Here's our summary of key economic events over the weekend that affect New Zealand, with news central bankers will be waking up today with a new inflation threat.
More generally though, it will be a busy week in the US with non-farm payrolls, JOLTS job openings, ISM services and manufacturing PMI, and external trade data all due to be released. Elsewhere, inflation rates will be released for South Korea, Switzerland, Mexico, Philippines, Indonesia, and Turkey. Then the central banks chime in. India, Australia, and of course New Zealand are among those that will review their monetary policy settings. Finally, more PMI figures are set to show the state of the manufacturing sector in China, India, Russia, South Korea, Canada, and some of the larger EU countries.
But first up today we have a sharp oil supply cut announced by OPEC earlier today. They are reducing supply by -1 mln/bbl/day. Markets weren't expecting this, and OPEC clearly want a higher price. Saudi Arabia led the cartel by pledging its own -500,000 barrel-a-day supply reduction. They were followed by Kuwait, the United Arab Emirates and Algeria. Russia said the production cut it was implementing from March to June would continue until the end of the 2023. The move is likely to complicate central bank efforts to rein in inflation.
In other news, we can report that Taiwan's factories held all their February recovery in March but couldn't quite break back to an expansion mode. The downturn in production continued to ease, while firms signaled only marginal drops in new orders and employment in the latest PMI update.
Last week we noted that China's recovering car industry is doing so because of steep discounts rolled out by manufacturers, and at a level that is unsustainable. Now we can note that China's airlines are recording higher passenger traffic but also booking huge losses at the same time. Neither industries seem to have a sustainable business plan. So that will be why earlier last week we reported a sharp deterioration in Chinese business profits.
And staying in China, their factory expansion extended to a third straight month, even if it didn't quite rise to the expected level. But according to the official data, their service sector is positively booming. But before accepting those conclusions it is probably best to await the private survey results which are due out later today.
Japan's stats are a different story, accepted as unvarnished. They reported a surprise rise in industrial production in February, far stronger than anticipated. And they reported far better retail sales for February than expected as well. If they keep this up, the world's third largest economy may become a driver of international trends.
But there is huge uncertainty hanging over Japan at present. They have finally got inflation up consistently above 2%. And they have a new central bank governor who seems committed to unwinding their ultra-loose monetary policy. What has to be achieved on that front is huge. And the implications for other economies could be massive. For example, Japan's loose policies shifted vast amounts of investment overseas - they own 8% of New Zealand's debt securities, 10% of Australia's. The total is so large it exceeds the UK's annual GDP by +26%. Decisions to be made in Tokyo in coming months will determine the speed of the unwinding, a disinvestment offshore that could easily roil financial markets.
In the US, data out over the weekend showed personal incomes rose at a +6% rate in February from January, and their personal spending rose at a +2.5% rate. This is not a sign of growing household stress. The inflation measure in this latest data shows it receding, running at an annualised 3.6% in February from January, and +5.0% higher than year-ago levels. That is actually its lowest rate since August 2022 when it was on its steep rise.
Meanwhile the Chicago PMI remained very negative in March but unchanged from February, in this barometer of the American industrial heartland.
And the University of Michigan sentiment index slipped in March, but driven mainly by those who self-identify as 'Republican'.
But those ho-hum data don't seem to be indicators of financial stress. Even in a long perspective the share market VIX index of stress isn't currently elevated. And the broader financial stress index maintained by the St Louis Fed isn't either, quickly retreating after a brief and relatively minor spike last week. Even the Fear & Greed index is currently running at Neutral, after running in Fear territory a week ago, and Greed territory a month ago.
Although the battle isn't anywhere near over and the Fed still signals inflation is their top concern, markets are saying they like the PCE track.
In Europe, German retail sales came in unexpectedly weaker for February.
French inflation eased in March to 5.6% and Italian inflation eased to 7.7%. Along with easing German inflation that we have previously reported, the EU says its overall bloc inflation was 6.9% in March, lower than the 7.1% expected and very much lower than February's 8.5% rate. They will count these declines as 'wins'. Falling energy prices are behind all these improvements, aided by the price caps imposed in Russian energy.
In Australia, CoreLogic's March house price report shows a +0.8% rise from February, gaining back some of the -8.7% fall for the year. That is actually its first rise in 11 months. For Sydney, they had a better-than-average monthly rise of +1.4% but remain -12% lower in a year. For Melbourne, the gain from February was +0.6% to be -9% lower in a year.
The UST 10yr yield starts today at 3.47%, and down -1 bp from Saturday. The UST 2-10 rate curve is still inverted at -56 bps. But their 1-5 curve inversion is greater again at -105 bps. And their 30 day-10yr curve is also more inverted at -122 bps. The Australian ten year bond is still down at 3.24%. The China Govt ten year bond is little-changed at 2.87%. And the New Zealand Govt ten year is starting today unchanged at 4.25%.
The price of gold will open today at US$1970/oz and retreating -US$2 from Saturday.
And oil prices were little-changed on Saturday at just over US$75.50/bbl in the US. The international Brent price is now just under US$80/bbl. A week ago these prices were US$69 and US$74.50/bbl respectively. But following today's supply cuts, these prices are sure to rise.
The Kiwi dollar is little-changed against the USD and now at 62.5 USc. Against the Aussie we are firmish at 93.6 AUc. Against the euro we are firm at 57.7 euro cents. That means the TWI-5 is now at 70.6. But it is up +40 bps from a week ago, and up +30 bps from the start of March.
The bitcoin price is very little-changed again today, now at US$28,211 and down a very minor -0.4% from Saturday. Volatility over the past 24 hours has remained modest at +/-1.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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43 Comments
Friedman/Schwartz didn't write this recently, but they may as well have been on Capitol Hill this week describing the Fed's claims about this month's big events - and almost certainly what will come from it. https://youtu.be/u0YGwEcYpXA Link
After the 2008 MONETARY crisis, the Fed came out of it with more power and responsibility than ever. No one bothered to ask whether authorities could have been effective with the powers they had. Or at all. What about this time? Link
Blame OPEC oil cuts for inflation. Blame Putin, blame Covid. Central banks always have an excuse and it is never central banking manipulation that has caused the current bubble economy.
Blame the weather too, given it turned up timely, quite handy, otherwise might have run out of blames for the next CPI here in a couple of eeeks or so.
... there must be some civil servants who've not been blamed for anything yet ... throw them under the bus too ...
What’s interesting is the final straw document had been successfully hidden for quite some time. So with the three strikes sitting over Minister Nash, who exactly had possession of it and had decided to wait until then to bring it to the surface, and who was the first recipient?
Leave those poor bureaucrats alone please.
Word came out this weekend that some poor sods at the new "Three Waters" authority are making $74/hour as personal assistants, $134/hour writing job descriptions and $220/hour advising on Maori strategies.
All this, long before the entity's fate hangs in balance and most of its staff would have little to zero actual work - Thirsty Work: Three Waters consultant and contractor spend gushes past $50 million - NZ Herald
The trail from this made me smile, Foxy and GBH acknowledged, but the frustration I feel is the truth in your comments. When are we going to call bull shit on the politicians? Yes there are outside factors influencing economies, but in the end it is the politicians who are required to set up and maintain the regulatory infrastructure to keep things under control, and that includes the framework of the RBNZ. The shambles that successive Governments have proven to be is coming home to roost but they all remain in denial.
Total shambles.
Speaking of shambles, heard a nurse on RNZ this morning, 15 years experience, on 65k. She’s had enough, going to Aus like many others where she can double her money and have better work conditions.
Yet, both our public and private sectors are full of bullshit jobs paying 100+.
Will we ever get our priorities at least close to right?
Horrible stuff.
Ironically, policy grads are paid more than 65k in their first year at MoH or MoE tasked with finding solutions to chronic shortages in our health and education frontline workforce.
Thats gold
It sure is
The skills of a top nurse grossly underrated. Fact is they are doing roles now that 20 years ago would be undertaken by a Doctor.
Then compare nurses salaries across other govt depts and the BS jobs being done on $100k plus - and the answer why we have a shortage is as plain as day.
Your pay isn't based on how hard your job is, its based on whether they can find someone else to do the same job for less.
It seems they have gone below the limit of what nurses are prepared to accept so they need to up the pay. But as for those "batshit" jobs, if they were easy and interesting then they wouldn't have to pay 100k+, everyone would be lining up for them at much less.
Along with the 100K+ public servant, we also pay for a 300K consultant who actually does the work.
With a watertight disclaimer allowing no liability if the work turns out a dud. In which case , the government and/or its bureaucrats can blame the consultant and leave all involved unaccountable.
Energy reduction will ALWAYS result in inflation (or dollar destruction); the only variable is efficiencies.
So David is quite correct with: 'The move is likely to complicate central bank efforts to rein in inflation'
and: 'Falling energy prices are behind all these improvements, aided by the price caps imposed in Russian energy.'
Extrapolate...
Not always?
It'd be energy available/energy users wouldn't it?
Per dollar
they are an energy expectation, every one. Doesn't matter whether they are held by 8 people or 8 billion.
Back of the envelope calculation : all those minimum wage earners who got a boost to $ 22.70/hour on April 1'st are now grossing over $ 47 000 p.a. ... just shy of the 30 % tax bracket which kicks in at $ 48 000 ...
... Captain Bracket Creep , Sir Michael Cullen , would've been well proud of the Ardern/Hipkins Labour government ... just another 30 cents an hour , and even minimum wage earners will be " rich pricks " ... ahhhh .... that's progress ...
Don't you worry GBH, Robinson will announce changes to the Tax brackets just in time for the election. Should buy a view thousand votes from the sheepels.
Living wage up 9.9 percent to $26/hour, that's a 37.5% larger increase than minimum wage.
A slow clap for politicians and union negotiators who foolishly thought they could deliver a big minimum wage increase to peg it to living wage (socialist singularity) and peg it there.
This overpaid bunch can't wrap their heads around the simple fact that higher minimum wages without underlying economic productivity gains contribute to higher living costs, which pushes up living wage rates required to keep heads above water.
The universe gave us one earth with no lines drawn on it. The unintelligent humans (politicians and rulers) created divisions and became manic. Some intellectual and intelligent ones created internet to join the humanity again but this was also censored by unintelligent ones. Now again now more divisions are created and resources are reduced artificially.
How much more stupid can the human race become?
Its the evolution of survival instincts as people seek power and influence over every one else. Base emotions ruling the intellect really. Hasn't changed much in thousands of years.
Tbf, not even scratched the surface of our ability to be stupid, we can do so much more stupid.
Potentially millions of petrol and diesel cars may about to become unsellable in China as the country implements new vehicle emissions standards
(It's dated March 30 btw.)
Legacy auto faces disaster in China with unsellable cars as pollution crunch looms (thedriven.io)
Aucklanders will be first in line as they ditch their bus service.
Living wage up 10%.
A lot of people will realise come september that they are now on the bottom rung of the salary ladder.
They've been told they can't stand on the top two, for a while now.
Maybe we could save by making all ladders two rungs shorter?
The KSA production cut is yet another poke in the eye (or more southern region) for the US and by extension the 'rules-based international order'. The Great Game was all jolly hockey-sticks when the West umpired it and fielded the teams. Not really as much fun when the new multipolar world order calls the shots. Especially since the new overlords have the energy, mineral, engineering and manufacturing resources to make their version tick.....
Why would any of the oil producing nations loosen the vice grip? They have no reason to, the United States Government is incapable of agreement and untrustworthy. None of its agreements last more than one administration, being an enemy of the United States is dangerous but being a friend of the United States is even more dangerous.
The American Empire is rapidly collapsing from its overextended reach in the face of challenges yet its governing elite have not clicked to the new reality.
Maybe they have.
Maybe that was why Nuland was in Ukraine.
Question : who has been sighted most often since January 1'st this year : the abominable snowman / the Fiordland moose / Jacinda Ardern ?
Yes, I would have thought that as a current MP and PM at the time of most of the Nash stuff, she should be asked a few questions.
Tova is now her media advisor
A Fiordland moose needs a Media Advisor?
Feel for her re the vitriol. She was a paddling pool level swimmer who ended up in a stormy ocean. Id imagine leaving the country would high on her list - gong out in public too dangerous with the state of NZ nutterism. .
True, got out of her depth a lot earlier than commonly acknowledged. A series of unexpected highly critical events and dramas catapulted her into being an international celebrity and the momentum of that carried a lot more a lot longer than it should have. A show pony and a light one at that, as evidenced by Scott Morrison’s easy brush offs over stopping the 501s and opening the border up with Australia, even though Delta was roaring in from India.
For example, Japan's loose policies shifted vast amounts of investment overseas - they own 8% of New Zealand's debt securities, 10% of Australia's. The total is so large it exceeds the UK's annual GDP by +26%. Decisions to be made in Tokyo in coming months will determine the speed of the unwinding, a disinvestment offshore that could easily roil financial markets.
Finally people are starting to take notice. Japan is a crucial net creditor. To the world. I've bought this up around the water cooler and people look at me like I'm as mad as the bat stuff.
The new governor (Kazuo Ueda) has already expressed support for QE etc and has only said he would take a look at the yield curve control approach. As much as the economics community would love to see the BoJ fall into line with other central banks (and be, you know, normal), I just don't see it happening. The reason the BoJ is a major creditor is because of long-term trade imbalances - what else are they supposed to do with the foreign currency they amass?
As much as the economics community would love to see the BoJ fall into line with other central banks (and be, you know, normal), I just don't see it happening.
Why would they love to see this? What happens if JPY repatriates? Well at least it would make imports cheaper.
Last week we noted that China's recovering car industry is doing so because of steep discounts rolled out by manufacturers, and at a level that is unsustainable
Subsidies provided in domestic currency, or in kind support like discounted internal shipping or electricity are sustainable in China. This is just classic industrial policy - subsidise with domestic resources, stimulate domestic economy through job creation, build market share and destroy overseas (unsubsidised) competitors, adjust prices etc. We keep expecting China to fall because we think they are playing to the same rules as the West imposes on itself.
> driven mainly by those who self-identify as 'Republican'.
I didn't think republicans were into identity politics?
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