Here's our summary of key economic events overnight that affect New Zealand, with news inflation's track has everyone's attention everywhere.
But first, US jobless claims rose last week by +235,000 which was a small but significant rise and might signal the start of a weakening labour market there. And it was more than expected. Many will no doubt say the shift is too small to be significant, but it is a turn from the long string of declines in this leading metric. There are now 1.935 mln people on these benefits, also a minor increase.
Staying in the US, we probably should note that despite the high-drama headline-grabbing brinkmanship surrounding their debt limit and resulting "extraordinary measures", their bond markets remain very calm with Treasury issues trading normally and ignoring the Congressional theatre.
Meanwhile, the US Treasury says cloud computing poses risks to their financial sector. They say reliance on Amazon, Microsoft or Google could have broad consequences. They are flagging "all eggs in one basket" risks.
Fitch Ratings has revised its forecast for China’s economic growth in 2023 to +5.0%, from +4.1% previously, reflecting evidence that consumption and activity are recovering faster than initially anticipated after the authorities moved away from their “dynamic zero Covid-19” policy stance in late 2022.
China will announce its January CPI inflation later today and it is expected to be at +2.2%, and up from +1.8% last month.
Taiwanese inflation rose and by more than expected. To be fair, it is only from +2.7% to +3.0% in January so still very low in a global context. And their wholesale price growth actually fell in January from December, from a +7.1% rate to +5.6%. So the consumer price change may be just noise.
German inflation however came in lower than anticipated at +8.7% when a rise to +8.9% was expected (from +8.8%). Again, these are small shifts so probably not really indicating that inflation is shifting lower there yet. A work in progress considering it peaked at 10.4% in October.
The OECD reckons real household incomes are now rising in much of their bloc, principally because real incomes are rising in most of Europe and the US. Exceptions however are Canada, and especially the UK where there is a fierce fall of real household incomes underway. Brexit isn't working out for them.
Global container shipping rates were little-changed again last week and remain well below their ten year average levels, and a huge drop from the pandemic spike. There is no sign of them turning up any time soon. Bulk cargo rates are also unchanged this week, and also low. Both are a sign that global trade is in a soft patch as big-power rivalries keep relations at arms length.
The UST 10yr yield starts today at 3.60% and down -8 bps from this time yesterday. The UST 2-10 rate curve is more inverted at -86 bps. But their 1-5 curve inversion is unchanged at -107 bps. Their 30 day-10yr curve is also more inverted at -99 bps. The Australian ten year bond is up +2 bps at 3.64%. The China Govt ten year bond is little-changed at 2.91%. The New Zealand Govt ten year is starting today at 4.21% and up another +4 bps.
Wall Street is ending its Thursday session down -0.3% on the S&P500 on leaking risk sentiment. Overnight, European markets were book-ended by Paris up +0.9% and London up +0.4%. Yesterday, Tokyo ended its Thursday session little-changed, down -0.1%. Hong Kong rose a strong +1.6%. Shanghai ended up +1.2% yesterday. The ASX200 ended down -0.5% yesterday and the NZX50 was down -0.8% yesterday with a late drop right at the end.
The price of gold will open today at US$1873/oz and down another -US$2 from this time yesterday.
And oil prices start today little-changed at under US$78/bbl in the US. The international Brent price is now just over US$84/bbl. They fell away inbetween but are now almost back to yesterday's level.
The Kiwi dollar is up +20 bps at just under 63.5 USc. Against the Australian dollar we are up the same at 91.2 AUc. Against the euro we are up slightly more at 59.1 euro cents. That all means our TWI-5 starts today at 70.7 and +30 bps higher than yesterday.
The bitcoin price is now at US$22,535 down -1.7% from this time yesterday. Volatility over the past 24 hours has remained 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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62 Comments
Brexit isn't working out for them
This is a concern, because it signals that breaking from the established order usually doesn't pay a good dividend. So for NZ it likely means we will continue to be a franchise outlet of the common global order. Can things get noticeably better within the parameters we have to work under.
In general interconnectivity and trade brings prosperity. We are better off having more customers with fewer barriers to trade.
UK government is its own worst enemy, who would trust them?
Credit Suisse Craters After "Staggering" Bank Run And Warning Of Continued Losses
Credit Suisse’s total assets under management stood at just 1.3 trillion Swiss francs at the end of 2022, a decline of almost 20% from a year earlier.
Aye NZ remains at heart, a mercantile nation. That is why I find the 12th position ranking in cabinet, for Mr 0’Connor, and his ministries, as both strange and disquieting. Once upon a time the Agriculture minister and/or Trade Minister were alongside the Prime Minister. For instance Duncan MacIntyre, Jack Marshall, Colin Moyle, Mike Moore.
Nathan Guy.
Hahaha
Numbers also reflect that trade is no longer a priority in NZ. We came out at the very bottom of OECD economies in exports as a % of GDP.
I think the problem is bigger than that. The EU was formed as a counter to the sheer size of the US economy, but it was still wedded (and still is) to the flawed theory of the 'free market'. So when the UK undertook Brexit, they knew they had a problem, which was in part the EU, but they didn't really know how to fix it the core issues. They (the Brits) are still too wedded to the 'free market' theory.
I believe in free markets Murray but it's also an oxymoron.
The big players who proclaim it certainly don't want it. They profit from control of their market, not from efficiency.
Think of our supermarkets, last thing they want is a free market.
Then government, local government, energy, banks.
I understand what you're saying. Ideologically, in a theoretical ideal world 'free markets' are completely logical. But it is not a ideal world.
The term is a misnomer as well and your comment I suggest errs in this. The term 'free market' refers to being free from government regulation in the belief that 'natural forces' will find the ideal balance. But markets are a human trading construct, hence there are no 'natural forces' and humans have always endeavoured to manipulate their environment, including markets to their own favour. Thus I would challenge your comment where you say the big players don't want it. It is the big players who manipulate it the most, thus the market is not and has never been 'free', hence the need for government regulation. That is governments role; to ensure everyone gets a fair deal. Unfortunately they're often not up to the job.
That is a good comment murray86
I think we agree Murray. In a free environment the players do manipulate to close it up and achieve control.
Regulation. Briefly put I see two types. A grocery commissioner determining prices. Or Muldoon type price controls. Disaster and doomed to fail.
Or monopoly breaking. So for supermarkets allowing a maximum of say fifty outlets in each group. (NW currently about 250). Inducing real competition. Not least to benefit suppliers as well as consumers.
The USA did this 100 years ago. Trustbusting.
yes I think so too. While I can envisage some circumstances where price controls are required, mostly a properly structured market would achieve it in itself. But there would remain some parts that would require it; Auckland is a great environment to build competition Patea less so. Business's do need to make a profit, just how much is the question? i would suggest that the Government could achieve it several ways, but they just don't seem to want to.
Having been in retail, I would say the best regulation would be banning special deals between wholesalers and chains. Allow the small guy to compete on a level playing field and cartels could never develop!
Totally agree hence almost all countries have an Airline.....
And a refinery... wait a minute.
the EU is a colony of USA
Colony: a country or area under the full or partial political control of another country and occupied by settlers from that country. The EU is not under full political control - that is Puerto Rico.. There are very few American settlers; tourists yes but settlers very few. Therefore not a colony.
The political control is another matter - big countries boss little ones. The British couldn't extradite Irish terrorists from the USA; France bullied NZ over their terrorists; China generally does whatever it wants - could the Philippines build a new island near the Chinese coast? If the EU united its foreign policy and had an army it would be roughly as big and powerful as the USA.
> breaking from the established order usually doesn't pay a good dividend.
I think it's more a case of adding trade barriers, masses of red tape, for a market that takes 40% of your exports.... doesn't pay a good dividend.
Brexit must affect everything.
UK house prices plunge over last three months with estate agents 'struggling to sell anything' and vendors were agreeing to significant price drops.”
Perhaps price discovery is faster in a bigger market as the tide of cheap debt receeds.
Could be. Even the larger than ours Aussie market is starting to recognise what a longer term disaster low interest rates have been. Whatever happens from here is going to hurt a lot of undeserving people. It's just a matter of who that is - current owners or future ones.
House prices could fall between 20 per cent to 25 per cent nationally, a correction that is sharper than previously forecast as a result of Tuesday’s ninth straight interest rate rise
Anyone else noticing an increasing number of empty shops, both in rural locations like Napier Hastings and surprisingly CBD places like Fort street in Auckland, where you can see multiple empty shops in a row. This may look like 1990s soon
Fort St was heavy with the backpacker crowd. They will be back.
Doubt it..its trying to go upmarket from when I last strolled through..
the backpacker lodges, travel companies and backpackers themselves are all missing..... its lookng rough in there, the little liquire shop on end is gone from memory as well
Lots of homeless action in there. Not a very pleasant area
It's transitory. The increase in min wage will solve it because this will create new customers with more cash in their pockets.
will make no difference to families income, WFF allowance will correspondingly reduce.
Taking the p##s. Of course it will make no difference. The increase has just made even less likely these shops will re-open - unless they all use vending machines.
Hastings CBD was doomed the day the big box stores opened in the Nelson Park development. There's efforts to revitalise Heretaunga St East since it's closer to the I-swear-we're-not-treading-water-on-massive-debt crowd in Havelock North, but overall the CBD is a wasteland. I don't get into town often, other than farm supplies businesses, but Nelson Park seemed busy last time I was there.
Napier CBD always felt more vibrant but I agree the edge has come off lately. There seems to be a general air of the good times being behind us.
I was in Napier in November, it was great! And felt fairly vibrant.
There was an arts festival and football tournament on though, so maybe it was busier than normal.
I think a lot of this was covid/tourism shutdown related. Rotorua is dead. Central Tauranga is also.
Re Rotorua, I think it is wider than just the shutdown. It has been going downhill for a while.
Central Tauranga has always been dead, lol.
I remember staying there on a Sunday night about 5 years ago, it was about 6.50pm and I wanted to get a coffee. The only cafe that was open was The Coffee Club, and it closed at 7pm so I couldn’t get in.
IT GUY
Probably the most significant factor for empty CBD shops is changes in retailing rather than economic downturn.
The importance of the CBD retailing is based on the CBD being the early 20th century public transport node and accessibility. Over the past twenty years big box retailing and suburban shopping centres have grown at the expense of those in the CBD as the car has replaced reliance on that public transport. Similarly, over the past forty years or so the car has meant supermarkets have annihilated suburban grocery stores and butchers which were located on customers walking distance from their home (the pattern of former small suburban shopping centres in Hastings is a great example of this).
In the 1990's when Hastings District Council was considering their retail strategy, four or five sites for big box retailing were considered including a greenfield site and the racecourse. Nelson Park was chosen as the site as it provided the best connectivity to the CBD and would have the least impact of the CBD retailers.
As for Napier, CBD retailers will be feeling the effects of the recent (past year or two) of the new big box retailing (such as K Mart, Torpedo7 etc) out towards Ahuriri.
The reality is simply that the CBD retailers are facing fierce competition from the suburban shopping centres which are advantaged by economy of scale (big boxes), ease of parking, climate controlled environment, piped music etc.
The increasing importance and freedom of the car has meant exactly the same thing has generally meant the decimation of the smaller rural service towns - one only needs to look at the Manawatu, Rangitikei or Canterbury for prime examples . . . empty shops and houses.
Yes. The internal combustion engine has a lot to answer for. It's not just heat sterilizing the planet, it's socially sterilized our communities.
Min wage hike from chippy won't curb inflation
Oh, really? the minimum wage hike was below the increase of living costs ,for minimum wage earners,especially as it's 5% net. Would have thought that a decrease in the spending capacity of such a large group of minimum and near minimum ,wage earners was disinflationary,ok?
From their perspective it probably is, but this large group of people is a pass through cost for what ever business they work for, be it driving, supermarket distribution fruit picking etc.... Not just minimum wage earners will want the pay increase...
Companies will soon not be able to pass on costs so will look to reduce expenses, this will occur by redunadancies, often up to 10% is a finance controllers starting point.... every recession is simillar but not the same....
Labour cannot make us richer by just increasing the min wage.
If you produce xx widgets per hour to be a profitable employee and your boss has to pay you more, either the widgets go up in price and the public keep buying...or you or some of you work colleagues loose their job.
Take you pick
The central banks flood the world with cheap money causing inflation and rewarding speculation by the already wealthy.
Now it is suggested that to 'fix the economy' we need to give the poorest effective pay cuts?
Yup. The root of the evil is Monetary Policy. Leave that in place (and we can't get that power back off govts/banks) and we have a chain of workarounds pushing problems around.
They flooded the world with cheap money to fix the GFC.... then Covid, but yes this is how its always worked since fiat detached from gold. For ages Land became the new anchoring collateral to lend against but now its so far removed from its ability to pay the debt against it in real interrst terms its falling.....
Or you invest in machinery to make more widgets per hour. Add automation. It’s what productivity is all about. Your attitude is why our GDP per person is crap.
You relocate 90% of sock making to China where they use the same sock making machine they do in Dannevirke but Labour is way cheaper and container rates to big markets are cheaper, scale produces effciencies etc , as that 90% world production is decentralised from china, expect prices to go up, they have to.
Exceptions however are Canada, and especially the UK where there is a fierce fall of real household incomes underway. Brexit isn't working out for them.
Ordinarily I'd be happy to blake Brexit but obviously Canada isn't impacted by Brexit. However I'd note that both countries have had surges in immigration, it's quite possible they are adding people too fast for their job market which is depressing wages.
UK has a surge in immigration? I thought Brexit was all about taking back control of the national borders?
Among the list of "skilled' occupations for fast-track residency in Canada are religious leaders, librarians, dancers & circus performers and administrative assistants.
Canada was always a migrant-friendly nation, but Trudeau has created an environment where everyone with a pulse is eligible for a Canadian PR.
That being said, the country also receives an influx of talent because of US' broken migration policies. American employers often move foreign workers with rejected US visa applications to their Canadian outposts.
OECD saying then, that wages rising faster than inflation? I think not.
That depends how you calculate inflation.
I think the severity of this approaching cyclone is going to be critical to the economic outlook, let alone the most important thing, the human cost.
if it’s as bad or nearly as bad as the last one, I think there is a good chance the next OCR lift will be only 0.25, or potentially zero.
Anyone else old enough to remember what happened to Darwin when it got flattened.... My uncle was building bridges back when Bola hit the east cape, gave him a decade of work. It would not surprise me if the corramandal gets completely cut off here for weeks/months.
Bola caused severe damage to the North Island of New Zealand, where heavy rainfall peaked at 917 mm (36.1 in) in Gisborne Region. Damage totaled over $82 million (1988 USD).[2] Seven people were killed due to flooding,[3] and hundreds were evacuated when a swollen river threatened Wairoa. In Whangaruru Harbour, Northland, an elderly male suffered a heart attack and died during the peak of the storm while attempting to tie down a neighbour's empty water tank. The name Bola was later retired, meaning it will not be used again within the same basin.[4]
Yes I remember Bola well. I remember studying it quite closely as part of School C geography.
Not directly but a friend of my fathers that's a builder spent a few years in darwin post devastation before returning with his deposit on a farm.
Photos showed kansas tornado type destruction of whole city blocks.
Trademe residential rentals 3865
On 5 February 4048
Continuing to fall
This time last year there was over 5500 for rent in Auckland. A drop of 30 percent and dropping fast I would say
The reason is as you know, that most landlords are nice, caring people who do not want to place extra financial burden on their charges, I mean tenants
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