Here's our summary of key economic events overnight that affect New Zealand, with news global interest rates are on the move higher again.
First up in the US, the widely-watched University of Michigan consumer sentiment survey jumped to a thirteen-month high and beating market forecasts. It is just another brick in the evidence pile that a recession is some ways off yet.
And across the border, the Canadian economy added +150,000 jobs in January, the most since February 2022 and much more than the market expectations of just a +15,000 increase. It is another impressive Canadian economic metric.
Meanwhile, the Canadian loan officer survey reported improved lending conditions. In fact their non-housing lending conditions turned positive for the first time since 2020 when monetary conditions were artificially loose.
In China, we got an indication of just how serious Beijing is to restart their economy after the pandemic. China's banks extended +¥4.9 tln in new yuan loans in January, well above market expectations of +¥4.0 tln and the largest amount of new loans ever. It is a monumental amount of new lending for just one month, +NZ$1.15 tln and for perspective for all of 2022, the approved a record +¥21.3 tln. In just January 2023 that raised that by almost a quarter! They aren't doing things by halves here and won't die wondering.
China also reported January inflation at a +2.1% rate although the rise from December was at an annualised rate exceeding +9%. Still, this was very much as markets expected. The producer price deflation however seems to be staying minor.
That is not the case in Japan where January producer prices came in +9.5% higher than a year ago (as expected), although in the December to January period they vanished.
And staying in Japan, they are about to get a new, and somewhat unexpected Governor of their central bank. The preferred candidate declined the promotion and the actual nominee has analysts searching for his likely policy preferences.
India released December industrial production data and that revealed a solid if 'modest' rise in the context of what they had in the rest of 2022.
There was a big set of key data released in the UK overnight, most of it grim.
With international tourism in full flow, sales and profitability look encouraging in Fiji for firms there. Fiji may get almost 1 mln short term visitors in 2023, their most ever.
The UST 10yr yield starts today at 3.74% and up a heady +14 bps from this time yesterday, up +21 bps for the week. The UST 2-10 rate curve is much less inverted at -77 bps. And their 1-5 curve inversion is also much less inverted at -977 bps. Their 30 day-10yr curve is following, less inverted at -88 bps. The Australian ten year bond is up a massive +14 bps at 3.80%. The China Govt ten year bond is little-changed at 2.92%. The New Zealand Govt ten year is starting today at 4.22% and up another +1 bp but up +26 bps for the week in a relentless drive higher.
Wall Street is ending its Friday session unchanged on the S&P500 but baking in a -1.0% drop for the week. Overnight, European markets were book-ended by London down -0.4% and Frankfurt down -1.4% for the day. Yesterday, Tokyo ended its Friday session up +0.3% to limit the weekly dip to -0.3%. Hong Kong fell a massive -2.0% to end the week down -0.7% in a set of volatile sessions. Shanghai ended down -0.3% yesterday but up +0.5% for the week. The ASX200 ended down -0.8% yesterday and down -1.7% for the week. The NZX50 was up +0.5% yesterday for a minor +0.2% weekly rise.
The price of gold will open today at US$1863/oz and down another -US$10 from this time yesterday but little-changed for the week.
And oil prices start today up +US$2 at just under US$80/bbl in the US. The international Brent price is now just over US$86/bbl. That is a net +US$6 rise for the week, although that only takes them back to week-before levels. Russia announced lower production levels.
The Kiwi dollar is down -40 bps at just under 63.1 USc. Against the Australian dollar we are unchanged at 91.2 AUc. Against the euro we are also unchanged at 59.1 euro cents. That all means our TWI-5 starts today at 70.6 and very little-changed for the whole week.
The bitcoin price is now at US$21,698 down -3.7% from this time yesterday and building the weekly loss to -8.1%. 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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25 Comments
With the inflation basket adjustments today, the 3-months trending pace of core inflation moved up to almost 4%. Also housing gained more weight in the CPI basket, and shelter inflation will remain high for a few more months. It certainly doesn’t help the disinflation story. Link
Currency is meant to be used.
To see what I mean, realize that as inflation has indeed eroded the purchasing power by whatever amount, we needn’t be exact, over whatever long timescale (start with 1965, it makes the same case), and yet while the dollar was being eaten away every last form of living standard here and around much of the world skyrocketed in a way and to a degree human imagination could scarcely have imagined beforehand.
Even counting the last fifteen years when those have stagnated and reversed in some places to some degree, we all aren’t just better off, the vast majority of us have become so absurdly better off we can’t even conceive of general subsistence let alone having personal experience with it. Not just us, our parents and probably grandparents, too.
Yet, all the while the storage value of the dollar has indeed been unequivocally demolished.
But not by the Fed. No, no, no. See, the actual currency the same vast majority uses right now is private commercial bank virtual money. When FDR violated the “gold clause”, he didn’t establish then and forever public monopoly on money, the President instead unleashed the full capacity of private non-physical bank money – which then quickly and easily spread around the post-war world (the eurodollar era).
Let’s be perfectly clear: that money did not conjure then deliver this planetwide prosperity. That’s not what money is nor how it would ever work. No, human innovation in technology and its application, that was the real invisible hand. However, it would never have been able to reach its fullest extent without the fluid, dare I say elastic medium behind it all keeping things running and more often than not within tolerable boundaries. Link
from AFR, clearly message lost in NZ Labour, who are convinced wages need to rise.
That Tuesday release referred to multiple “increases”, as did Friday’s monetary policy statement. The Reserve Bank again outlined the importance of preventing a price-wage spiral.
(Most economists refer to this phenomenon as a wage-price spiral so the RBA’s word ordering suggests that the central bank believes the process is triggered by price increases.)
The RBA’s worry is that rising goods prices prompt more workers to ask for more money, which in turn prompts further price increases.
Or maybe RBNZ are correct andclearly the message is lost on businesses. Rising prices push cpi up. It's profit gouging as practiced by banks and energy companies that's really having an effect. Every announcement this year regarding profit has been well in excess of 7%.
In China, we got an indication of just how serious Beijing is to restart their economy after the pandemic. China's banks extended +¥4.9 tln in new yuan loans in January, well above market expectations of +¥4.0 tln and the largest amount of new loans ever. It is a monumental amount of new lending for just one month, +NZ$1.15 tln and for perspective for all of 2022, the approved a record +¥21.3 tln. In just January 2023 that raised that by almost a quarter! They aren't doing things by halves here and won't die wondering.
Who will benefit if the West is content to close trade with China?
German Finance Chief Alarmed by Growing Reliance on China as Trade Deficit Widens
"A dangerous development: Germany's trade deficit with China more than doubled in 2022. We should learn from the experience with Russia," the minister said on social media.
He added that instead of becoming more dependent on Beijing, Berlin should "urgently review this and opt for more free trade with partners who share our values."
Balloons blow, and capital won’t flow. ‘US Makes Case That Chinese Balloon was Part of a Spying Program’, says Bloomberg, and “The Chinese spy balloon shot down Saturday included western components with English-language writing on them.” ‘US Aims to Curtail Financial Ties With China’, says the New York Times, with the White House preparing rules to restrict US dollars from flowing there. An inverse CFIUS would stop US investment in areas related to technologies like AI; or with dual civilian-military uses, which is a longer list; or balloons. Link
Who? African countries?
China extends massive new loans. How high can the universal debt mountain go? I’m drawn to an episode of The Goons many many years ago. The attempt to escape through a high window. First Bluebottle climbs on Eccle’s back, then Eccles climbs on Bluebottle’s back and so on up the wall. Except the narrators then cuts in saying it can’t last. And it didn’t, to the requisite sound effects.
I liked the Goons.
China, along with a few other countries, should think less about economic growth and more about population growth. On the current trajectory they will suffer a huge population crash that will set them back decades. Pro-natalist policy can't just be done off the side of a desk, it needs to be wn official position with budget and targets attached.
Good point. If countries keep drowning young households in debt to keep the economy chugging along, one can expect fertility rates to drop even further.
A little bit public but I'm not sure the side of a desk is that unsuitable. 😁
Agree..washing machine as well..
A crash in population might just mean a biosphere that can support complex life forms into next century.
On the current trajectory they will suffer a huge population crash that will set them forward decades.
The accumulated wealth of many being shared over a future smaller population.
Sharing "wealth" among fewer will not help much. The problem is a massively aging population with not enough workers to feed and care for them and to pay tax to maintain the required infrastructure.
That's right. If 1/3 of the houses in Auckland emptied overnight, the ones remaining have to cover the same level of expense on maintenance and services.
I haven't come across too many depopulation success stories that'd have me looking forward to it.
Labour kindness continues - 7% harder for an unskilled worker to get a job and little or no benefit to the minimum wage worker.. If only there was an opposition party that wasn't clueless.
"A sole parent with two kids is going backwards by 5-6% almost irrespective of hours worked. The bulk of the increase in the minimum wage has been consumed by the government, almost none of it is turning into household income.
,,,When the Labour government claims that they’ve inflation adjusted the minimum wage and it’s fine, realise that that’s not true. And when the media or people on twitter claim that these people are now OK for cost of living pressure, that’s also not true. And it’s especially not true for those most in need – sole parents with kids, people living on their own – those people receiving support from other government programmes."
https://www.kiwiblog.co.nz/2023/02/minimum_wage_increase_-_employee_imp…
Regrettably that simply tends to prove, illustrate if you like, that there is always going to a percentage of people who cannot adequately take care of themselves, financially and more, and who the government cannot adequately take care of either. There are of course a multitude of causes and reasons but relentlessly, in either case, that percentage continues to grow.
Pretty sure there will be some tax changes soon.
Perhaps, and if so as welcome as they are overdue, especially for the low income end of the scale. More often than not though, tax relief, cuts if you prefer, are signalled for the future, rather than an immediate introduction. If that again transpires those in need now will be suffering just the same.
Gee roads and supermarkets in Auckland crazy busy as people stock up. Keep safe!
Couldn’t find a spare trolley at our local supermarket today. It’s like Christmas except a very shit version.
I am stocking up at 8am Monday, there will be no queues.
Canoe?
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