Here's our summary of key economic events overnight that affect New Zealand, with news that so long as labour markets stay positive, soft landings are the worst that is in store for 2023. The big global economies seem to be handling the unexpected bumps that get thrown up.
But first, American retail sales fell in March from February to be just +2.9% higher than year ago levels and far less than inflation's bite. It was a result that surprised analysts who expected a -0.4% month-on-month fall when they got -1.0%.
But other American indicators weren't so negative. Industrial production rose +0.4% in March from February to be +0.5% higher than year ago levels. This data is 'real' without inflation.
And consumer sentiment, as measured in the widely-watched University of Michigan survey rose too. That shift wasn't expected, but it was in both views of current conditions and expected future conditions. However, Americans apparently think inflation will rise (contrary to most other data that shows it falling).
Meanwhile, the leakage from deposits at US bank accounts, which fell sharply from the start of March (-US$400 bln or -2.3%) are stabilising in the April updates. But that masks big shifts from smaller banks to the majors, who are now reporting bumper profits. And too, big funds like Blackrock. During this time the Federal Reserve stepped in with more market support, suspending its tightening. Although over this past week, it has resumed the drawdown.
In Canada, their real estate industry is talking 'green shoots' as they enter their Spring selling season. After declining for 12 consecutive months, their national home price index rose +0.2% to C$709,000 (NZ$855,000) from February to March. Their market suffers from an unusually low number of listings available. But their much higher interest rates will make it challenging to build any sort of meaningful recovery.
Late yesterday, Singapore surprised analysts with an unexpectedly weak Q1-2023 GDP result, down -0.7% from the prior quarter. Actually the Q4-2022 result showed virtually no growth, so they are knocking on the door of 'recession'. Their year-on-year +2.1% rise in 2022 crashed to just +0.1% in Q1-2023 from Q1-2022.
The OECD is pointing out that that global labour markets remain very tight in developed countries. In February, the unemployment rate remained at its record low in the OECD (4.8%) and this is despite the Euro area still much higher (6.6%). The unemployment rate was stable or decreased in more than 70% of OECD countries, but close to its lowest level in only seven countries, including Canada, France, Germany, Japan, Australia and New Zealand. It remained stable in Canada at 5.0% in March 2023 for the fifth consecutive month, while it fell slightly to 3.5% in the United States.
The Economist is saying New Zealand is the ninth best place to do business in a list topped by Singapore. The US is fourth on this list. Australia doesn't make the top ten. China is noted because it has fallen sharply down the list.
The UST 10yr yield starts today at 3.51%, and up another +6 bps. The UST 2-10 rate curve is marginally more inverted at -58 bps. Their 1-5 curve inversion is now at -121 bps and marginally more inverted too. And their 30 day-10yr curve is now inverted at -73 bps. The Australian ten year bond is up +8 bps at 3.41%. The China Govt ten year bond is unchanged at 2.85%. And the New Zealand Govt ten year is up another +5 bps at 4.15%.
On Wall Street, the S&P500 was down -0.2% at the end of its Friday trading session and booked a net +1.3% weekly gain. European markets were all up about +0.5% in their overnight trading sessions. Tokyo ended its Friday up +1.2% to lock in a +3.0% weekly rise. Hong Kong was up +0.5% to rise +1.5% for the week. Shanghai recovered +0.6% yesterday but that only left it with a +0.2% weekly gain. The ASX200 ended its session up +0.5% yesterday, locking in a +1.7% weekly raise. And the NZX50 ended its Friday session down -0.4% to barely hold a weekly 'gain' of +0.1%.
The price of gold is at US$2005/oz and down -US$39 from this time yesterday. A week ago it was at US$2008/oz, so actually very little net change.
And oil prices are at just over US$82/bbl in the US. The international Brent price is just under US$86/bbl. Neither is any material change from yesterday. But a week ago these prices were US$1.50 lower so the net move up since then has been a modest +2% or less.
The Kiwi dollar is more than -1c lower against the USD and now at 62 USc. Against the Aussie we are have softened to 92.6 AUc. Against the euro we have fallen more than -½c, now at 56.5 euro cents. That means the TWI-5 is at 69.8 and now its lowest in almost six months.
The bitcoin price is again little-changed, still at US$30,324 and down a mere +0.4% from this time yesterday. But a week ago it was at US$27,924 sot it has been a major +8.6% move up from then. Volatility over the past 24 hours has remained low at +/- 1.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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12 Comments
Even though NZ is a bit of a bit player on the world stage of business it’s nonetheless gratifying that we can make the top ten at least, on one hit parade. Wonder though if that’s quite what our relative bureaucrats have had in mind and how they might react accordingly.
Generally those things measure the amount of corruption, judicial system transparency, ease of a non-national to open a company and a bank account, and some other things. So New Zealand should in theory rank well. China's "transformation" of Hong Kong changed public perception quite a lot.
A bit more of this wouldn't go amiss:
Why Bank of England is looking to bolster UK protections for savers
David Chaston seems cheerful and I agree.
"......with news that so long as labour markets stay positive, soft landings are the worst that is in store for 2023...."
I never got the reasoning that we had to be hard on the inhabitants in order to lift GDP. Why have a higher GDP with miserable inhabitants?
Quite right. Who would have thought that a recent German referendum would show that Germans, by a margin of 82% to 18%, would prefer to be warm, fed, and employed, instead of being cold, hungry, and unemployed. All democracies, especially our own, should be careful of looking after minorities when the vast majority of voters don't want them to.
March FOMC Minutes Reinforce How Bad They Are at Money
Even the hawks at the FOMC find themselves moved by events, coming closer and closer to grasping this. The official minutes from last month’s discussions contain this startling (to those only following the Fed) passage:
“If banking and financial conditions and their effects on macroeconomic conditions were to deteriorate more than assumed in the baseline, then the risks around the baseline would be skewed to the downside for both economic activity and inflation, particularly because historical recessions related to financial market problems tend to be more severe and persistent than average recessions.” [emphasis added]
Yellen moved from “the US economy is really strong” to “we might still achieve a soft landing” real quick. Link
Monthly Budget Review: March 2023
The federal budget deficit was $1.1 trillion in the first half of fiscal year 2023, CBO estimates—$430 billion more than the shortfall recorded during the same period last year—and consistent with projections CBO released in February.
So in summary... "not enough people have lost their jobs yet" is what we have underpinning things.
When businesses and jobs are lost, the RBNZ's get out of jail card is "we told you all to stop spending money".
For me, the biggest warning sign was the government paying companies to keep staff on in 2020 - essentially that's telling you that employees are going to become a huge liability in the coming years.
Paying companies to keep staff on, and shovelling money into property to keep landowners from losing money. Quite the welfarism.
What? Govt bridge funding companies so that we come out of the pandemic with the jobs and enterprise? How's that a huge liability?
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