Here's our summary of key economic events overnight that affect New Zealand, with news the latest IMF forecasts show that the global economy is 'deteriorating'.
First up, American retail sales sagged to a weak +1.5% more than year ago levels in last week's same-store trading, far less than the inflation effect.
All American eyes are on tomorrow's CPI data which is expected to come in lower at 5.2% year-on-year and at an annualised 2.5% rate from February. If that is the actual result, it will signal good progress in their fight against inflation.
In China, consumer inflation has disappeared altogether. March prices were +0.7% higher than year ago levels and an 18 month low. But they are almost -4% lower than February on an annualised rate basis. That is the second consecutive month of falls. Deflation beckons.
Deflation is already here for Chinese factories. Their producer prices fell -2.5% from year-ago levels, the sixth straight month of retreats. In fact, the March fall from February ran at a -5% annualised rate. It will be no fun making stuff in China these days. The more orders they get, the tougher it will be.
China's new yuan lending rose strongly in March from February, but only to the expected levels. The rise wasn't as much as in January, or even January 2022, but it was the largest March rise ever and by some way. But new lending is one thing. Chinese borrowers are applying savers instincts, paying of their mortgages very much faster so the year-on-year rises are actually quite tiny. Beijing's efforts to juice things up with more debt is undermined by borrowers paying it off very much faster.
Meanwhile, Taiwanese exports fell faster in March than February, and fell faster than expected. Demand from China is the main cause. This is actually quite a grim report, although we should remember than many large Taiwanese companies have capacity outside the country, including in China and the US, like TSMC and Foxconn.
EU retail sales fell in March from year-ago levels and from month-ago levels too, although not by as much as expected. But this data just accentuates the steady decline in retail sales volumes that started at the start on 2022.
In Australia, the RBA pause on its rate hiking program has generated a substantial bump in Australian consumer sentiment, according to a recent survey. The biggest jump was by those who have mortgages. But the new improved level is still low, and Westpac says 2023 will still be lackluster.
On the business front, firms report current trading conditions are good, but confidence isn't, even if it didn't move any lower in March.
As earlier signaled, the IMF today revised its global growth forecasts lower to +2.8% from +2.9% for 2023 and to +3% from +3.1% for 2024, citing tight policy stances needed to bring down inflation, the fallout from the recent deterioration in financial conditions, the ongoing war in Ukraine, and growing geo-economic fragmentation. In its April World Economic Outlook report, they also noted the uncertainty from the recent financial sector turmoil. They also said a hard landing is likely if inflation can't be beaten. They are not optimistic about New Zealand's prospects although they don't see us falling into recession. They forecast +1.1% growth this year which will fall to a meagre +0.8% next year. Australia is expected to grow +1.8% this year and +1.7% next. All these levels are half of the 2022 expansions.
The UST 10yr yield starts today at 3.43%, and up +1 bp. The UST 2-10 rate curve is slightly more inverted at -63 bps. Their 1-5 curve inversion is now at -116 bps and unchanged. And their 30 day-10yr curve is less inverted at -75 bps. The Australian ten year bond is up +9 bps at 3.27%. The China Govt ten year bond is down -3 bps at 2.84%. And the New Zealand Govt ten year is up +4 bps at 4.01%.
On Wall Street, the S&P500 is up +0.3% near the end of its Tuesday trading session. European markets were all up about +0.5% in their post-Easter trading sessions. Tokyo ended its Tuesday up +1.1%. Hong Kong was up almost +0.8%. But Shanghai slipped -0.1% yesterday. The ASX200 ended its post-Easter session up a strong +1.3% but the NZX50 didn't get that boost, ending unchanged.
The price of gold is at US$2005/oz and up +US$17 from this time yesterday.
And oil prices are up +US$1.50 USc at just under US$81.50/bbl in the US. The international Brent price is little-changed however at just over US$85/bbl.
The Kiwi dollar is again softer against the USD and now at 61.9 USc and its lowest in a month. Against the Aussie we are have fallen -½c to 93.1 AUc. Against the euro we have fallen almost -½c too, now at 56.8 euro cents. That means the TWI-5 is at 69.9 and down -40 bps from this time yesterday and also a one month low.
The bitcoin price is higher again today, now at US$30,228 and up another +3.6% from yesterday. Volatility over the past 24 hours has been moderate at +/- 2.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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59 Comments
Inflation disappearing, recessions looming - time for some more OCR rises?
The only way inflation is disappearing is through creative statistics. From personal observation it’s accelerating
I guess we will find out in about 4 months time thanks to our very delayed statistics.
20th April for Q1
US cpi out overnight tonight
Construction services and house prices seem to be deflating rapidly - but luckily house prices arent included in the inflation figures :)
Everything else still seems to be booming and prices are rising
Badly skewed math didnt help in the boom and unlikely to hèlp in the bust.
How separating house prices helps i cant fathom
Erm, the price of new housing is included in the statistics. The price of land is not. This is because land is not a good that is 'created' (with few exceptions) and therefore inflationary and deflationary impulses in land prices don't merit the same attention. It's mainly because regardless of what the price of land is, across the whole economy the consumption stays the same. Production and consumption of other G&S however, is impacted by inflationary and deflationary impulses. If the main aim of CPI statistics is to inform monetary policy (which it pretty much is) including land would simply muddy the waters.
Perhaps it would be useful to think how the consumption of land vs other goods would change if NZ entered an inflationary or deflationary spiral.
This is an interesting point.
However surely there should be some debate here - as the astronomical rise in house prices must to a large extent be due to increases in the cost of land which is dictated by demand and possibly price controlled to an extent.. In some ways similarly to other finite resources like oil and water?
I am def not bad at math - and really dont understand the argument to leave some specific costs out on some biased basis. When they are so important.
Globally Covid has certainly made a fine mess hugely finer hasn’t it. It’s genesis was from within China and now it seems China might well be the greatest sufferer of consequences. Guess there’s some poetic justice to that?
And it seems they are intent on providing the distraction most would prefer to avoid. They are exercising an encirclement of Taiwan. They have to be very confident that the Japanese, Koreans and the Americans will stay out of it. But the Japanese, and the Koreans will likely demand American assistance. China's occupation of Formosa will increase the territorial threat to both Japan and the Philippines, and the Koreans will likely see it as one too.
An invasion of Taiwan would be suicidal. At the very least, it would be economically suicidal for them. If the USA got involved then the impacts would of course be much wider than economic.
Given this, I had always thought rationality would win out. Having seen Mr Putin’s imperial delusion at play, and Mr Xi demonstrating some similar behaviour and now effectively holding ultimate singular power in the CCP, I am not so sure.
History has shown that rationality often loses out when it comes to horrid autocrats.
"I had always thought rationality would win out." This has historically been the most common mistake by world leaders. Rationality I guess is a little like sanity, being a very much relative state. But I would have to admit that I too hoped my version of rationality/sanity would prevail.
But I see Xi making the same error. It almost looks like that he could be trying to emulate Reagan, forcing an arms race that would economically collapse Taiwan, making China the winner by default. Sun Tzu says you have to understand your enemy, but China clearly believes like Putin that the US is a paper tiger. Ukraine may have reinforced that belief. While the US may have been happy to let Europe deal with Ukraine, with just some relatively minor support from them, they will fully appreciate that the same posture cannot work in the Pacific. There will be a lot happening that we don't know about. I'd bet there are a few US, Korean and Japanese Hunter/Killer subs marking Chinese targets currently. Don't bet that the CCP will baulk at throwing their youth into the meat grinder of that war. This is not about the Chinese people, it is about the power and prestige of the CCP.
We are perfecting ways to wipe ourselves out.
Would Biden defend Taiwan if he got a phone call to say the Poseidons were loose and awaiting instructions off the California coast?
Murray86. The value of US military aid to Ukraine far outstrips any other country, hardly 'minor'. War against Taiwan wouldn't be a 'meat grinder' attritional conflict in the way European ones were/are, it'd be more a do or die one shot only largely naval affair. The 130KM wide strait between China and Taiwan is a formidable barrier and there'd be a long warning and preparation period as China accumulated its substantial logistic support arrangements. Seaborne invasions are notoriously high risk. Taiwan is no degraded Ukraine relying on clapped out Russian equipment, its 200,000 strong military is very well equipped, including with the latest US missile systems. In addition to its strong military capacity in Japan and Korea the US carrier fleet has fearsome power projection capability that the Chinese are decades away from matching. It'd be a monstrously risky endeavour for Xi to attempt a physical invasion.
Remember reading Janes as to how the Taiwanese had piped every potential beachhead so as to set the sea on fire with oil. That was in the 1950s. Might still be there but there will be too, mines laid for ready release and as well another seventy years to embrace other technological advances in defence capability. No surprise attack, satellite surveillance and fortified islands on the approaches. There is only a small seasonal window of opportunity to embark across the strait and surrounds.The marines had plenty of seaboard landings in WW2, sufficient to evidence how treacherous and unpredictable they were then. Airborne means a fantastic number of casualties, including civilian. Hell after Crete, a similar hilly terrain, even Hitler forbad any further paratrooper actions given the extreme casualties. This is a densely populated island, a missile attack will cause huge civilian casualties and the Taiwanese have enough of their own to reciprocate and besides, no nation has ever been bombed into submission outside of nukes being employed. On the other hand an enforced embargo is a consideration. Enforcement of that though will be somewhat provocative in terms of accepted international waters.
An American trade embargo is a certainty. Probably most of Europe too. If this extended to a maritime blockade/seizure of Chinese shipping and fishing boats then Xi is in a world of hurt. Every Chinese leader is well aware of the way historic regional unrest repeatedly weakened and tore China apart. With the Chinese population now much better educated, no longer an agrarian peasant society and these days heavily concentrated in Eastern cities, this astute calculating man will be well aware of the potential unrest of the economic catastrophe for his people which a blockade would usher in. Unlike Russia, China is far from self sufficient in resources, with this reality being a significant handbrake on its imperial ambitions.
Foxy's comment, plus sooner or later China will need to put troops on the ground. There will still be the large attritional outcomes for their fleet which will cost a lot in terms of lives as well as material, but the meat grinder will begin when they try to put troops on the ground. As Foxy said, the Taiwanese are very well prepared, not matter how superior the Chinese may think they are. But consider that you are presenting a rational perspective. do the Chinese see it that way?
Yes, national identity fictions such as Lebensraum and the Holy Russian motherland appear rational to their proponents. Superficially, Chinese ambitions to fold Taiwan into the mainland have an element of logic, provided the intervening 80 years since they were last one state can be magically disregarded. Curiously Tibet is never mentioned by China when she is advocating for a return to what existed earlier last century. But your question is a good one. Xi has spent his life carefully considering and manoeuvring. His rise to power has been achieved by calculated increments. It is hard to imagine him irrationally launching a grand strike against his island neighbour being acutely aware as he will be, of the monstrous risks involved. The greater risk I suspect is unintended escalation resulting from a mistake by his military. On that , witness the mighty American machine uncharacteristically back pedalling at pace after some incompetent ruskie pilot clipped a drone over the Black Sea - a powerful display of the sensitivity to escalation risks which we can only hope the brylcream comrade in Beijing shares.
There are softer targets in much easier reach. Mongolia is increasingly being propositioned with “cultural reform.” It was not all that long ago part of China as Ukraine was part of Russia. Interesting dynamic there though because in the 1930s Stalin took hold there so much so that he was prepared to let Zhukov cut his teeth and give the Japanese a severe beating in 1939. Russia now though has rather weakened itself.
Not so sure this comparatively small scale clash really was a 'severe beating' of the Japanese army. With most Japanese forces bogged down in fighting the Chinese the imperial high command was most reluctant to fully engage the Soviets and their young commander, Zhukov. The main Japanese force he was up against was effectively a border defence and reconnaissance force, one of the Kwangtung army's weakest links. Tokyo sought to keep this conflict as local as possible and even pulled back from exploiting what minor advances their forces made in this skirmish they couldn't win and didn't want. Soviet propaganda of course presented it as a notable victory.
There weren’t many Japanese soldiers that survived. Due testament to their fanatical serf like devotion to the Emperor. More than anything else the Russians had heavy armour and plenty of it, the Japanese light and thinly spread.
"Globally Covid has certainly made a fine mess hugely finer"
I would suggest it's the governments (over)reaction to Covid which has created the mess, i.e. lockdowns and shut borders.
"What storm"?...way to early for your suggestions Yvil
Covid kills the weak (obese, diabetic) and vulnerable. Any virus that kills a host will not have a chance to survive. Covid never made the mess, government controlled Big Pharma experts made the mess. Nobody died that was not gonna die.
Its quite depressing, the S&P just keeps climbing. What it should be doing is plummeting or range trading. This can't be allowed to spread or ITGUYs short holdings are toast
(DP)
Its ok..he had some BTC in that holding..
Whew, one offsets the other
Rising BTC usually signals risk on, better short cover
The New York Times has identified 34 operations known as Bitcoin mines in the U.S., all of which are putting immense pressure on the power grid and creating costs for everyone around them, most of whom have nothing to do with Bitcoin. https://nyti.ms/3mfvvdL Link
Are the IMF statistics useful?
always seem to be adjusting after the fact
Looks I'm going to pay under $2K all up for an EV charger fitted 7m from a switchboard, including the charger itself which I sourced separately specifically for certain reasons (RFID card support so I'm not reliant on apps and Wifi).
Hardly the $4K or so I used to see quoted on some news articles for installing a simple wall unit inside a garage literally next to the switch board.
Got a link for useful info on that GV. ?
Wall unit is a 32amp type 2 socketed (for maximum futureproofing as we will probably move from a Leaf to something with a Type 2 port at some point) from Drive EV in Taupo - it's an EV Power unit with load balancing, cost was around $875 from memory, looks to be closer to $900 now through EV Power. It's a pretty common global unit by the look of it, sold in other markets with swappable face plates for matching house exterior colours. I'm not trying to hide mine though, it's a selling point.
Cost for install was circa $1,100 but the distance from the board is the main driver, if it was closer it would be less but I wanted the unit outside which means the wiring has to be in a conduit of some sort, so more cost. But this is the optimum position for a charger for us and I was happy to pay extra to get it, because it gives me both rear flap access for cars reversed in and front access for our current Leaf if we just drive straight into the driveway, or back it into the garage. Win win.
Only thing I'm not getting vs. other options is solar capability but I can buy a clip for possibly fitting later, although the house itself won't really suit solar (unless flexible solar panels reach the point you can pull them like you would a sun-shade).
$1100 for some wire, polyethylene and a circuit breaker? I'm pushing my son towards an Electrical Apprenticeship. Money for jam.
I mean... you should do that anyway. But yes, that's pretty much what I'm getting. But I can assure you it will be a damn sight tidier than if I did it, possibly a bit less lethal as well.
I hear the PM now considers me a dog whistling racist because I oppose the original 3 waters issues of stripping the water assets from local government and splitting the water resources into 4 entities and basically controlled by central government.
Co-governance only came out after others looked closely into the 4 entities being set up, the vast majority of us were unaware of co-governance and possibly still do not fully understand the concept even now, including many Maori (who do not trust the Maori Elite in Wellington)
So Mr Hipkins, to me, you are the dog whistler racist by raising the issue, not me.
HIpkins interviewed went to great lengths to sympathise with Minister Mahuta but at no point did he mention, nor the interviewer ask, about her clandestine attempt, in the dead of night, to entrench the three waters legislation. This was calculated, a covert attempt, with the full cooperation of the Greens, and in defiance of the then Prime Minister and her cabinet. In essence it subverted recognised parliamentary protocol and undermined democracy itself. But obviously to PM Hipkins, that’s all good, isn’t it, and quite frankly, that sucks!
Such a weird argument regarding ownership. Are you not a citizen of NZ and therefore retain ownership? "Central Government" means, you and me, the people own it. Yes, it might be gone from local control though locals will still control it anyway, given they live there and most likely will be local input into local running anyway?
Sure, complain that your region, who maybe invests in water resources more than others, is being forced to "bail out" others, but shouldn't we help our neighbours if we are better at doing stuff than them?
Seriously ? Which part of "unelected racist control" in Te Mana O Te Wai don't you understand ?
“Whoever gets to write Te Mana o te Wai statements gets control of water, land, planning rules and regulations, land use… TMoTW statements will cover every pipe, river, creek, farm pond or fresh water body. Actively excluding around 85 per cent of New Zealand’s people from engaging in a process which affects everyone/every square inch of the land and the salt water many miles out to sea deserves closer examination.
“If Te Mana o te Wai is such an important principle then surely everyone (ngā tāngata katoa) should be able to be involved. So many parts of society actively excluded from participating is unacceptable and unjustifiable.”
https://pointofordernz.wordpress.com/2023/04/07/graham-adams-what-hipki…
Yes, this part should probably be addressed. However given our current state of affairs and the system we have been operating to get here (capitalist extractive, socialising the costs): https://www.stuff.co.nz/environment/300851641/45-of-rivers-unswimmable-…
Maybe we would be better off following a different route, where water resources are looked after for future generations instead of protecting corporate profits?
Ownership, functionally, is about control. Having centrally appointed agencies in charge of infrastructure for water across the entire country when the state of our roads, rail and other vital links suggests that capability does not exist or does not matter in NZ is a huge step backwards, especially in places like Auckland which has had water meters and been trying to deal with a huge population increase foisted on it by Wellington government departments, who don't deal with the fallout of hugely exploding city populations because no sane person actually wants to live in Wellington in the first place.
That alone makes it a terrible idea. Lots of people thought performance of regional water entities was bad already, but no one seems to want to consider the huge potential for them to get even worse. There is nothing based on our current declining levels of state service provision to suggest things might improve at all.
Looks like a 3 Waters "rebrand" is imminent ... KiwiWater, anybody? (and apparently the co-governance aspect won't be going)
Haha, gold! Sorry I mean Kiwigold!
The classic Inflation hedge, NZ$/Gold at another all-time high this morning.
Taken in two parts - that's offshore prices up (the cost of our imports up), two thirds of it due to a deteriorating price of the NZ$/US$.
How long do we think the RBNZ tolerate that to going on, given the import reliant nature of our economy? Can't we see what will happen if the RBNZ fail to keep raising the OCR, let alone what will happen if they cut it?
NZD down across the board. Looks like we are witnessing a broad move since the rbnz announcement which should have pushed us higher
It’s been up and down within a small range over the past 6 months. I wouldn’t read too much into this latest oscillation.
My current thought is the NZD might plummet sometime early/ mid next year. Our economy could well slump much more than many others and force the RBNZ’s hand in cutting the OCR more aggressively than others.
If they cut OCR more aggressively than others the NZD will crash making inflation worse. RBNZ just falls into line with FED’s narrative, expect more of the same the world now knows lowing rates to ridiculous levels just doesn’t work and just makes huge bubbles in financial systems this time it is way to big to print themselves out of it. If the money system keeps going it will take years to recover.
Which is not good, and at the very least will be of considerable concern to the RBNZ.
They must be in a meeting right now and the topic de jour will be "If 5.75% won't be enough, how much will be?"
"WHATEVER. IT. TAKES."
I've been hawkish throughout but I think RBNZ have belatedly taken sufficient steps to begin to slow inflation.
What do you think will happen to our OCR if the NZD falls and oil prices remain unchanged? (or are pushed higher by OPEC to keep a squeeze on us Westeners).
If high oil prices are correlated with high inflation as jfoe has mentioned then dropping the OCR might not help things too much.
My global economic indicator of choice (CHFNZD) hits close to all time highs again - the world thinks we are in for a bit of a collapse.
Hmmm, mine too!
The quarterly CPI numbers at the end of the month should offer us guidance on how we are doing at suppressing inflationary pressure.
Given the huge increases in the basics and overheads (insurance etc) a stable spend would reflect a huge drop-off in purchasing power and suggest there's some serious sacrifices elsewhere being made, not captured in any model. If anything the inflation numbers we're heading at the moment are a significant under-cooling. Card spending data is the key piece of context.
The RBNZ OCR rise seems to have had no sustained strengthening of our currency. In fact it has dropped in value.....chickens coming home to roost with our current account deficit?
Look at Australia, significantly lower OCR but running a trade surplus (and lower inflation). Their dollar strengthening against ours.
Economists will now be keeping a close eye on imported inflation - especially a potential double whammy if both oil supply (OPEC) and the NZ dollar decrease.
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