Here's our summary of key economic events overnight that affect New Zealand, with news the world's economies are being bolstered by expanding service sector activity.
In the US, there were two services PMIs out overnight, both signaling a modest expansion. The ISM services version fell in March from the prior month and to well below forecasts. They now have their slowest growth in the services sector in three months. Demand and employment cooled while capacity and logistics improved, and price pressures eased to their lowest since September 2020. The internationally benchmarked Markit version actually rose in March, but to the same level as the ISM one. It didn't show the strong expansion in February.
US mortgage applications fell rather sharply last week, down -4.1% from the prior week and are now running -35% lower than a year ago. Spring may have arrived in the US, but the housing market is missing the customary burst in listings and purchase activity. There was virtually no change in the average mortgage interest rate last week to affect these results.
The precursor ADP employment report ahead of Saturday's official non-farm payrolls report shows private businesses created +145,000 additional jobs in March, below an upwardly revised +261,000 in February and analysts forecasts of +200,000. Analysts' forecasts for the non-farm payrolls gain are currently sitting at +240,000.
The American trade deficit for both goods and services was little-changed in February and still well below year-ago levels, in fact back to two-year-ago levels. US exports contracted -2.7% while imports were lower too.
Following strong increases in January, Canadian goods exports and imports decreased in February. Exports were down -2.4%, while imports decreased -1.3%. As a result, Canada's merchandise trade surplus narrowed.
In Japan, their services PMI was revised higher in March from February. This was the seventh successive month of rise in services activity and the strongest pace since October 2013.
For India, their services sector is still expanding at a healthy rate.
In Germany, factory orders grew much more than expected in February from January with their best rise in 20 months. But that still leaves them -5.7% lower than year-ago levels.
The UST 10yr yield starts today at 3.29%, and down another -5 bps from yesterday. The UST 2-10 rate curve is less inverted at -47 bps. Their 1-5 curve inversion is unchanged at -109 bps. And their 30 day-10yr curve is still inverted at -125 bps. The Australian ten year bond is down -10 bps at 3.22%. The China Govt ten year bond is little-changed at 2.88%. And the New Zealand Govt ten year is starting today down another -6 bps at 4.06%.
Following yesterday's surprise +50 bps OCR rate hike, markets are unsure there will be one at the next MPS meeting on May 24. But by July 12 they seem certain there will be at least another +25 bps on the way with the OCR topping out then at 5.50%.
Wall Street nearing its Wednesday close with the S&P500 down -0.4% from yesterday. Overnight, European markets closed mixed with London up +0.4% and the others down -0.4%. Yesterday Tokyo ended its Wednesday session down a sharp -1.7%. Hong Kong and Shanghai were both closed for a public holiday. The ASX200 ended unchanged and the NZX50 ended down -0.3%.
The price of gold will open today at US$2020 and holding yesterday's level.
And oil prices also unchanged at just on US$80.50/bbl in the US. The international Brent price is now just under US$85/bbl.
The Kiwi dollar is a little firmer against the USD and now at 63.1 USc. Against the Aussie we are +½c higher at 94 AUc. Against the euro we are also almost +½c higher at 57.9 euro cents. That means the TWI-5 is now at 70.9 and +30 bps higher than this time yesterday.
The bitcoin price is little-changed again today, now at US$28,052 and down a minor -0.4% from yesterday. Volatility over the past 24 hours has been modest at +/-1.7%.
Please note that New Zealand is on holiday tomorrow (Good Friday). We will return on Saturday.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
88 Comments
“yesterday’s surprise +50 bps OCR rate hike.” The oven in the government’s kitchen cabinet has just been turned up, and someone just left. Harry Truman could pick ‘em alright.
There is no way to thread the needle so credit-asset bubbles never pop. Yet here we are, watching the global Everything Bubble finally start collapsing, guaranteeing the collapse of collateral and all the debt issued on that collateral, and the rabble is arguing about what policy tweaks are needed to reinflate the bubble and save the global economy from bankruptcy. Link
Excellent article.
Yet so many think things will be back to ‘normal’ in a year or so.
Very true on the Main St. I know many over leveraged property collectors that are stressing out on the current mortgage rates.
Yet - they are all telling each other (and themselves) that the property boom will start again soon with much lower borrowing costs.
They are holding on by their fingertips and it wont end well for them. They remain doggedly hopeful it will suddenly turn back in the favour of debt holders.....
They have ignored my warnings to deleverage (Sell one or two, to drop debts perhaps?? I said)
I have a mate who is also in the development advisory space. An eternal optimist. He reckons Auckland housing and development will start humming again late ‘23. I told him he’s dreaming, add at least two years to that timeframe.
I have been in the property game, not particularly successfully, since the late 70s, early 80s. So far, every downturn has had an upturn follow it. Without exception. Every period of low interest rates has been followed by a period of high interest rates. And visa versa. Again without exception. What we all know is that prices are falling at present, and then they will rise again at some stage in the future. But when exactly? That is the fun bit. The doom and gloom people always think that they will never come back up. They have refused to check our property price history. This shows the property prices will come back, and there will be a lot of money made by anyone who gets in any time before the next peak. I hope to be one of them.
Gee, HouseMouse: "Yet so many think things will be back to ‘normal’ in a year or so".
That is a bit rich coming from you. You put yourself up there but have no idea, amongst your many claims -
- Inflation done by end of 2022 (sub 4%)
- Mortgage rates back to 2 to 3% by the end of this year
- Unemployment above 5% by early 2013 and 7 to 8% by mid 2023
- OCR not going over 2% this cycle
- "groceries won't rise much more"
. . . and so it goes on.
You are the "TA of interest.co"
Cheers
I made those calls on inflation well before the Ukraine war. Yes they probably would have still been very wrong. So what? Tell me who has been universally right? Many / most economists thought inflation was transitory.
And I underestimated the lag effects on unemployment. Probably will be a year out. But directionally correct, or you disagree? If so, why?
And do you think my house price calls will be wrong? And my calls on a residential construction slump? ( noting hardly any one has ben talking about it over the past 2 years)
It seems like I rile you up. Maybe you dislike the fact many of my calls have been so good (let’s not forget my late ‘21 calls on the sharemarket).
I like riling up status quo property fiends like yourself. The status quo and people like you have so much to answer for in creating this shambles of an economic situation.
Just putting it out there but Id say the resi construction slump has been one of the most obvious outcomes out of this for most of us.
Inflate or bust. Bust collapses the financial sector (white collar), which we don't need to survive. Inflation kills the productive sector (blue collar), slowly, painfully, that we need to survive. I choose bust, bring it on.
Heard a podcast from the Economist where the speakers brought up the Auckland property bubble as a "great" example of monetary policy gone rogue.
I found it hard to disagree with the statement that throwing cheap money on a lacklustre economy is likely to propel asset speculation. Doesn't take a genius to put that together but our fiscal policymakers still have their foot firmly pressed down on the accelerator.
The Everything Bubble will burst, but it won't reinflate in the decade ahead due to a) the retiring Baby Boomer generation, and b) the decline in birthrates in both the East and West.
Hi everyone,
I'm interested in buying gold, I have never bought gold before. Does any reader have experience buying/owning/selling gold?
What's the best way to buy gold in NZ?
Thanks
No experience yet but was also interested so I had looked into this earlier. NZ Mint will sell you bullion at a slight premium if you want to purchase physical locally. You can also purchase through Perth Mint where you'll get a slightly better rate on the gold. Both of these crowds offer secure storage for a fee if that's what you're after.
Of course they do.
Next thing you know, they'll be lending out proxy on it.
More proxy that the gold they hold, but who will know?
It works out well, for a while.....
Indeed. All sorts of 'owners' looking to verify their off site holdings at the moment.
Most gold is actually paper gold. It is an IOU pegged to the price of gold. There have been concerns in the past the the paper gold market may become disconnected from the real gold market. But it hasn't happened yet. Old article but sort of relevant.
https://jessescrossroadscafe.blogspot.com/2015/09/bullion-bank-apologis…
Thank you all for your comments, much appreciated. I suppose the first question to answer is:
1) buy physical gold, which begs the question of where to store it?
2) buy shares in gold, with the question is the company issuing the shares strong/ enough to withstand a market crash?
It seems both questions come down to security of tenure?
The ASX is full of gold mining companies, some are making great profits and paying strong returns out every 6 to 12 months.
Things to sift out:
1. Cost to mine each ounce. AISC per ounce.
2. Life of mine.
3. Management experience and quality.
4. Dividend policy.
5. Sovereign risk. (USA and Aussie are best) Send you money offshore also diversifies your "NZ risk"
Assess the other risks yourself and make the call.
Don't buy it from The Markets - could end up being a millstone around your neck: https://www.ft.com/content/a8c4d8d5-7c81-4c54-a90a-9f3f60d1bdd2
This guy has been in the gold market for many years and has some great advice
https://www.youtube.com/watch?v=Olnwt3Crj1k&list=PL7vUOWh5dtHN0HL-ckjHL…
Get yourself a pistol safe and bolt it to the wall and floor.
Just be careful if your house floods or falls down a bank.
Most gold is actually paper gold.
There is paper gold and there is paper gold. For ex, any gold ETF owned by the investment banks like JPM is bound to be rehypothecated. For ex, GLD. If everyone claimed their physical it simply wouldn't exist.
I own paper gold through the Perth Mint (PMGOLD) and I'm quite comfortable with it. Only at Armageddon will I know if Perth Mint has been playing silly buggers as people queue to redeem their paper for physical. What's more, PMGOLD is guaranteed by the WA Govt. OK sure, we can't trust any govt, but it's not the federal govt and WA has far more to lose. Compared to JPM, the audits of gold at Perth Mint are more transparent. That being said, unless the gold is in your hot little hand, it isn't really yours.
You probably already have one, but in case you don't, the price and installation cost of the safe might decide if it's worth it to you. You'll need one that weighs at least 125k (bigger is better with safes) to deter anyone looking to move it whilst you're at Countdown.
Or, just set the safe in concrete. Tends to slow removal efforts.
I use NZ gold merchants, they are good because you can buy smaller amounts, another company I used put the minimum purchase up too high for me. I have set up a Perth mint account, but haven’t used it. My plan it to put aside a bit each month as a way to hedge inflation, but not enough to panic if gold doesn’t work out in the long run.
Thanks HSL, have you also sold some of your gold? If so was it easy to do? Do you feel comfortable that NZ Gold merchants is a strong enough company to survive tough times?
Only buy physical gold, gold certificates are just that. A piece of paper with a few words on it. Like a fiat currency.
Thanks, where do you store your physical gold? In a safe at home? What about theft? Fire?
Sounds like your provisioning the financial doomsday bunker Yvil........Good to see you considering the growing and growling bear market of many assets.
The gogold team will help you out. Consider this though, holding physical PMs dont payout a cent. Silver has better prospects imho and no where near its peak, gold is near its peak. Good doorstops too.
Best exposure imho is in the booming Aussie gold producing stocks.......Ive had 27% dividends return over the last 2 years with one particularly profitable smalltime miner and its set to increase with both production and the booming gold price. I hold a few on the ASX. Consider looking there.
Thanks NZ Gecko, I'll look into Gogold.
Paint silver doorstops black.
and what was the dividend returns on your worst gold stockholding?
Good question. Some have zero dividends currently, as they are holding mining leases or exploring for more PMs or in the spending stage on developments.
A zero dividend payer that I currently hold is this:
Investigator Resources - Home (investres.com.au)
IVR share price and company information for ASX:IVR
INVESTIGATOR RESOURCES LTD IVR(ASX) - ASX Share Price & News | HotCopper Forum
IVR It is on the more speculative end of the shares scale, yet they hold a massive inground silver resource.
You cannot expect a 36% return every day or even every year, but I got a 36% share price rise yesterday.
IMHO this beats any years dividend!!!
I don't suggest anyone buys or take any stock as a recommendation - do your own research!
Good question. Some have zero dividends currently, as they are holding mining leases or exploring for more PMs or in the spending stage on developments.
Pretty speccy Gecks and not particularly liquid.
I'm boring as and only holding GDX at present (used to own Oceana but it's a pig; its directors are shonky; and the company has relisted on Toronto Stock Exchange from ASX).
My watchlist in the space includes Evolution (no brainer), Northern Star, Silver Lake Resources. Not keeping up.
Yes as I said its a speccy.......but a great trading stock with big swings, somewhat underpinned by inground resource and moves wildly with the silver price.
I suggest Yvil that if you buy gold, buy real actual gold. Something you can carry home in your pocket (or wheelbarrow).
That's it's usefulness. Real gold is one of the few portable things that are under your complete control. ie:. Not subject to the control of somebody else's keyboard.
Don't buy proxy's etc.
Thanks KH. The problem I see is that if I can carry it to my home, someone else can carry it out of my home...
Safe deposit box? Are they actually available?
I don't anticipate a problem in New Zealand. But some places at some time you could live it would be a real solution to dig them up from the garden, conceal your coins in your person (think about it) and run through the night to the border.
Easy to take overseas as well if you have to leave in a hurry...??
a la Fujimore’s exit from Peru?
Baywatch, I sense sarcasm and cynicism in your posts above and below, why is that?
by Baywatch | 6th Apr 23, 10:23am
Just be careful if your house floods or falls down a bank.
Buying gold is easy ..its selling that's the hard part..(from experience...delays and large ticket clipping)
I’ve used MyGold to buy physical silver. The sell gold bullion from all the reputable mints also. Always been impressed with them.
Thanks Albert.
The gold I own I purchased at gogold.co.nz. Just round the corner from work so was easy to pop in to collect.
Thanks Pragmatist, are you comfortable with holding physical gold?
Yeah, I only have a few ounces, If i'm carrying my leather wallet I often have one in my back pocket.
Mistook a one ounce gold coin for a $2 coin and almost threw it into a charity bucket once, noticed just before I launched it at the bucket. Don't do that, could be the most expensive Bunnings sausage you ever buy.
LOL
I live in ChCh and used Morris and Watson. Check out their website for contact details.
Thanks Edward.
Are you Edward Diego from GP Forums?
Hi Yvil,
I've never invested in gold but read quite a few cases about gold investment at law school. Even in some situations where investors thought they had bought a 'separate pile of gold' which was being held in a vault somewhere, the companies they bought the gold from was not actually managing it as they were contractually obliged to. So when an insolvency event occurred, the investors ended up having to fight with the liquidators and amongst themselves. I guess the key thing to do your research but know that there is still risk even if you think you have found something which is 'risk free'.
Bullion is readily bought from either Morris and Watson or Regal Castings (they are the 2 principle suppliers to the jewellery trade, but now also sell a variety of bullion bars, and they will sell to the public on contract). Their in house bars (stamped with their mark), are more cost effective than buying coins etc. They will buy back at spot price. Both are well established companies (who are by no means dependent solely on the bullion trade, so they aren't about to fall over). They use a mixture of recycled and new gold (sourced in NZ and Aus) to make their bullion. They send out insured packages via NZPost.
Hey Yvil
I've used "NZ Mint" in the past for Silver bullion (physical) which I store in a safe (attached / bolted / hidden) - more as a novelty to show the kids than any real attempt to diversify.
Funnily, was delivered by courier to my work in a standard NZ Post courier bag (no packaging, wrapping etc), which was somewhat unexpected! Started some good conversations though...
Thanks Llama, KoW and Duncan!
Going to be an interesting few months. Downsizing from three cars to one, spending some minor money on minor tweaks (wallbox charger for EV, vertical freezer so we can scale meals and keep more leftovers), getting ourselves into a position to dig-in and just grind through the next year on what is essentially a lockdown budget. Many households will be doing likewise. We'll need that cash available for offsetting when our loans come off fixed.
The sad reality is that with food inflation running at over 10%, we're already trying to see what we can eat less of. It's depressing because we want to keep eating things like vegetables but a formerly $120 shop pre-covid is now a $220 shop, and that's before you take shrinkflation into account - so you're actually getting less, in many cases; as well as a trip to a fruit store on top of that.
There in lies the guts of the problem. Folk are spending more to buy less basics and essentials, an inflationary spiral heading for a very hard landing.
I guess the 2023 version of 'Fortress New Zealand' is households protecting themselves from dysfunctional governments and gormless financial institutions.
It was just the system - the whole thing was temporary.
Money was a proxy for real stuff (like food) but there's too much proxy now; it is worthwhile cutting out the middle stage and growing your own food.
Winter greens, organise a glasshouse if you live south, get ready for spring planting; it's easy, satisfying, and you know where it's come from. If you haven't got growing space, there's always someone close by who has an unused back yard; offer to share the produce as rent. Too easy.
That and energy-efficientising your house; energy will never be cheaper, regardless of finger-pointing.
That's going to be my next step, PDK. Sorting out elevated planter boxes that we can all tend to as a family once we're in the house and settled. Vege beds are hard work and keeping animals out of them is a problem unless you want to deal with netting. I'd rather build elevated enclosures I can move around in the event of severe weather and integrate some irrigation with a hose fitting arrangement that I can just plug in. There are some retail solutions but they are incredibly expensive.
I may still go down the garden bed route for things kumara if I can set aside enough space to make growing it worth it. At $11 a kilo at the supermarket (people freaked out at $8 a kg and here we are in double digits with nary a wimper), but for lettuce greens which are hard to even find in supermarkets at the moment, let alone afford, I'll probably stick with elevated planters.
You can do quite well just constructing rectangles out of say 12 x 2 to whatever size for any area available but if so make sure you put a couple of layers of good weed mat on the bottom which we haven’t got. All our good work conditioning and fertilising the soil gets matted & sucked out by the neighbours blasted willow and other tree roots.
Even weedmat doesn't hold invasive roots at bay for long.
Case around for a 2nd-hand glasshouse - often folk sell them with panes missing which would be expensive to replicate. Just cover the south side with something else (the sun never enters the south side) and use the glass where it's needed. Build a raised-bed either side, with a walkway down the middle (saves your back) and plonk the glasshouse on top of it (gives you headroom).
I've got one which is 8 metres long, made from the remnants of 4 old glasshouses; works a treat.
For $1500-$2000 you could get a basic second-hand hunting setup. Get meat, get exercise and fight climate change (by killing methane producing ungulates) all at the same time.
Instead of netting to keep diggers off I carefully lay prunings from shrubs around my plants.
Do you have space for a garden? Some friends have gone all in and now have a abundance of vege from a small plot...does take manual labor however which seems to be a dying skill?
Snap
:)
Good luck GV, going from 3 cars to 1 is a great move, one that will surprise about how much you will save!
As much a safety thing as anything else. One is a two door Euro performance hatch that pre-dates the arrival of GV 27 Jnr, the other is a Korean four door hatch which runs of the smell of an oily rag. We'll be just using a new-shape Leaf which will double as a plaything for hobby purposes as I try to upgrade it with better charging, and maybe even an LFP battery down the line so we can get our money's worth out of it. But going from 2x ICE and 1 EV to just the EV will drastically shorten the payback period on the EV.
Get yourself an eBike for the odd occasion when you need to drop the kids off at sport but the other one needs the EV to get some paving slabs from bunnings.
We are more the opposite, the car is used on the odd occasion that someone else needs the eBike.
Our daily runabout is using about 30 cents of electricity per month.
Well I actually feel sorry for a lot of businesses, hospitals, trades, etc which will effect us all in some form. Those young professionals who are trying to get ahead in life see little, to no future in NZ and are leaving. We have major shortages of healthcare workers and other workers in professional organisations. Its ok for those of us who are a bit older, have had a house and career for a while, but young builders (who's industry is about to go belly up I suspect) and other trades will see little hope. It's a real shame we are heading down this path. Immigrants are'nt exactly flocking to NZ to fill the gap either, maybe NZ just not that attractive to a lot of them anymore.
Net migration inflows have soared from -16000 seven months ago to +33,000.
National and especially ACT are keen on cranking up immigration to suppress wages and increase sales for their business donors. Couple that with a drastic reduction in new house builds and I arrive at the conclusion rental properties are going to get hard to find and rents will shoot up in the coming years.
Not really ok for older folks who drain more of the social security budget - hospitals GP surgeries and rest homes are chronically short staffed which will only get worse.
Reminds me of the fable about the grasshopper and the ants.
So practically no one picked the 50bp increase, including bank economists but Robbo assures us that this increase has already been "factored in" by banks and rates will not rise? How is that possible and if so what's the point?
Consumer spending is up so it seems many consumers are not overly concerned. The whole thing seems very out of whack.
Yeah I found myself in the unfortunate circumstance of watching Seven Sharp last night, their "expert" claimed that this was simultaneously both a surprise to bank economists and already priced in.
The RBNZ has been doing their best for over a year now to signal that we need to stop consuming and borrowing as much.
People have ignored their advice, the Herald and property spruikers have done their best to downplay the housing crash and encourage people to be optimistic about future growth.
The RBNZ's only option is to double down until the message gets through that we're in a nasty spot. The comments section yesterday was full of anger and denial and blame from those that are now coming to terms with the reality of the situation. This understanding will not flow through to the wider population for a while yet.
I assume the 50 point increase was done in part to actually create a newsworthy story that would be picked up by the MSM in an effort to try once again get the message out there. A 25 point increase would have largely been ignored, the 50 point increase is at least making front page news.
Yesterday was the first time there has been any discussion in my office about interest rates and what they mean. Previously it was about how much house prices were increasing, where a good place to buy was, all the Reno's that people were doing or planning to do, where to get a bargain investment property...
Good work RBNZ.
One assumes you haven't lived through an over tightening downturn. This is what we are heading for now. The RBNZ started too late and is now over reacting based on lagging indicators. So now going too high based on old data, even when indicators are pointing their job is having the desired effect (mortgage applications have fallen off a cliff, house prices are collapsing, inflation adjusted spending is down, unemployment is rising). Their job should be to hold as the current indicators are as a result of last years OCR rises, not current actions.
They are terrible at their job and have consistently made the wrong decisions at the wrong times in the past 10-15 years, both getting us into this mess, now getting us out of it. Its hard to believe people can't see this, they are using the same incorrect methodology they used to get us into this situation to try and get us out. If their decisions have been wrong in the past and they aren't changing their methodology for making decisions, they will continue to make the wrong decisions. Just because its in a different direction, doesn't make them less wrong, it will just have a different outcome (much higher unemployment, much deeper recession etc).
Theres a major offshore force you need to keep in mind. If we lose NZD power, we simply import inflation... Its either engineer a recession or maintain inflation, and I argue continued inflation is much worse in the long run. Blunt tools render blunt results though I agree.
Agree and I see the RBNZ in addition to controlling inflation has to completely and utterly destroy the housing market in such a way that housing it is never seen as a get rich quick scheme for those with access to credit. The housing market has been the largest factor driving New Zealand's poor productivity and increasing inequality over the last decades. It needs to be hamstrung once it is destroyed so it can never again rise from the ashes and cause a similar level of devastation.
Agreed - but what else is there?
Bill English made that primary mistake, talking about the 'productive economy'. That assumed consumption of the production. That consumption had to be done somewhere, and that somewhere had to be the shell and contents of houses. Nothing else societally, scales enough.
They should have taught physics as part of Econ.
They should have taught physics as part of Econ
Absolutely right. Idiots in the Cabinet still believe international tourism could rescue our economy. Plot international tourism activity (NZ and global) chart on the global price of crude oil and you will notice a pattern.
Dinosaur juice makes up a huge chunk of the cost of international travel, particularly in case of isolated nations such as NZ.
Asset price collateral eroding in value
Meaning less to borrow against
Too much risk taken now had downside payments to be suffered. Cannot postpone recessions and not expect consequences. Business cycle is credit driven despite what the Chicago school believe
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.