the council have been quite strict on drainage etc. In most cases they need a retention tank unless they have a connection to a very decent storm water pipe. They are probably better than what they replaced.
Most councils design stormwater pipes to handle a 10 or 20 year storm if there’s an overland flow path for stormwater to follow during the larger events (in many cases the roadways would be assumed to help convey flows up to a 100 year event).
After looking at the HIRDS data for one of the Auckland rain gauges, the recent rain event appears to be greater than what’s considered a 100-year rain event. Regardless of the impacts of intensification, that’s a lot of water that often isn’t designed for due to how infrequent the event should be.
Also if the ground is already saturated, then it can’t absorb as much if a rain event sticks around for a few days (especially if the ground water levels are higher) such as with the Nelson floods in Aug 2022, so the main issue is giving the water a place to go. Homes in low-lying areas don’t have a lot of easy solutions (ie Westport).
Intensification probably has some impact, but new builds should be mitigating the increase in impervious area (hopefully). Otherwise you’re correct that there would be some impact and downstream effects should be considered. But building more homes outside of the flood plain also provides a place to retreat to (ie eventually abandon the lower-lying areas over the next 50 years or so).
My 2 cents.
Unfortunately the 100 year event pre global warming is now probably a 5 year event!
Too true! Climate change is often accounted for in designs and models these days (ie RCP 8.5 scenario). But we’ll see how accurate those predictions are.
Our jobless rate is expected to remain at a very low 3.3% but jobs growth is expected to be a minimal +0.3% in a very tight labour market.
Being employed is no guarantee of weathering the next year or so. We had a 24% increase in house and contents insurance this week (non-Auckland/Coromandel), and a 14% increase in car insurance on top of the recent 11% increase in pet insurance. How many employed Auckland people are going to stop their insurance to make ends meet after this weekend?
If the bygones principle kicks in for Auckland businesses after this week, what will that mean for the rest of the country?
Insurance is out the gate expensive now.
Just got my pet insurance renewal through, and it is now cheaper to buy a new dog each year (courtesy of a quick puppy check on TradeMe) than pay the insurance bill.
It's a 4-year replacement cost for us, but I take your point. The pet insurance outfits are taking out a lot of ads at the moment. There must be money to be made.
I can't tell if you guys are pulling our legs or being serious about pet insurance. Surely only someone who is completely unhinged would consider such a thing.
Yep. Just like human health insurance, if your dog or cat is healthier than average you will save money by not having it.
Unlike human health there is no public system to pick up the bill when you do need to get them treated. $9k for getting a broken leg in a kitten pinned together. We'd had her 3 months, so ~$90 in insurance premiums.
Even if we never claimed again the insurance company will probably never make money out of us on that cat.
We are up about $2k from our pet insurance in just one year. I am actually wondering if it is too cheap at the moment and they are making a loss!
One trip to the emergency vet is $250 and that is only an examination. And normal vets are so busy you can't get in for days. Any kind of surgery costs thousands.
tell me about it. The Vets sell fear...and we just got suckered. Buy quality food and you avoid most dog health issues.
I don't have it, but can see the value. Pets are family. You look after your family.
100%, the doggo is a big part of family life for us - getting out for walks, going to the beach for a swim etc. Also the best money I've ever spent on my health and fitness; have dropped 20kg and never been fitter since starting to do more regular hill walking, running and swimming with the hound. Worth every cent.
I had that conversation with my daughter a few years ago, she swears that it pays for itself.
I said that it was a shame that life insurance wasn't offered for pets.
Pet insurance is an absolute rort. You're supposed to be insuring yourself against a 20k - 30k series of medical expenses at the end of the pets life, but the premiums were going to add up to at least that much over the expected pets lifetime anyway, and then most of the policies had a co-pay element for everything as well. It guarantees you'll spend that much, not insures against it. We just put what the premiums would have been aside throughout our dogs life, and drew down on it as needed.
I've now put enough cash aside for anything big now that I will look to cancel the policy (in light of premium costs) but it was admittedly a lot more reasonable until the last couple of years. The dog is only a few years old, and if I tally up what I've spent on insurance versus what I've claimed it's come out fairly even.
Morally, my biggest problem with pet insurance is whether at the "top end" (when spending thousands and thousands on all sorts of treatments) it is being done truly for the benefit of the pet or just the owner. My claims to date have been for various smaller injuries e.g. limping caused by chasing another dog.
Its worthwhile for puppies, especially purebreds. We have made many claims - they eat everything and it can make them very sick and emergency vets are not cheap.
The premiums vary depending on the breed, it may be worthwhile for some breeds and not others. You're always rolling the dice anyway. We have a purebred large breed, I did as much due diligence as I could when selecting a breeder and found one that had vet certificates proving four generations of ancestors were free of the common health issues my breed could expect (hip dysplasia, cardiomyopathy etc) so with any luck we'll avoid that altogether. We had the usual puppy problems, limping after playing too hard at the beach, face swollen from eating a bee etc. so we've definitely spent money, but I have a little over 20k now sitting there in the dog fund for my 4 year old.
was the house and contents increase the premium or the increased EQC levy to subsidise Wellington ?
That accounts for 40% of the increase.
Year after year, QE after QE, they always assumed QE worked so if no recovery it had to be the economy was broken not that they were totally wrong about QE (and the effects of fiscal spending). Year after year, they reduced potential as a plugline. https://youtube.com/watch?v=rOb7xb Link
Retail in Oz and Deutschland cratering. I'm expecting to see the incidence of the word 'unexpectedly' - er - Inflate.
That soil moisture map is a tale of two islands, with even the west coast getting dry
Most places past 15% already so I'm genuinely not sure what merit that headline serves, unless some people are under the impression their houses are still worth what they were a year ago.
Hipkins looking to continue the petrol subsidy beyond 31st March.
Another huge flip-flop from Labour, and a blatant election-year bribe. Our PM may have changed but our finance minister hasn't, and here's what he said as recently as December:
“The Government has invested over $1 billion over the past year to reduce fuel prices. However, it is not sustainable to continue to subsidise the cost of petrol indefinitely for everyone”
“We have to strike a balance between broad ongoing support and careful management of the Government accounts. That’s why we are transitioning to more targeted support for those most feeling the pinch.”
It seems "careful management of the Government accounts" doesn't matter much anymore when you've got votes to buy.
Quoi de neuf ... just another day on Handout Island.
What a laugh. The minister reduces the tax on fuel from ridiculously high to fairly high, and then has the barefaced cheek to pretend that it is a subsidy on the price of fuel. No wonder we mock them.
Fuel tax is used for road infrastructure, by reducing the fuel tax, roads are having to get paid for by general taxation. So it is a subsidy in that it's moving away from the mostly user pays way it was before.
If power or food were free we would call it a subsidy and any economist would tell you it will lead to excessive demand and all sorts of issues. But paying for roads is not OK for some reason.
Fuel tax doesn't even cover the cost of roads, 50% of local roads are paid for by rates and the very big projects are paid for by general tax.
The laugh is we are meant to be going green - yet here we are subsidising ice. Regardless of your views on climate, this is a contradiction.
I agree its a contradiction, however, the term 'Going Green' will go out the window once more people cotton on to the Green Washing and its real world ramifications that have been going on.
We need some strategic, logical and rational plan on the transition.
There's too many pitfalls to turning off the fossil fuels when we are absolutely not ready, and doing so undermines the countries overall living standards and pushes more people into poverty.
He can flip flop on all sorts of things now. because he's not Ardern. Including new taxs!!!!
Maybe they should privatise the roads so you can no longer call it a tax?
"invested" ha you mean paid peoples fuel bills. How f silly. Do they actually think this price is not the new normal!
After years of demonising road transport by a virtue-signalling government, they are now happy to turn the user-pay roading infrastructure model to a taxpayer-subsidised one.
The list of cost items Labour has added to the general tax pool in the last 5 years is never ending.
I can still remember the screaming when petrol was over $3.00 litr … seems to have subsided but still gnashing off teeth for EV's not paying RUC?
Don't worry its coming. As soon as the drop in revenue from the fuel tax begins to bite the EV road user charges will come. Just got to get enough people in those $80K Tesla's thinking they are going to be saving money for years to come before it kicks in.
I called it. Why wouldn’t he?
He’s come in as the ‘Cost of Living Crusader’ after all….
What’s going to be very interesting is how Labour plans to pay for any changes to the lower income tax thresholds. A revenue crash is underway, and beneficiary expenditure will start rising later in the year as unemployment rises.
Rising tourism will bolster??
Whats your immigration prediction. Nz is still an oasis despite our issues. The economic forecast is the UK is the only G7 country to shrink in 2023. Brits will leave
Immigration? It will be all over the place. I don’t see a clear directional trend.
- By second half of the year the construction sector will have well and truly slumped. We won’t need immigrants for building and trades jobs. Some on visas will leave.
- Hospo and retail will start having challenges, demand for staff will fall. What might have been a flood of immigrants last year will drop to a trickle
- There will be a steady but not large influx of workers in healthcare, education, care jobs.
so overall I see immigration volumes being low to moderate
At the moment I can rent the flats multi times over. By word of mouth, I haven't advertised. The number of rental listings in Auckland is in danger of slipping into oblivion like the Auckland hillsides. Dropped over Dec and Xmas and not recovered
The demand for accommodation is pumping
For now…
You are a pessimistic person, that is your problem. If you had ten million on deposit I bet you would think its not enough.
So predictable I didn't even put it in my 2023 lit of predictions. Wait for it to carry right through to the election and then turn into a bribe with Labour promising to keep it if re-elected. Nothing is easier than buying votes, promise most people an extra $20 a week and they will vote for you.
Not even that - just promise "you will fix things" and they will vote for you.
Yes very easy to predict - I take no kudos for clearly calling it - but despite that many here we’re adamant it wouldn’t happen….
Politics / vote buying trumps everything….
In a nutshell, nailed it
With next-generation artificial intelligence on the horizon, white-collar workers — teachers, coders … journalists — are starting to get nervous. A look at the historical productivity gains aided by automation is unlikely to ease their angst. (via @semafor) Link
Will places like NZ take in people surplus to requirements via new immigration quotas?
Really..the remote working with IT for school kids worked so well during covid...not. Although that App that the Uni guys used to write their essays was genius.
Id hope not as it's going to be a Tsunami event.
A family member lawyer at PwC in Europe suggests AI will make 70% of the work in major cases obsolete in the medium term. Poof goes those entry level research slaves.
I can see AI already making inroads into clinical and laboratory dentistry.
Will Kiwi firms invest in the excess human capital??? Some will try but thinking long term would that be wise?
We will see this sledgehammer 10 years later than our northern hemisphere neighbours.
Broadly speaking, technology is already taking a toll on the global workforce. It won't be a tsunami event but a slow burn.
For example, the green transition will wipe out millions of well-paying blue-collar jobs around the world. It takes far more workers to operate a coal-fired power plant than it takes to operate a wind or solar farm generating the same power output.
The US itself has lost more factory jobs to automation than to cheaper manufacturing locations like China and Mexico.
> Poof goes those entry level research slaves
AI just does a literature review, it doesn't produce new research output
teachers, coders … journalists — are starting to get nervous.
I don't think any coders are getting nervous.
Most teachers won't be either, as the bulk of young students lack motivation for self study.
My concern for teachers is that it could shift into a low skilled and wage "child minding" job, where you just keep an eye on the kids and facilitate the AI based curriculum. But I don't think this will actually happen even in the next 20 years as the human aspect of child development is still important.
I'd say a bigger threat to teaching is the incredibly low birth rate
My concern for teachers is that it could shift into a low skilled and wage "child minding" job
I think many of the teachers beat you too it.
Our local Primary school has BYOD from year 3. Most Maths and English is on-line with minimal input from the teacher. The Kids can't hold pens or spell properly anymore, they also watch you-tube when the teacher isn't looking and have learned to wipe their browsing history so that they don't get caught (Not bad for 6/7 year olds). I moved my kid to a school that uses pen and paper and his results improved immediately. In my experience IT works for older self-directed kids but can't replace primary teachers.
The price of gold will open today at US$1927/oz and up a mere +US$3 from this time yesterday.
‘Colossal’ central bank buying drives gold demand to decade high
Fallout from US sanctions on Russia helped fuel 18 per cent leap in purchases last year
Peak copper.
"Jetti’s technology is focused on a common type of ore that traps copper behind a thin film, making it too costly and difficult to extract. The result is that vast quantities of metal have been left stranded over the decades in mine-waste piles on the surface, as well as in untapped deposits. To crack the code, Jetti has developed a specialized catalyst to disrupt the layer, allowing rock-eating microbes to go to work at releasing the trapped copper.
Now, Jetti aims to apply its technology to recover copper from a common type of sulfide ore that couldn’t be economically processed via either route — the copper content is too low to justify the cost of refining, while the hard, non-reactive coating prevented the copper from being extracted in the lower-cost electro-chemical or "leaching" process.
Jetti worked with the University of British Columbia to develop a chemical catalyst that breaks through the layer, so that the copper can be released using leaching without the need for high temperatures."
https://www.bloomberg.com/news/articles/2022-11-27/this-startup-may-hav…
Government has u turned on fuel tax ending.
They would'nt wont to lose any traction in the polls and remind the people just how bad things are...to do that as Orr puts OCR up again is just not good politics.
The Fuel Tax Rebate didn't save anyone anything in net terms. It just moved the expense from one place to another.
Sure, it looks good to have removed it from the pockets of everyday New Zealanders, but the cost is till being borne by us - it's now part of Government Expenditure, and we will still have to pay the bill. And as the Government bills mount up - floods anyone? - then the cost of repayment has to rise. The only debate is "Will it be via Tax Rises; a Cut to Basic Services or Interest Rate rises?" and the answer is probably - a combination of all.
Reminiscent of the old sideshow at the fair. Put pea under one of four cups. Shuffle around. Pick the cup that covers the pea. By then though the pea is in the showman’s pocket.
The only debate is "Will it be via Tax Rises; a Cut to Basic Services or Interest Rate rises?" and the answer is probably - a combination of all.
Or tax rises in the form of simply leaving the tax brackets where they are, and letting wage inflation do the dirty work.
And then falsely claiming that indexing tax cuts for inflation amounts to a 'tax cut' knowing that no one will challenge your spurious claim that either shows a misunderstanding of nominal rates or a willingness to abuse the public's lack of knowledge that, by the same logic, you're hiking taxes by stealth every year.
Poor Aucklanders no money to fix roads due to lack of fuel tax or are we just getting ripped off with fuel tax?
For all the discussion leaning towards fuel excise, the real winners are the small proportion of Kiwis who have the "luxury" of easy access to public transport.
The subsidy my wife and I receive on half-price public transport fares journeying to work three times a week is equal to the taxpayer-funded discount on 109 litres of fuel.
No u turn on diesel miles. 20,000kms yesterday cost $984, today cost $1526
RUCs take longer to change for some reason.
Chuppie behind the 8 ball and making announcements after the price has reverted doesn't help.
Interesting that the RUC extensions and fuel tax reductions expire on 30 June. That would make the fuel tax go up about 105 days before the election. Any takers there'll be a sweetener to cover the slack from 1 July in the Budget this year?
Of course there will be. Or more extensions.
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