Here's our summary of key economic events overnight that affect New Zealand, with news price pressures seem to be easing in most economies - will they in New Zealand?
But first today, American mortgage applications, which had been rising in recent weeks, fell back sharply last week in an unexpected reversal. It seems the recent rises did not indicate a recovery. They were down -9% from the prior week and down -36% from the same week a year ago. There was a minor rise in the benchmark 30 year fixed mortgage rate to 6.43% plus points, but it seems hard to assign the reason to that. But with rates well above year-ago levels and with most on very long contracts, there is little refinance incentive in this market.
The US Fed's April Beige Book reviews describe an economy that is just chugging along at a moderate pace, nothing spectacular but not really slowing either. Consumer spending was flat, car sales steady, but lending volumes and loan demand were noted as lower. Their labour market showed a softer pace of growth and layoffs were concentrated in just a few industries they observed. Price increases "appeared to be slowing" the report noted. This has all the hallmarks of describing a 'soft landing'.
Wall Street is awash in earnings reports that don't suggest their economy is failing. But ratings agencies are on track to cut the most US corporate bonds to junk since the early part of the pandemic, boosting funding costs for some companies just as economic growth is slowing. Apart from the pandemic jolt, 2023 is on track to be the toughest on bond rating downgrades since 2016, possibly even 2009.
Canadian producer prices didn't bounce in the way expected. In fact they were -1.8% lower in March than year-ago levels after February was +1.6% higher on the same basis. The price pressure is noticeably off for Canadian businesses.
Canada housing starts however fell sharply to just a 214,000 annual rate in March. Almost 240,000 were expected, the same level as February.
And more than 155,000 federal workers in Canada went on strike after wage talks with the Ottawa government failed.
In China, the way provincial institutions hide bad debts from property companies is getting some transparency. The financial engineering pushed the losses deeper away from view, but they are still there and building. Analysts are concerned they are now so concentrated and so large that their capacity to hide them is running out, and a financial earthquake is much closer for these zombie companies and assets.
And one of China's largest EV markets, Europe, is insisting EV batteries meet their broad carbon targets - and that is a major problem for Chinese battery makers. They can't at present. EV sales were a stunning bright-spot in China's March exports. It may be brief.
And we perhaps should also note that Tesla has again cut prices. This is the third time it has made major price reductions, and in the prior cases it resulted in sharply rising demand. It is a move that puts a hard squeeze on other EV makers.
British inflation stayed above +10% when a fall lower was expected. However it was a fall from February, back to January's level. Food prices are the culprit there. It has now been more than two years that British consumer prices have been rising at an above +10% rate. The March result compares with EU inflation that is running at +5.7% annual rate now.
In Australia , the Westpac-Melbourne Institute Leading Economic Index was almost flat from the prior month in March 2023. This isn't a good sign according to Westpac. "The index for March is now consistent with below-trend growth extending throughout the remainder of this year," said Westpac chief economist Bill Evans. "While we see the household sector at the center of this, slowdown in the components of the index is also highlighting the drag from dwelling construction and the slowdown in the world economy.”
Join us at 10:45am this morning where we will have full coverage of the local March CPI. Markets expect an annual rate of +7.1% and an annualised Q4-2022 to Q1-2023 rate of +6.8%. Variation from these levels will certainly have financial market implications.
The UST 10yr yield starts today at 3.60%, and up +2 bps from this time yesterday. The UST 2-10 rate curve is little-changed at -65 bps. Their 1-5 curve inversion is now at -109 bps and marginally less inverted again. But their 30 day-10yr curve is now inverted at -12 bps and a further substantial lowering. The Australian ten year bond is up +4 bps at 3.55%. The China Govt ten year bond is still at 2.85%. But the New Zealand Govt ten year is also up +5 bps to 4.35%.
On Wall Street, the S&P5400 is in its Wednesday trade and after being lower all morning is now up into positive territory, up +0.1% from yesterday. Overnight, European markets closed up +/-0.1% across the board. Yesterday Tokyo ended down -0.2%. Hong Kong ended its Wednesday session down a sharpish -1.4%. Shanghai ended down -0.7% at its close. The ASX200 ended its Wednesday session little-changed while the NZX50 ended up +0.3% and the best of the markets we follow.
The price of gold is at US$1994/oz and down -US$11 from this time yesterday.
And oil prices are down -US$1.50 and just over US$79.50/bbl in the US. The international Brent price is just under US$83.50/bbl.
The Kiwi dollar is unchanged against the USD and now at 62.1 USc. Against the Aussie we are slightly firmer at 92.4 AUc. Against the euro we are little-changed at 56.7 euro cents. That means the TWI-5 is at 69.9, up +20 bps.
The bitcoin price is softer today, now back down to US$29,255 with a -3.1% fall from this time yesterday. Volatility over the past 24 hours has stayed moderate at +/- 2.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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86 Comments
First home buyers are starting to dominate the property market flocking to open homes and making up a quarter of all property sales so far this year.
https://www.oneroof.co.nz/news/43435
Is this a good thing? House prices are falling, interest rates are still going up and inflation is running high. That's a recipe for plenty of FHB mortgagee sales in the not too distant future when the RBNZ engineered recession hits...
Last I looked the actual number of FHB purchases was nearing all time lows. Reporting FHB increasing as a percentage of total sales just shows investors are backing off faster than FHB are.
Maybe FHB believe they have to buy a house. Investors not so much.
Lots of property for sale around here, but I notice that there are not the open homes of the past. Maybe one roof talking up the market?
A lift from 22 to 25% is not flocking it’s noise in the lowest March figures in 12 years
The number of relocating owner-occupiers made up 26% of all property transactions in the first quarter of 2023 - down from 31% in the same period last year, while the number of first-home buyers bucked the trend rose to 25% from 22%, according to CoreLogic’s latest buyer classification data based on title transactions.
Those owning multiple properties such as investors have also dipped and now makeup 21% of all purchases, while cash multiple property owners have lifted to 15%. Overseas buyers 6%, those re-entering the market 6% and other buyers 2% have remained relatively flat.
Almost 6000 sales in a month though still. Thats a lot of people at open homes if you count couples and families of buyers plus the buyers who missed out.
Maybe I am drawing a long bow.
A 12 year low so yes time to put the bow down…
I think the bow was manufactured by the Scared Vested Interest Co.
Got to be amazed at how much hot air he can blow, could heat the new Christchurch stadium......
And a significant percentage of New Zealand houses just took a nasty 20% devaluation because...
...the buyer’s loan manager in Whangārei saw the words “polystyrene cladding” on the report and said, “it’s a leaky home” and wouldn’t lend the amount needed to complete the purchase.
Sure, cladded housed were always suspect, but now, it's been confirmed - leaky or not.
"cladded housed were always suspect"
You prefer your houses with the pink batts and framing exposed to the rain?
These systems are still used today and are approved by Councils when plans are submitted, if that’s the case the councils have some accountability.
One buyer and one bank had a problem. Probably more to do with the borrowers financial position and the potential exposure to the bank if a problem developed later on. The offer was conditional on finance. Could have fallen over for any number of reasons. Assume it was the one and only offer they had. The agent bringing his builder mate to try and steal the house is a red flag. Fire that agent. Fact is the property value has dropped since December 2022 regardless of plaster cladding or not. Your CV is meaningless. Relist with another agent. Find a buyer with reasonable equity position and make all of the building reports ect available. A sensible bank will lend to a reasonable purchaser. The price will be the price.
Gotta love the terminology these spruikers use! Talk about polishing a turd.
Surely you don't believe the spin from oneroof?
When no end to the increasing interest rates, not sure FHB are getting the right advice to buy now at these prices.
But if they are getting something great at 2016 prices, then go for it. Otherwise run a mile away and don't get sucked into this mill where you will grind paying mortgage for the rest of your enjoyable life.
Rent isn't cheaper nguturoa.
It is a lot more and spread out over a much longer period of enjoyable life.
Historically true but not guaranteed in the future. Right now rent is much cheaper.
Introducing the amaazing Jimbo, who believes in pixies. Tonight he will present to you the art of isolating houses and rents from the effects of inflation. Lets welcome him in
W
Just had my yearly rent review .. zip, narder, nil, big fat 0 - the landlord obviously knows they have an exceptional tenant and want to keep it that way!
(Auckland Rental)
I didn't raise the rent on my (higher end, close to CBD) Wellington property earlier this year, even though new tenants were moving in. Rents there reached the point a few years ago where I felt guilty asking what The Market said I could get, and I've been "under-pricing" it ever since.
Then again, I also did the unthinkable and rented it out to three males in their early 20s. Zero issues so far, and they even contacted us to make sure we were ok after the flooding here in Hawkes Bay. It's almost as if we're building a mutually respectful business relationship. Who woulda thunk it.
It helps that the property is freehold, so no worries about interest costs. I'm sure someone will still find a reason to hate me,
Houses I'm looking at have dropped around $1000 a day for over a year now. Rent is nett gain for some time to come
Flocking and dominating at 25%!? Did you hit your head?
With comments such as these, the commenter IS the entertainment - lol! The only reason he/she does this is through deep frustration the markets not turning anytime soon.
https://www.news.com.au/finance/economy/interest-rates/major-rba-review…
Major RBA review recommends the establishment of separate boards to set interest rates
The system that determines Australia’s interest rates is set for the biggest shake up it’s had in decades after a series of forecast bungles.
Interesting. Are we different in any way from RBA?
The world is apparently burning 4 times more coal than it did back in the 60's, we in fact now burn more coal now than ever so the production of EV's using fossil fuels for electricity production and mining of minerals in China is a joke really. People drive their EV's thinking they are saving the planet but in reality its not. Saving the planet is all about reducing consumption and making things last. You can make an ICE car last 30 years if you treat it right but too many people want a new car every 5 years or less.
You sound like the aggregation of the 10% of my Facebook feed that I've unfollowed for posting complete nonsense.
I can't believe you were able to get some much data and valid points into that sentence. Are you an expert?
Sorry but some countries EVs make great sense.
Coal use plummets to 32-year low
Less coal was burned in the last three months of 2022 than in any quarter since December 1990, Marc Daalder reports
After coal use in New Zealand soared in 2021, it has now plummeted to the lowest level in more than three decades, new statistics show.
Result of all the rain we have had so hydro been pumping and no need for coal ?
And all that wind blowing the turbines in Wellington...
Population in the 1960s was 3 billion and subsequently China industrialized around coal. So you don't need to look much further than data statistics
https://www.statista.com/statistics/1198050/carbon-dioxide-emissions-fr…
The annual consumption of primary energy in China went from 1.4 TWh to 36.2 TWh between 1965 and 2021. By one estimate 21-26% of that energy can be attributed to export manufacturing and transportation activities.
I doubt the world is prepared to bear the sky-high goods inflation that would eventuate from China and India reducing their coal consumption without replacing it with a cheaper alternative in their energy mix.
Why not go further with reducing consumption and ditch the car entirely? Many city dwellers can live their day-to-day life in active and/or public transport and hire a car when needed for out of town trips.
Hence the need for liberalising and allowing freedom to intensify around existing train and bus infrastructure.
No, no no.
That is where 'environmental' thinking falls over; because it is energy-blind.
Those tightly-packed commuters denote two expectations: that there will be some activity to commute to, and - more importantly - that the compact set-up can be supplied and waste-serviced. That requires much more acreage, much more footprint, than the crammed bit.
And fossil energy was underground-stored ancient-sunlight-lit acreage; when it leaves us, your compact cities are unlivable and the competition for acreage will make today's niggles look insignificant.
. Surely we're past that discussion-point? (though Parker apparently isn't).
Hey PDK,
I'm a convert to limits of growth, energy and material depletion etc... but I'm not yet convinced about this meaning we should move away from cities.
Who is the best person to read up about this idea that when we hit the energy and materials crunch in earnest the population will move away from cities?
Maybe this: https://smallfarmfuture.org.uk/
or this:
https://www.thegreatsimplification.com/ (it doesn't seem to come up as a separate URL, but if you go down to Animated Series, the one on the right is The Great Simplification.
There's enough on the Hagens site to keep you going :) He was a Wall St high-flyer (really high) then had an energy-epiphany. Edited The Oil Drum for a few years; was a great clearing-house for info/ideas back in the day)
:)
Hagens has been doing great interviews lately, esp the one on the prospective "Hydrogen economy".
https://www.youtube.com/watch?v=YVjEK_PjvD0&ab_channel=NateHagens
And just plain thought provoking.
https://www.youtube.com/watch?v=Xc53KPv7flk&ab_channel=NateHagenshttps:…
Thanks, I've listened to a few of the episodes on the Great Simplification, they were fantastic. Must not have got to the ones on decitification yet. Thanks again for sharing.
You can make an ICE car last 30 years, but for the last 22 years or so of that life the EV will have repaid the carbon debt used to produce it.
A lot of the carbon use associated with cars is in the building and maintaining of the roading infrastructure (concrete and asphalt). Only a nice away from car dependency can offset those carbon inputs
You still have to maintain bus infrastructure which uses the same infrastructure. Buses are also heavier than cars so still damage the roads (they're essentially medium trucks), requiring concrete/asphalt. No out there, but you do save on the carbon emitted by the cars.
If you think of Auckland for example, if we had no cars at all then there would be very few roads needed for buses and those roads would be basic and cheap to maintain. No motorways etc, no need for big infrastructure, no need for bike lanes as roads would be safe enough for bikes, and very fast buses that would not need to stop very often. Not saying that is what we should do, but I am saying that it is cars causing the vast majority of the problems.
Cars are just pieces of metal. They don't plan or build the roads, or cave to political pressure to build less PT or to not reallocate road space. Cars are not the reason central ministries can't plan or design a rapid transit network without it blowing out by tens of billions, nor do cars hold up vital infrastructure like Light Rail so they can hang stuff they actually want to do (like expensive harbour tunnels) off it.
These are all people problems. And people will keep buying cars as long as that persists.
With the rate of demographic collapse I see that as a transitory problem.
Demographic collapse? I predict NZ will pass ten million before we see three million again. How many of those millions are the parents of ACTs constituency remains to be seen?
"You still have to maintain bus infrastructure which uses the same infrastructure"
Bus infrastructure on it's own only requires a tiny proportion of the roading infrastructure to operate. You could half the width of almost every suburban street in NZ if you didn't provide on-street parking.
There is also nothing really forcing us to use buses. Surface light rail would be more efficient. One of the reasons light rail is such an eye-wateringly massive price is because they are tunnelling to retain on-street parking and not inconvenience car drivers.
Buses are generally pitched as the preferred PT solution as you can then bundle in the road maintenance costs in as PT. The Road Haulage lobby and car lobby love this as it means they do not have to pay their way.
That's 30 years of burning a rapidly dwindling resource? That if we keep burning, we will heat up the planet hugely? Think more, even though it probably hurts.
Came across this in an old news feed NZ medium going up 50k in a month back in 2017. We have a long way to fall yet
Data from the Real Estate Institute of New Zealand shows more houses were sold in March 2017 than the past six months but that increased supply had done nothing to constrain the median sale price which jumped from $495,000 in February to $546,000. In total 8,504 houses were sold in March, more than 2,200 than the previous month.
From The Guru
19000 extra homes are needed for the population increase... BUT "With literally tens of thousands of people having held back from buying a property since prices started falling at the end of 2021, the volume of people who may or may not step forward to start bidding at the slowly recovering auctions is large. All it will take is some signal that interest rates are set to fall away, and those delayed buyers will start stepping forward. That is perhaps why we should not expect such a signal to be given by the Reserve Bank for a long time. Of course, the longer it waits, the worse the house-building crunch, the greater the shortage, the greater the price catch-up."
We are truely lucky that so many houses are for sale, inventory stands at 27 weeks across NZ at the end or March.
All the fruit pickers, nurses, bus drivers and hospo workers flocking in will have a truely staggering choice for thier first purchase in NZ.
We could well see a jump in unintentional landlords who cannot sell but chose to rent out, be carefull after 6 months your potential capital gains are taxable.......
What percentage have unrealistic sellers. Is it half or three qtrs. It only takes a small drop in stock levels
Why are you posting propaganda again? I’ll give you credit when it’s due though, at least your consistent with your spruiking.
Isn't it better to be informed. Or why do you come here then
Mainly to feed the trolls....
They need food scraps now all the Real estate commissions have dried up.
Good ‘ole Tony. He’s getting ahead of himself.
Yes construction is slumping, especially new starts - as I have predicted for more than 1.5 years. But there’s still an awful lot of housing to be finished in 2023.
Yes immigration has picked up, but what happens when we enter recession. People will leave the country and fewer will come.
Once the construction slump truly lands then yes the supply of housing being completed will fall off a cliff. But that’s at least 6-9 months away.
Immigration up, more $ spent, recession avoided. That's the Government's plan, right?
Welcome back HouseMouse!!!
There is a major announcement expected this weekend while Hipkins in is Australia. The rights of Kiwis living in Australia are set to be improved. Devil is in the detail. Australia has a skills shortage just like we do and skilled Kiwis are a quick and easy fix.
HM Did the inflation announcement change or influence your view of Tony's op-ed
Not at all. I have been expecting inflation to subside a bit. It’s still way too high. It’s still hard to see OCR cuts happening before 2024. Until cuts start there will be minimal change.
You have good reason to rubbish the quality of our economists
Inflation in NZ is still rising. Just bought an air filter for my 2001 Honda accord. NZ$76. Changed the oil, filter and air filter in my 2012 Honda accord in the USA, for less than US$50. Houston we have a problem.
Very hard to know what the problem is though. 50 usd is about 80 nzd, so from your anecdote we could be suffering from deflation.
He's saying he got a full service for the cost of a part here. But that's always been the case for car parts in NZ. You're generally better importing them yourself, especially a certain German manufacturer who bought a former British small car manufacturer who shall remain nameless. Until I got an industry connection, I was basically replacing parts with what I could find on Ali Express, otherwise I couldn't afford to keep it running.
You're right, I missed that bit.
In general, I'd expect the country-to-country variation to dwarf inflationary effects. Pretty common to see things go for double what I'd expect in the UK (not restricted to car parts)
"a certain German manufacturer who bought a former British small car manufacturer"
Is that BMW, who bought Rover, a manufacturer of small cars (Minis) and large cars (Land Rovers, Rolls-Royce)
Or VW, who bought Bently a small manufactuer of cars.
Oil AND Air Filter
I've usually found it cheaper to purchase & import parts from Japan & the USA for a hobby 25yo Nissan Pathfinder 4wd than buy in NZ. Shocks/Struts, Springs, CV axles, wheel brgs, gaskets, trans fluid cooler....
Found the same when I was working on a project BMW E36 a few years ago. Pelicanparts.com for all parts, shipped here within 2 weeks and considerably cheaper landed than local parts suppliers.
I bought a set of 14 head bolts for from memory around $15 - $20 landed. Local suppliers were charging $20 for just 1 bolt. OEM water pump $150 vs $500+ locally. Ended up buying 2 aftermarket water pumps with metal impellers for around $50 each.
the problem in large part is monopoly suppliers in NZ
So for example Toyota or their agents sell Toyota parts imported by Toyota. This is typical of many suppliers including machinery for farmers and contractors. It might look like competition as you have a number of say excavators or tractors to choose from for initial purchase but even then there is usually only one supplier and importer for each brand
And if you use after market parts they will tell you the warranty is now void so lots of people rollover
I have attempted to import refrigeration compressors from USA only to be told they have a NZ agent - who of course charges a lot more. When I eventually placed the order for shipping to a pacific island nation the poo hit the fan but they had to deliver or risk being sued or prosecuted - was well worth the hassle
(Relocated)
In China, the way provincial institutions hide bad debts from property companies is getting some transparency.
European commercial real estate prices are down 21% and back at 2016 levels. Nothing to see here. Link
Cutting your daily commute to work seems like a no-brainer for households with stretched budgets. My employer has been able to increase staff headcount by 31% since Covid in the same office space.
The top 20 stocks in the S&P 500 account for over 90% of the YTD returns in the index. A very mega-cap concentrated rally. Link
It looks like Bernard Baruch's old saying is coming true: "The main purpose of the stock market is to make fools of as many men as possible." Fund Manager most overweight bonds since Global Financial Crisis on absolute & relative basis, latest BofA Fund Manager Survey highlights. Link
Some comments here suggest buyers are holding off as prices are dropping.
In fact prices fall because banks won’t lend what valuation is on house. So valuations fall to try to get sales.
But this doesn’t work as rates keep rising and affordability tests get tougher, so fewer loans
In addition buy to let investors withdraw as cannot leverage as previously, due to collateral (what they own) falling in value all time. Meanwhile, QT is retiring money supply and banks are troubled by what they bet on treasuries to balance loans.
Finally all debt is having to refinance at higher rates, draining further credit from system. This combo is only starting on down cycle which is v likely to persist til 2025 as inflation not dropping and so higher rates for longer.
Buckle up its going to be a long night
I found this article insightful.
"These inner-city neighbourhoods have seen their startling pandemic-era rises wiped out – and five more suburbs are hot on their heels."
The most frothy Pandemic stimulus era suburbs that are already back to pre-covid valuations. Many more to come I'm thinking.
https://thespinoff.co.nz/business/19-04-2023/revealed-the-four-suburbs-…
Thats a great article.... Amazing that Coatesville is only down 1.8% vs the Falls in Herne Bay etc
Running typo in the 'S&P5400' there team
Inflation is like the Titanic (the Fed) after hitting the iceberg (if you believe it). "Water is contained in compartment 3", our central bankers bleated (It is transitory). Screw the boilermen powering the ship. "Now we have it contained below decks" (wage earners and savers). Screw the 3rd class we don't need them. Now we have it contained under the top deck. (FIRE sector). Don't need them anyway. OK my elitist friends, time to jump into the life rafts and save our own asses, screw the people, let them fight for survival.
Damn
We've run out of coal.....
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