Here's our summary of key economic events overnight that affect New Zealand, with news of more signals that the world's major economies may be in for a stuttering phase.
First, we are starting to see some labour market slowdown signals in the US.
Initial jobless claims rose to +238,000 last week, a bigger rise than was expected. There are now just under 2 mln people on these benefits, the highest level in more than a year.
February layoffs rose to 77,770, more than five times higher than the 15,245 job cuts announced a year earlier. So far this year, that takes the total to over 180,000, the highest since 2009. Tech pullbacks accounted for more than a third of these. But the bigger perspective is that this is still tiny in relation to the total 156 mln labour market.
These two metrics are leading indicators, but the real data comes tomorrow in their non-farm payrolls report, which is expected to show payrolls expanding a modest +205,000. However, over the past year or so this data has rarely done 'modest'. Its strength has confounded labour market analysts, and the Fed.
The American economy started the new year strongly according to the Fed's Beige Book survey. It noted steady consumer spending and stabile factory activity. But the forward sentiment is less positive, matching what the wider community expects. It is just that those predictions of a slowdown never seem to materialise. They will at some point of course (the stopped-clock effect), but it is approaching two years since the "slowdown is coming" mantra started.
Opening-up demand in China is not generating consumer inflation. Their CPI fell to 1.0% in February from 2.1% in January. Market analysts had expected February to come in at 1.9%. The actual result was the lowest since February 2022, and was due to a sharp slowdown in price rises for both food and even more so for non-food categories. The January to February rate deflated at a -6% annualised rate. Milk prices rose; beef and lamb prices fell. To be fair, the easing of food prices comes as the Chinese New Year period passes. But that can't hide weaker demand overall.
Corporate China isn't optimistic that policy measures will fix that weak consumer demand any time soon.
Separately, China said producer prices deflated at a -1.4% year-on-year rate in February although there was no change between January and February.
Japanese machine tool orders were expected to rise in February from January and break a long-running decline. But they didn't. In fact they fell -10.7% from year ago levels, a quickening pace of retreat. They were down almost -4% in a month.
Shipping freight rates for containers are still falling, down another -3% last week, dominated by falls in rates out of China. But we are starting to see rates rise in a minor way for cargoes to China. Trans-Atlantic rates are rising now too, even if it is minor. Bulk cargo rates are still rising and in fact are back to their highs for the year.
And it is probably worth noting that wheat prices are falling faster now, well past the stress we saw in mid 2022. They are now back to levels we had at the end of 2020.
The UST 10yr yield starts today at 3.93% and a net -6 bps softer from yesterday. The UST 2-10 rate curve is less inverted at -101 bps. Their 1-5 curve inversion is little changed at -92 bps. Their 30 day-10yr curve is actually less inverted at -67 bps. The Australian ten year bond is up +5 bps at 3.71%. The China Govt ten year bond is unchanged at 2.91%. And the New Zealand Govt ten year is starting today at 4.59% and down -8 bps from this time yesterday.
On Wall Street, the S&P500 is ending its Thursday session down -0.3% in late trade. Overnight, European markets were little-changed except in London where they ended down -0.6%. Yesterday Tokyo ended its session up +0.6%. Hong Kong fell another -0.6%. And Shanghai fell a minor -0.2%. The ASX200 ended its Thursday session up +0.1%, while the NZX50 fell -0.3%.
The price of gold will open today at US$1826/oz and up +US$9 from yesterday.
And oil prices start today +50 USc firmer at just over US$77/bbl in the US. The international Brent price is up to just over US$82.50/bbl. But they have been volatile in between.
The Kiwi dollar is marginally firmer, now at 61.3 USc. Against the Aussie we are up a little at 92.7 AUc. Against the euro we are little-changed at 58 euro cents. That leaves the TWI-5 little-changed at 70.1.
The bitcoin price has fallen from this time yesterday, now at US$21,492 and down -2.9%. However, volatility over the past 24 hours has been remained modest at +/-1.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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87 Comments
The China rebound - yeah, right
Yip. They face a perfect storm with multiple issues that will dampen their growth for years or even decades.
So they're not going to rebound, what will happen
Deflation, stagflation, negative growth?
Now the shit hits the fan. Marginal companies start making looses and firing staff, Unemployment rises, people miss mortgage payments and eventually mortgage sales occurs. Its a recession, they follow the same general theme.
Start making looses?
Looses are very popular in Alaska. They like to smoke them while eating snow.
Xero lost $9m in their prior year. So they announced job 'looses' and the shares rebounded.
Profits re-invested and buying up other platforms..
Mediocre rates of growth
You can't lose with that forecast.
Should China have anything above 'mediocre', you will call it fake news, you won't accept their data.
2.9 percent growth in calendar year 2022
Boring….
It’s what I genuinely think
pot calling kettle black in terms of generalised comments!
So to humour you - between 2 to 4% growth for this year (mediocre by modern China standards)
Anything above 2.9 is a rebound surely. 4 percent would be a small rebound but still very helpful to nz economy
Definitely no nz recession by mid-year
How can the Bitcoin volatility be 1.7 but the decline 2.9?
+/- 1.7 is a 3.4 range?
From what value? Both figures refer to previous 24hrs.
"The index measures the implied volatility of bitcoin — the view on volatility over the next 30 days held by bitcoin option traders".
(Traders who price and trade volatility don't worry about the immediate direction of price-moves. They're simply trading how much the price of an instrument will move in the future.)
It'll be the average deviation across a 24 hour period. Not the min-max deviation value.
They will at some point of course (the stopped-clock effect), but it is approaching two years since the "slowdown is coming" mantra started.
Market professionals pricing the inverted US government Treasury bond curve have a different objective - its called profit. They are under constant scrutiny from peers and management and the stakes are high in terms of securing million dollar bonuses.
Is stuttering the new transitory?
S.s.s.s.tut.t t.t.ering Is the n.n.new T.t.tranny.
.
Good news with the job losses and layoffs. Everything going to plan.
Good news?
Pretty clear that it was sarcastic
Sarcasm is Xero's statement that the job cuts is about growth and improving customer outcomes. Now where have I heard that before 🤔
Xero - Not good news for Napier I imagine.
The CNN Fear & Greed index timeline is now in a freefall. Going to require a goldilocks jobs number tomorrow and a surprise big fall in the CPI number next week to pull us out of it, otherwise much lower stock prices ahead by the looks of it.
Technically looks like S & P going to retest 3800 as support.
When. Why do you say that
Are you expecting a rosy job number... or a dismal one
there is a 30 Nov 22 4070 high again 27 Jan eventualy it managed to go through this level and it acted as support multiple times, but on 16 feb it lost support, and over the last week selling at this level has overwhelmed buying, so the index will now look to retest 3900 as support. i dont see it holding. as the index is in a 3800-4100 range trade. it will break lower on an positive news as that will mean the fed has to act more, short term treasuries are all way higher then the market expected Q4 22. I think we retest 3800 and IMHO it will not hold. 3600 is then support. We are in a good news is bad and bad news is good range trade.
Are we still in a bear market
S & P has made two higher peaks since 3600 low point
by IT GUY | 10th Mar 23, 9:12am
there is a 30 Nov 22 4070 high again 27 Jan eventualy it managed to go through this level and it acted as support multiple times, but on 16 feb it lost support, and over the last week selling at this level has overwhelmed buying, so the index will now look to retest 3900 as support. i dont see it holding. as the index is in a 3800-4100 range trade. it will break lower on an positive news as that will mean the fed has to act more, short term treasuries are all way higher then the market expected Q4 22. I think we retest 3800 and IMHO it will not hold. 3600 is then support. We are in a good news is bad and bad news is good range trade.
I dont see much point in that label, you cant really trade on it as info, the index has toyed with the 50 day moving average as support the last few weeks but today totally rejected that, IMHO this is a significant thing.... now 50dma becomes resistance.
3600 is then support
Brilliant! IT GUY has called it. We are not in a bear market but a sideways one. The stock market looks forward 6 to 9 months so that takes us to April / July period.
by IT GUY | 10th Mar 23, 9:37am
I dont see much point in that label, you cant really trade on it as info, the index has toyed with the 50 day moving average as support the last few weeks but today totally rejected that, IMHO this is a significant thing.... now 50dma becomes resistance.
What a ridiculous response to some quite useful information. Thanks IT Guy
Pretty obvious that Health , Police, Education, Transport going to be front of mind this election campaign. With the stats out how much worse things are now compared with 2017 it will be difficult for Labour to say look at the last national gummint..... Hipkins is having to apologise in the house for wrong imformation on a weekly basis..... its going to be a long ugly slug fest all the way into Oct.
Construction industry can be saved by shifting to building urgently needed high security prisons. El Salvadore has halved its murder rate with this solution. It's time to admit that home detention, family conferences and slapping with wet bus tickets just isn't working.
If we reclassify ram raids as break ins, then the ram raid stats look better......
Pretty sure looking to authoritarian El Salvador for solutions is not the way forward. Mass arrests for loose "gang affiliations" is not a solution. In fact, it may have actually nothing to do with the drop in murder rate: https://www.theguardian.com/world/2021/dec/08/el-salvador-us-gang-leade…
Wonder if we will get a CGT if Labour/Greens win election? If you remember back PM Ardern ruled it out while "she was prime minister". Now that we have PM Hipkin's it could be quietly back on the table.
It would be a perfect time time to implement.
1) We all ready have falling house prices so it won't have an immediate effect
2) Green's may insist on it as a part of a coalition agreement
3) We really need additional sources of income to pay for rising super and healthcare costs. I think we have reached an exhaustion point with income taxes.
4) A CGT combined with lowing income taxes in the lower bands could be a good way to win those middle class swing voters who ultimately decide the election.
It will simply not get enough revenue in the door.... not in a recessionary environment, May not stop them selling it tho.... National won't be able to find enough cuts in useless spend to fix things, they too will have to look for more revenue IMHO
Not to mention that capital losses now look likely. Will need to be an asset tax to achieve any meaningful revenue..
CGT is a very inefficient tax. It relies on turnover (no transactions, no tax) and 'gains' (a flat market, no tax).
Correct. There's a high chance that a flat market and the drop in expected revenue leads to a return-to-normal of any individual income tax brackets that may have been adjusted. And if we get more CC driven extreme events (likely) then there will be even more tax on top of that to begin with.
The political system that gave us ten years plus of no changes to our current tax brackets isn't going to suddenly and radically start competently running a tax system because we decide to implement a CGT. It's just something else they can neglect or stuff up and then gaslight the electorate when they start asking questions about it.
Realistically, do we need wholesale tax reform? Yes. Do we have a political system competent enough to execute and oversee the administration of it? **** no.
Didnt Labour run a working group on tax reform who came up with CGT but JA said no? I am not against paying more tax, life has been good to me, but I want that tax spent on front line services (not road to zero adverts) and I want my tax prioritised on all NZers not a Maori and a Rest of them structure. Indians, Chinese etc everyone should be catered for by need not their racial background. I have no faith that Labour, clearly captured by their Maori caucus can deliver such a change to NZ services. Willie (democracy has changed) Jackson and Mahuta need to go form their own party. I have no issue with them campaigning on these things and winning seats, but a vote for labour is going to see Labour/Greens/Maori Labour/perhaps TMP all climbing over each other to score points, perhaps the answer is a labour Chinese and Indian Caucus. perhaps even a just Pakeha caucus , would that fly?
They did but it was a shit-show from the start. Appointing Cullen was dumb, limiting the scope to not include the family home was dumber and the icing on the cake was the report that proposed dragging Kiwisaver into the CGT net - you know, the thing that taxes you year on year so you don't get the benefits of the compounding returns.
The dissenting TWG report basically pointed out you could get almost all of the benefits of the proposed CGT from extending the brightline on real estate without totally stuffing up the tax system on other things and the benefits just weren't there to justify doing so. Plus it's worth noting the bulk of the dissenters were tax practitioners as opposed to academics or union economists, and I think there may have been a realisation that the report was a bit wonky when it came to the critical details - and that's before Winston got anywhere near it. If they were to pick it up again today, it would still be unworkable garbage.
"Appointing Cullen was dumb" great comment. They had to know he would have had the biggest bias, and blinkers. Was so arrogant that he would not take well to dissenting voices i.e. could not build consensus without building an unbalanced team. Basically he blew it trying to screw the "rich pricks" through his own prejudices.
When I go to McDonalds and order a large quarter pounder combo, I get more chips and a bigger drink. It costs me more money, but I get what I pay for.
When I upgrade my phone and order a 256gb iPhone as opposed to a 128gb one, I get the extra storage. I costs me more money, but I get what I pay for.
When Grant Robertson instructs the IRD to tax me, I pay more but don't seem to get anything for it. Hospital wait times are worse than ever, the roads are awful, police don't seem to show up to much these days, education standards seem to be slipping, I can't think of a single aspect of my daily life where the "value for money" aspect of taxation versus services received feels better.
In other words, tax costs me more money but I don't get what I pay for - and I see no problem in being salty about that fact.
I wouldn't be opposed to paying more tax IF it meant actually enjoying better public services. Heck, even if a "disproportionate" (relative to population size) amount of tax is divvied up and redistributed on an ethnic basis I could tolerate it if the rest of us were getting better services overall and the extra money seemed to be yielding results in these targeted communities in terms of improving health outcomes, education etc, but I can't see any evidence of that.
All that seems to happen is that more and more of my hard-earned disappears into a black hole, with a limited, privileged group of high paid civil servants and well-connected business interests benefitting to the detriment of the rest of us.
Based on current performance, if tax rates doubled overnight I don't think we would see any improvement to any public service. I really mean that.
For what it's worth I don't actually believe any political party or system is now capable of fixing a system in terminal decline. Labour is clearly not capable of fixing the problem, and I have no faith that NACT can either, if anything they will just accelerate the decline. I don't actually care about "intentions" either ... they are meaningless. All that matters is results and nobody seems capable of generating them.
We are on the Titanic after it struck the iceberg, and as I'd rather be rearranging the deck chairs in first class than the bunk needs in steerage I'll probably just vote for whoever puts the most money in my back pocket going-forward so at least I can have a nice drink or two before we sink.
And the band played on.....
I suppose word is quickly spreading on the dwindling living standards in NZ, despite the high cost of everything. Retaining local and acquired talent in NZ was always a task but now the talent influx hasn't looked promising since the borders reopened. Vested interests and authorities are putting lipstick on a pig by selling raw numbers on net migration as a 'brain gain' success story.
Speaking on behalf of my sector, generous industrial policies and better career prospects across the ditch are soaking up more NZ talent than we can produce or attract from elsewhere. The economic outcomes of such a talent drain won't be felt directly in the short or medium term, but the long-term consequences could be dire if nothing is done (think South Africa).
The answer is blindingly obvious.
You have already enjoyed those improvements BEFORE you paid extra.
We've been living beyond our means for 40plus years. Time to pay up.
Very good point.
Same applies to much our our housing stock. No improvements on much of the stock for decades, the owners content in their belief they can ignore R&M and cap improvements as they can just cash out their dump at super non taxable profits.
That strategy is collapsing.
- 2018 - NZ Superannuation $13.7b
- 2021 - NZ Superannuation $17.8b
All non-means tested of course. Thanks for your increased tax contributions, but there's not enough money in the kitty for your precious public services.
I'm glad we are on the same page - something needs to be done about super. But I seem to recall last time a change was mooted it was decried as being racist, or something like that.
The proposal was that super age goes up for non Maori but as Maori life expectancy was shorter it should go down for Maori.....
Another Willie Jackson special deal
A land value tax (starting really low at 0.5% but potentially progressing in the future) combined with reducing the income tax burden via overhauled tax brackets & inflation adjustment would be a great start!
This should be fiscally neutral, the new tax fully & directly reducing the income tax burden.
We shouldn't rely on a new land tax to make indexing happen - the indexing should happen automatically. It needs to be taken out of politician's hands so that they can't just sit back and increase tax by stealth, instead of taking a proper pitch for higher taxes to the electorate for their approval.
"The joint project with the Illinois Institute of Technology (IIT) has achieved a radical jump in the energy density of battery cells. The typical lithium-ion battery used in the car industry today stores about 200 watt-hours per kilo (Wh/kg). Their lab experiment has already reached 675 Wh/kg with a lithium-air variant.
This is a high enough density to power trucks, trains, and arguably mid-haul aircraft, long thought to be beyond the reach of electrification. The team believes it can reach 1,200 Wh/kg. If so, almost all global transport can be decarbonised more easily than we thought, and probably at a negative net cost compared to continuation of the hydrocarbon status quo."
https://www.telegraph.co.uk/business/2023/03/07/coming-ev-batteries-wil…
Disclaimer - this comment was sponsored by big oil.
This is great news. Thanks profile.
Isn't science marvellous?!
The only question is where will the energy to fill those batteries come from?
For much of the world, such technological breakthroughs will help replace the small-scale combustion of oil with large-scale combustion of coal. Big leap forward for the environment!
There's really just two types of people, pessimists and optimists. Experience teaches, the former will stay where they are.
Say that to the optimist who did not put enough lifeboats on the Titanic or more recently, the planners who decided to put the Fukushima nuclear plant in an active seismic zone.
False Economics. Build some pebble bed reactors, if we ever get through land based uranium there is a limitless supply in the oceans. Added bonus of keeping the climate change cry babies happy.
"In addition, the technique can even use waste fibers for a greater cost savings and that analysis shows that seawater extraction could be competitive with land mining at present prices."
https://www.pnnl.gov/news/release.aspx?id=4514
“…nuclear power’s price is dominated by the cost of power-station construction and decommissioning, not by the cost of the fuel. Even a price of $300/kg would increase the cost of nuclear energy by only about 0.3 p per kWh. The expense of uranium extraction could be reduced by combining it with another use of seawater – for example, power-station cooling.”
https://www.withouthotair.com/c24/page_166.shtml
I agree about the case for more nuclear and the Greens are coming back round to the idea of nuclear https://www.theguardian.com/environment/2023/mar/09/a-long-overdue-moment-the-uk-greens-pushing-for-the-nuclear-option
No need for the childish "cry babies" comments though
Solar is making a pretty good go of it.
You find, once you start looking. Who would've thought?
And Iran just discovered a bunch more Lithium, so that will be valuable. Of course, to exploit it one would expect Iran will become a war zone and then an insurgent riddled wasteland...
Not necessarily. US companies are learning how to coexist with repressive regimes.
Chevron activities picking up pace in Venezuela — MercoPress
It's a huge victory for democracy if private American interests get there via offshore shell companies in tax havens before public-owned Chinese interests lay their hands on it. [sarc]
Electronic card spending data was out yesterday. When adjusted for CPI, consumer demand is clearly in freefall. Literally GFC levels of collapse. Meanwhile the economists and commentators talk about the need to 'loosen up the labour market' and hike rates to cool the jets (or whatever). Mad times..
We've had Mad Times for many decades. Certainly since that GFC. An OCR at 0.25% and lower elsewhere - that was Madness, and we are reaping the rewards today. Whatever answers there might be to add some sort of sanity to the current situation, continuing on that same path of Negative Real Interest Rates isn't it.
It used to be that low unemployment (like literally 2%) was a sign of a healthy economy. Now we think it is a sign of 'mad times' - something that needs fixing. Agree on the low interest rates for ages though - monetary policy will go down as the worse contribution that economics has ever made to society (and there is plenty of competition).
And yet we will be stuck with Monetary Policy. Is there any real chance of abolishing the Fed and all it's little buddies before Mad Max takes to the roads?
Jfoe, I don't get your logic. You're saying low interest rates were bad but increasing the interest rates (to fix the problem partly caused by low interest rates) is bad.
I think things will be bad enough by the next RBNZ meeting, both domestically and internationally, that it will be 25bps max.....
💯 insane
what are the numbers?
do they split off domestic vs overseas spending on CC?
If it includes tourists spend, it really is down.
Massive contagion in the US banking sector!
Silvergate filed for voluntary liquidation yesterday, and today Silicon Valley Bank is down 54% after selling off $21b of bonds:
https://twitter.com/GRDecter/status/1633919731081125890?s=20
The top 4 US banks have lost $47b in value today:
https://twitter.com/m3_melody/status/1633920487251410944?s=20
As Robbie Williams once said, you win some, you lose some.
It will be ok, there will only be this one cockroach.... wait a minute..
Houseworks will spruik regardless of bad financial and economic news
That’s ok, we are really short of the trolling spruikers these days, makes it more fun
Well I am not the only one that is an optimist
But there is 40 : 1 ratio of pessimists v optimists here.
You're just running with the crowd Fritz / Housemouse after being banned
Have you enlisted a gang to instantly upvote your inane comments. Or maybe it is Yves or P8 who detest me, lol
btw S & P index down nearly 2%
Or maybe it is Yves or P8 who detest me
One moment you're friends with Yvil, another moment you're shouty
Dr Jekyll and Mr Hyde like
Quite inconsistent. Sorry to say
Why this sudden meltdown in bank stocks? A couple of interesting theories and charts are doing the rounds, so let's have a look under the hood. A thread.
by Audaxes | 28th Dec 22, 11:31am
Are Central Banks Going Bankrupt? Morgan Stanley Makes A Striking Observation
As a sidenote, based on average Treasury yields at the various points that the Fed has expanded its balance sheet, we estimate that the Federal Reserve’s $9 trillion balance sheet is now underwater. If the Fed was an actual bank, and if banks marked their assets to market value, the Fed would be insolvent. Of course, the Fed doesn’t mark to market, nor have banks done so since the early-2009 market low, when the Financial Accounting Standards Board relaxed FAS Rule 157 (which is actually what ended the global financial crisis – by making bank insolvency opaque). In effect, the Fed has created liabilities for which there is now no corresponding asset, and now finds itself wandering into fiscal policy, which is the sole domain of Congress. Needless to say, nobody cares.
Even without capital losses (which can be recovered by holding the bonds to maturity), the Fed will also go underwater if the interest it pays on reserve balances exceeds the interest it earns on the bonds it purchased. In this case, the Fed can be expected to book any loss as a “deferred asset.” As Ben Bernanke explained before Congress years ago, when the Fed books a loss as an asset, “it is an asset in the sense that embodies a future economic benefit that will be realized as a reduction of future cash outflows.”
What Bernanke meant with that hand-waving gibberish is this: Fed normally returns the interest received on its asset holdings back to the Treasury, for the benefit of the public. If the Fed’s bond purchases lose money, that interest will instead be used to cover losses. See, “it is an asset in the sense that it embodies a future economic benefit [to the Fed] that will be realized as a reduction of future cash outflows [to the public].” Yay. Link
The old park it in the long book trick.... Nothing new under the sun.
A Few Rich Firms Are Fueling Record Buybacks, JP Morgan Says
March 9, 2023 • Michael Msika
US buyback announcements are running at a record pace this year, though more than two-thirds of the $261 billion in commitments are spread across only five companies, according to JPMorgan Chase & Co. strategists.
Chevron Corp.’s $75 billion leads the way, followed by Meta Platforms Inc. with $40 billion, Goldman Sachs Group Inc. with $30 billion, and Booking Holdings Inc. and Salesforce Inc. with $20 billion each, a team led by Dubravko Lakos-Bujas wrote in a note.
While announcements of buybacks are scaling new peaks so far this year, execution of them has been falling. According to the strategists, stock repurchases were down 20% in the fourth quarter, with the pace decelerating since the first quarter of last year.
Buybacks have been a key source of share demand in the US over the past decade. But given current uncertainty over economic growth, companies may seek to preserve cash, while repurchases have also become a target for tax increases by the Biden administration.
Share buyback announcements by S&P 500 companies over the last 12 months have totaled $853 billion, compared with a peak of about $1 trillion in May 2019, the strategists said.
This article was provided by Bloomberg News. Link
Deflation in China
Stagflation in Uk and EU and Japan
money tightening and destruction via QT
Credit crunch splintering deluded finance markets
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