Here's our summary of key economic events overnight that affect New Zealand, with news the Aussie labour market is now shedding jobs in an unexpected development.
But first, US jobless claims came in almost exactly as expected at +255,000 last week so there are now 1.95 mln people currently on these benefits. This 'canary' metric isn't yet showing the expected labour market shift to tougher conditions.
However, American producer prices rose in January by +6.0% from a year ago, which was a lesser rate than in December but not the pullback markets were expecting. The annualised rate between December and January was at a more than +8% rate however and the most in seven months, so inflation isn't beaten in this data and it maintains pressure on the Fed. Equity markets fell after this data. Bond yields rose.
And that is despite a very weak factory survey from the Philly Fed's heartland manufacturing area. It was an unexpectedly sharp and deep retreat with weaker new order levels.
American housing starts fell in January from year ago levels and from prior month levels to a 31 month low, but new building consent levels were unchanged from the prior month even if they too are down steeply from a year ago. Both metrics were pretty much in line with what was expected however.
Officially, prices for new houses in China fell -1.5% in January from a year ago. But given this market is in the doldrums with few sales (and low demand), it is doubtful this tells the real story. Resales are probably harder hit, with official data showing only six of 70 large cities recording prices the same as or higher than the same month last year. This is unusually low for them. A private survey showed that these sales volumes fell -14%.
In Hong Kong, their population decline is easing. The city’s 7.3 mln population fell by a net -12,900 people in the second half of 2022, down from a decrease of -55,400 in the first six months. The total 2022 decline is less than originally feared, but it is unusual.
You may recall the announcement of a couple of days ago of a gigantic aircraft order from Air India/Tata for 470 new aircraft from Airbus and Boeing. The announced deal is worth about NZ$100 bln. Well it turns out they have options to buy another 370 aircraft on top of that in this deal. It it a truly massive deal. But we should remember all this hinges on Tata successfully turning around the previously-state-owned airline that has been a basket case for years.
Australian consumer inflation expectations are proving sticky. The latest Melbourne Institute survey shows them at 5.1% and while this is down from 5.6% in January, it has now been a year where it has oscillated between 5% and 6%.
In Australia, their labour market is wavering. It shed workers for the second month in a row in January, in a sign the nine consecutive official rate rises are starting to bite. They were expected to record +20,000 new jobs added but in fact they lost -11,500 jobs. Their unemployment rate rose to 3.7% (from 3.5%), adding 21,900 to the jobless rolls.
Hot on the heels of yesterday's half year CBA strong profit announcement, NAB has reported quarterly results that show higher interest margins and low bad debt levels. But credit impairment charges did rise from low levels. Their profits were up +19%.
Aussie tourism has also recovered strongly, quickly. It is now back to 75% of its pre-pandemic levels, and back to full 2015 levels. Kiwis are the largest group visiting. New Zealand is also their largest destination, but that was from where only 17% of all Aussies returned.
Global container shipping freight rates edged down again last week to take them -27% lower than the ten year average. Bulk freight rates are in the doldrums too and now threatening all-time lows.
The UST 10yr yield starts today at 3.84% and up +4 bps from yesterday. The UST 2-10 rate curve is less inverted at -80 bps. And their 1-5 curve inversion is also little-changed at -93 bps. Their 30 day-10yr curve is also little-changed at -74 bps. The Australian ten year bond is down -4 bps at 3.77%. The China Govt ten year bond is unchanged at 2.92%. The New Zealand Govt ten year is starting today at 4.39% and up +5 bps from yesterday.
Wall Street has started its Thursday session with the S&P500 down -0.6% near the close. Overnight, European markets were all higher, bookended by London up +0.2% and Paris by another strong +1.0%. Yesterday Tokyo finished up +0.7%. Hong Kong ended up +0.8%. But Shanghai ended its Thursday session down a full -1.0%. The ASX200 ended up +0.8% and the NZX50 ended up +0.6%.
The price of gold will open today at US$1841/oz and up +US$3 from this time yesterday.
And oil prices start today back up +US$1.50 at just on US$79/bbl in the US. The international Brent price is now just under US$85.50/bbl.
The Kiwi dollar is unchanged at 62.8 USc. Against the Australian dollar we are softish at 91 AUc. Against the euro we are also softish at 58.7 euro cents. That all means our TWI-5 starts today back at 70.5 and marginally lower.
The bitcoin price is now at US$24,969 and up a very strong +9.6% from this time yesterday. It is pushing towards the US$25,000 / NZ$40,000 levels quickly now which we last had eight months ago. Volatility over the past 24 hours has been extreme at +/- 5.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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In Australia, their labour market is wavering. It shed workers for the second month in a row in January, in a sign the nine consecutive official rate rises are starting to bite. They were expected to record +20,000 new jobs added but in fact they lost -11,500 jobs. Their unemployment rate rose to 3.7% (from 3.5%), adding 21,900 to the jobless rolls.
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It's like that scene where Indy tries to retrieve his hat under the sliding door, but instead he's a fraction of a second too late.
It's a massive turn around. Everything seems very volatile at the moment with no telling where the chips will fall. There will be plenty who believe they can read the tea leaves, and some just on the balance of odds will be right - but who?
About the only thing I can be certain of is instability for the foreseeable future.
It's always been like that - people are just arrogant in the belief of their knowledge. .
That's pretty nuts considering they must be adding a lot of jobs at the same time as some sectors recover
Aussie rents up strong over last 12 months, hard to know what's going on if unemployment is rising.
Australia’s rental market clocks up fastest annual price increases on record
https://www.google.com/amp/s/www.domain.com.au/news/australias-rental-m…
Unemployment only rose in seasonally adjusted terms, the underlying rate did not change: https://www.abs.gov.au/statistics/labour/employment-and-unemployment/la…
"In Hong Kong, their population decline is easing... but it is unusual."
HK residents dropped by 1% (70k) in the numbers. It's not as bad because they are being replaced by mainland Chinese.
Place is hardly uncrowded anyway.
This illustrates the immense challenge of decoupling from China. "50% rejection rate for iPhone casings produced in India. [...] Apple’s target for casings that fail to pass quality control is 0%, with Chinese suppliers reportedly getting extremely close to this." Link
Another construction firm in administration, and typically clueless denial from MBIE:
https://i.stuff.co.nz/business/131225602/construction-firm-with-over-10…
This is why people are wrong when they assume the government, and most particularly Kainga Ora, has a Plan B when construction activity dies.
That's a commercial groundworks firm, and that industry isn't looking bad like residential - in fact theres a decent void of supply in that space.
More likely they haven't managed to meet the operating environment of the last 3 years. As you saw the other day with Fletcher's, margins have been pretty low despite the high activity.
You're looking a bit too hard.
It’s the overall article and MBIE’s clueless denial of a slump that I am more interested in.
So, you don’t think a slump is underway?
Probably, but your case study isn't related to that, they're falling over because of the nature of covid era construction
- jobs take 2-3x longer to complete so various labour, scaffold, site costs, etc costs are through the roof
- materials that should arrive overnight are now months long waits
- most of the labour force is relatively inexperienced so rework rates are high (and the contractor has to eat the cost)
And it's not improving
There are many more reasons than those that it’s falling over.
But that’s a good start.
But less so a future "slump", which would be a drop in sales.
You have transposed one thing over another.
Not sure what you mean, can you expand?
The current sales slump is a massive factor.
There isn't a sales slump in commercial, it's the opposite. This firms' issues are due to poor operating profits, not lack of sales. They will have been bleeding cash and are out of liquidity.
I'm surprised more firms haven't fallen over, maybe covid era subsidies and low interest rates have allowed them more headroom than otherwise.
I am talking about residential
“There is a historical issue that has to be dealt with, which as prompted the director to initiate the administration,” he said.
Something else going on?
Cyclone Gabriel might be some of them's saving grace, if it is not too late?
May be some of them
“A lot of the insolvencies we are seeing now have pre-2019 IRD Debt.”
Been coming for a while. As the article notes IRD were soft over COVID, did it really help? Like so much of our management over many years we're great at delaying and worsening the inevitable.
Good comment redcows.
As for me I can't imagine owing IRD since 2019. I would have been sold up years ago. How does that work.
Remember, some businesses had no income over that period, or at least nothing near covering their overheads.
Those with IRD debt pre-2019 were trading insolvent for over a year before COVID came along.
Having IRD debt doestn mean your insolvent , it can be for alot of reasons .
This Gov does not even have a Plan A
Yes, lol
Australia and NZ, peas in a pod. Both allegedly left leaning Govts standing by shrugging and asking questions in committees whilst their central banks crash their economies and throw thousands on the dole... all in the vane hope that this will stop the global price level moving up by 10%.
How dumb can you get? If the prices and wages in every country across the world go up by 10%, we don't get to just 'opt out'! It's not like other countries are going to charge us (or pay us) 10% less because our central banks have crashed the economy... 'oh, this customer is in NZ, they've tamed inflation over there so we charge them less for Saudi oil'...
I’m not sure what your argument here is.. a strange one though. You’ve completely ignored currency and exchange rates.
No I haven't - exchange rates are determined by capital flows, not goods or relative pricing.
And higher interest rates attract capital flows, strengthening the exchange rate, lowering the cost of imported goods.
Relatively high rates attract foreign investment, which can drive exchange rates, yes. But, pumping rates high to protect your currency in a country with high private debt, a growing trade deficit, and a big primary export market is stupid. Better to let the prices adjust with everyone else.
Hardly the case at the moment out to 2 years - New Zealand Dollar/U.S. Dollar Forward Rates.
Don't you think the Western World could do with a lot less consumption, anyway?
I looked at one of the old school class photos recently, and the thing that stood out was....no one was fat. Go into any equivalent school today and tell me what you see. And that's before we look at the USA and UK.
10% increase in costs that sees general consumptions drop? 10% still looks on the light side to me.
Best comment of the thread, thus far.
Still Plenty money and credit floating around, so don't hope of any slow down.
If it's a good thing, it sells quickly.
At the moment people who bought crap to later sell it at a profit are stuck because no one wants to buy crap anymore.
Possibly the government can start a ministry of crap buying.
Credit supply just turned negative (payments are outstripping new loans).
P.S. Real-economy money printing is not QE but it’s fiscal stimulus (in most cases) and real credit creation. Q12021 marked the top in the impulse of global credit creation. Link
The last round of globally concerted money printing was done in Q1 2021. Since April 2021, the S&P500 has returned 0% ex-dividends in almost 2 years Link
An industry on its knees: Hawke’s Bay horticulture wiped out
It will take years and hundreds of millions of dollars to get “the heart’' of the Hawke’s Bay economy beating again.
Hundreds of hectares of orchards and crops have been washed away by Cyclone Gabrielle, with the true extent of the carnage still to be determined.
Every dollar made on an orchard is said to be worth four to the wider region, and horticultural leaders are calling for local and central government assistance.
Flood plains are why we have great agriculture. Yes the silt from the flooding will mean that deep rooted planting may not be a consideration right now but I expect absolutely that shallower rooted crops will be what will replace what was there. The ground may need about fifty years before the return of what we had but for example we have the knowledge and the creativity to make a success of the region again.
We just have to make the crisis something which has a positive outcome for us all.
Nobody - not even Kim Hill/RNZ - has thought to ask where this 'mud' and ' silt' comes from. It's topsoil from further up the catchment, lost from there forever. A form of entropy we should be strenuously parrying.
Great news to start the day
Rotorua first-home buyer Liam Benfell works his way to property ownership at age 21
https://www.nzherald.co.nz/rotorua-daily-post/news/rotorua-first-home-b…
Yes, cut down on takeaway coffee and Disney+ and you too could one day afford a house is a 'semi-rural suburb' of Rotorua.
Start saving from the moment you can walk /sarc
Why denigrate him and his suburb. You were born with a silver spoon, I bet
I'm not denigrating him personally. Dude bought a house at an age where I was spending equal time between the pub and lecture halls. It's more that the futility of living like a monk to afford a semi-rural home, which for many would be removed from family, support structures and work opportunities isn't exactly a 'Oh well we've fixed housing moment' nor is it the inspirational moment for young people that you seem to think it is.
But, sure anyone who points that out is on the pig's back, charging through a velvet field, or whatever your garbage reflexive response is to someone who challenges power structures within this gerontocracy we pretend is a functioning country. If being able to articulate that makes you think I have a 'silver spoon' then that probably says far about you than what you think it does about me.
And overpaid?
One could say ‘Good on him’.
One could also say ‘Yet more propaganda from the Herald to try and stem further collapse of the housing market, given how dependent on advertising revenue from the real estate sector they are.’
👍
Even better news is how many will be able to afford in a few years once prices fall another 30%, remember HW2 its about having the roof over your head, not what you paid for it........
I would say owning the roof over your head. In 25 years the mortgage is gone while renters are still forking out their weekly earnings. Hopefully inflation does not boost the rents from what they are now.
So if owning the house is important as you say, surely you support much cheaper prices so more can indeed enjoy this acheivement....
I assume you will be voting Labour
But Labour have repeatedly said that they don't want house prices to drop. Continue to rise at a more sustainable pace was their stated goal last I heard.
Only Top/Green have said they want prices to fall.
Exactly, what Labour say and deliver are opposites, so if they say growth they will deliver falls.
Pointless to think the left want house prices to fall. I have only heard the Greens say they need to fall, but their other policies mean i won't vote for them. But think about it, it doesn't matter what colour your politics are, if you want people to have a decent chance at life irrespective of where they come from, then you HAVE to want prices to fall a lot. Wages cannot rise to the level to make houses at current prices, affordable (besides they'd go up with the rise in wages). Every body benefits when houses are cheaper.
...Except the people who hold debt against houses already, or who find themselves needing to sell due to divorce, job opportunities or for health reasons.
I mean yes, agreed with the substance of your point, if only because we need people to afford to do things like start businesses or have money to spend in the discretionary economy to sustain employment. But let's not flog ourselves thinking there's no losers at all if house prices plummet for a peak they should never have reached.
You and I have been contributing long enough GV to realise that while we might disagree on the detail, in the core we want the same outcomes.
But yes many are losing money now as houses fall in 'value' and can't sell for what was paid, and many more will lose when their turn comes, but then we all realised the Government (including the RBNZ) and the banks were creating and driving a problem that would have big consequences. I saw the beginnings of the problem in Whanganui in 2001/2 when foreigners were coming to town buying up rafts of homes and leaving. Learning that in Australia tour groups were being organised for 'investors' to come to NZ to buy houses at inflated prices as investments. If those 'investors' sold within a few years they will have made a significant profit. I thought it was criminal then, and still do. But Helen Clark actually stood up and said there is no problem here.
Agreed. As an aside, the concern I have about 'starting businesses' not only extends to the resources but also the space available to people in their own home. We're good at talking about 'number eight wire' but not so good at seeing what pricing two level town houses above 'affordable' housing will do generations of tinkerers, inventors and innovators to come.
Yes, there might be less need for a shed or a barn, but given many houses barely have enough bedrooms and many new ones eschew garage space altogether, I'm not sure we understand the value of the space we're losing.
The odds of me ever creating anything other than a healthy bottom line for my local Repco or Supercheap are slim, but my next house (fingers crossed) has a tandem internal garage and a desk. Who knows what the future holds. But for others that might be well out of reach and perhaps that's going to have consequences we don't quite understand yet. It must be important, because banks and telecommunications companies spend a lot of money on prime time 30 second spots telling me that those things are important. Surely they wouldn't lie to us?
Agree, was born on a farm, dad made me learn to weld, plasma cut and lift engines out of cars in teens. Without a garage dads cannot pass on these skills. A whole generation has also been told by council that they are not allowed to do X or Y.... on there own house. Only recently they have loosened rules.
That was the inevitable end-game of a long process called privatisation of the commons.
It started with land (real estate was originally royal estate) and evolved to anything it could - including intellectual 'property'. En route, any physical activity got privatised.
That has high-water-marked now. Combination of retiring folk with knowledge/skills, a coming cohort with neither (not relevant, at least), and a reduction in surplus energy combined with increasing entropy, which has removed societal resilience. Not, registered/qualified or not, you just go our and shovel the ' mud' from your driveway, catch water from your downpipes, plant a (well raised!) garden, hang everything out to dry, and get on with it. I see a time when even red stickers get ignored, indeed when the stickerer either gets lynched, or doesn't show up because there isn't any funding for such work.
Probably better I never learned to weld. I get into enough trouble with cars as it is. But for my kids, who knows. For me, finding car parts meant scouring global website and suppliers, for my kids it could mean 3D printing them. I want to make sure they have the space and tools to take that as far as they might want to, whether as a hobby or otherwise. As a parent, I consider that to be an important part of raising them. Feed them, help them grow up well-adjusted, give them a chance to develop curiosity and see where it takes them.
Agreed. And looking at the whole thread, I played with cars, built hot rods, got very good at rebuilding engines as a teen, and yes it is no where near as common as it used to be, not least because today's cars are a lot less capable of being tweak by the home mechanic. But the underlying theme of the thread is too many people, not enough room.
That's the same argument to not kicking your heroin habit.
Nope. Its competitive whatever the price is. Always has been.
Did I miss something - Have house prices gone down under a Labour Govt?
Right now they are!
The life of a spruiker - but then, that's an oxymoron.
In that they have yet to get one.
...prices for new houses in China fell -1.5% in January from a year ago. But given this market is in the doldrums with few sales...
It's difficult to have a spectacular real estate frenzy when the population is in decline I suppose. Fundamentally demand has been satiated.
This is the exact issue in japan, then are millions of homes in rural locations unoccupied. Japan has interesting inheritance laws where you can refuse an inheritance. In some cases people are refusing the old rundown, rates owed on houses of their rural parents. I have been watching it closely, you can buy a rural, close to a skifield, old house for way less then a Turangi hovel. In Japan the situation is made worse by the young deserting the rural communities to live in the big cities where jobs are. I can see the same thing happening in China over the next 30 years. India on the other hand.....
Troubling signs emerge as credit card debt hits record high
All is definately not well with many US consumers, they are not taking on debt at 20% interest rates because its attractive.
https://finance.yahoo.com/news/troubling-signs-emerge-as-credit-card-de…
Retail investors are pouring a record $1.5 billion per day into the stock market
https://finance.yahoo.com/news/retail-investors-record-inflows-us-stock…
ANZ NZ Weekly Data Wrap: devastation
- The scale of Cyclone Gabrielle’s destruction is hard to fathom. It will have economic reverberations for years to come.
- The rebuild effort will increase resource stretch in the economy, and will be inflationary.
- Targeted fiscal policy is a better tool than blunt monetary policy to provide disaster relief. Deferring OCR hikes could do more harm than good, and we continue to expect a 50bp hike next week.
- But the RBNZ can help by scaling back or suspending quantitative tightening to facilitate funding the fiscal response.
I don’t know whether it is drawing a too long a bow but looking at that latest ‘soil moisture deficit’ map and what has happened in Hawkes Bay it looks like a hell of a lot of water fell on the inland hills and poured out on to the flats on the coast. Catching everyone by surprise. I still can’t believe what I am seeing in the Napier/Hastings area. Fantastic to see the genuine support of the community and all support services. I feel for everyone involved.
My friend from Hawkes Bay said that is exactly what happened. It happens on the Thames coast too - water from as far back as Waihi feeds into the rivers. Thames can be sunny and then get flooded because of what is happening upstream. It is devasting to see this but the way Kiwis from across the country are pulling out the stops to help reminds me of how much we have in common. I wish we could let them know we are rallying and getting resources for them. I cannot imagine the difficulty of losing loved ones and or not hearing from them. Apparently the SARS team from Australia are expert at finding bodies. I think there is a lot of bad news to come. I hope I'm wrong.
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