Here's our summary of key economic events overnight that affect New Zealand, with news of a lot of second-tier data and some of it isn't very good.
But first, US jobless claims were in fact little-changed from the prior week, although seasonal adjustment generated a higher number. There are now just under 1.8 mln people on these benefits but that is up from 1.5 mln a year ago. Despite the headline seasonally-adjusted rise, the actual data isn't really showing any increase in new claims.
But they may be on their way. The Philly Fed factory survey dived to its lowest level since the pandemic and its eighth consecutive negative reading. This survey covers the Pennsylvania manufacturing rust-belt heartland and is quite a negative signal.
US existing home sales in March dipped from February to an annual rate of 4.44 mln when a 4.5 mln rate was expected.
Chinese foreign direct investment is falling and quite quickly now. It hardly changed from February to March and is now only +4.9% ahead in nominal terms from a year ago. In February it was +6.1% ahead. In the 30 years of this data, we have never seen such a month where there was virtually none. This is very unusual and no doubt is ringing alarm bells in Beijing.
Meanwhile, China's central bank kept lending rates unchanged yesterday, adding to signs that it has put monetary stimulus on hold while it watches the progress of what they hope will be a consumer-driven economic recovery. The PBoC's one-year loan prime rate, a reference for lending to companies, stayed at 3.65%. The five-year rate, a benchmark for mortgage interest rates, remained 4.3%. Both have been unchanged for eight months.
From a very low base, Chinese mortgage lending rose +50% in the March quarter from the same period a year ago as homebuyers took advantage of lower interest rates. It is a signal that policies to bolster the property market are kicking in.
Taiwan export orders rose in March from February but were still -25% lower than year-ago levels, a consequence of the vice China has on the island nation.
Consumer confidence in the EU edged up in April, according to the latest 'flash' survey. It was a faster improvement than was anticipated.
German producer prices rose in March to be +7.5% higher than year ago levels. But in February they were more than +15% higher, so we are witnessing a very fast correction there recently. In fact, from February to March prices fell at a much faster than expected rate, a very sharp -2.5% in just one month.
Last week freight rates for containerised shipping actually rose. It was a tiny move up, but was the first we have seen in a very long time. It was primarily driven by the Shanghai to Los Angeles route which rose +11% in a week. The Shanghai to New York route rose +12%. But apart from these two major trades, most other rates are still falling. Bulk cargo freight rates were little-changed last week, still running at their long term average levels, levels we first saw in 1988!
The UST 10yr yield starts today at 3.55%, and down -5 bps from this time yesterday. The UST 2-10 rate curve is little-changed at -64 bps. Their 1-5 curve inversion is now at -111 bps and marginally more inverted. But their 30 day-10yr curve is now inverted at just -2 bps with this inversion about to vanish. The Australian ten year bond is down -6 bps at 3.55%. The China Govt ten year bond is still at 2.85%. But the New Zealand Govt ten year is down -7 bps to 4.28%.
Perhaps we should also note that 'green bond' issuance reached US$858 bln in 2022 (NZ$1.4 tln). This is no small market of financing that comes tied to showing climate benefits, but it is still only 5% of all bonds issued. However it is hard not to view this as much more than greenwashing.
On Wall Street, the S&P500 is down -0.9% in its Thursday trade with a growing selloff. Overnight, European markets closed quite mixed, flat in London and down -0.6% in Frankfurt. Yesterday Tokyo ended up +0.2%. Hong Kong ended its Thursday session up a mere +0.1%. Shanghai ended down just -0.1% at its close which was a big late recovery. The ASX200 ended its Thursday session little-changed while the NZX50 ended down -0.3%.
The price of gold is at US$2005/oz and back up +US$11 from this time yesterday.
And oil prices are down another -US$2.50 and just over US$77/bbl in the US. The international Brent price is just under US$81/bbl.
The Kiwi dollar is softer against the USD and now at 61.9 USc. Against the Aussie we are much weaker at 91.6 AUc and more than -¾c lower. Against the euro we are down -¼c at 56.4 euro cents. That means the TWI-5 is at 69.5, down -40 bps.
The bitcoin price is lower today, now back down to US$28,475 with another -2.7% fall from this time yesterday. Volatility over the past 24 hours has stayed modest at +/- 1.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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90 Comments
These breakfast briefings are a real emotional rollercoaster. One morning it's green shoots and glimmers of hope, the next it's down in the doldrums. I'm getting whiplash with my coffee.
I was thinking the same. Best not to conclude strongly on either the bullish or bearish side. Things are all over place.
Having said that I lean the bearish way.
It’s all going to crap next month isn’t it?
Yep I said the economy in NZ would be looking pretty damn sick come May. it’s already showing plenty of signs of malaise
What is the prediction? Unemployment? GDP decline? Foreclosures? Judging by the number of people at the restaurant last night it didn’t seem like people are shutting their wallets yet.
New Zealand having the worst Balance of Payments Deficit in the OPEC top 40 is a Sword of Damocles hanging over the country. When world wide inflation took off in the 70's NZ's reliance of Agricultural Exports rendered it helpless in its fight to overcome imported inflation as the dollar dropped dramatically over the next 10 years: New_Zealand_Dollar_-_USD_Exchange_Rate.webp (1536×407) (wikimedia.org). Back then Imports were controlled by the Commerce Commission through Import Licensing, but none the less the rise in Hard Commodities was much greater than the rise if Soft Commodities-like Wool. This time is different as the major change to the economy in 50 years is International Tourism & Education. Let's hope those 2 segments pull us through.
Pays to make a note of the average AGE of those eating out at packed restaurants, don't be surprised if everyone looks like they are aged over 60 because they are the people with disposable income to spend.
HouseMouse
Your May Day prediction was CPI “sub 4% (on an annual basis).”
Pretty specific - and I wouldn't call that "pretty damn sick.".
That might actually happen, last quarter was less than 5% annualised.
Yes it's fun to mock his bad predictions and see him get all defensive about it.
And I also have had my share of anti-fan mail for my forecasts incl sh1t from HM.
As I have said recently the next six months will be very interesting both economic and political. After the two RB atom bombs I was starting to have doubts about the timeline but the rapid turnaround in inflation has encouraged me. I see others are joining the chorus
If you think I am going to get in to any more mudslinging with you, you are very much mistaken. You won’t be seeing any ad hominems from my side. Have a great day.
HouseMouse
You posted I predicted chaos - no you were calling 3% CPI and then upped it to sub 4%. We would love to have CPI of that - not chaos at all.
So yet again, when you say “as I was predicting”; I’m calling you, and your consistent poor predicting and commenting out. Simply see it as correcting your claims.
Cheers
I didn’t anticipate the unexpectedly high food inflation component of the CPI. Not many did.
And btw, my May prediction was much broader than inflation. More broadly it was the timeframe that I expected a whole lot of economic problems to be coming to a head - and they link to Inflation.
So more job cuts, more liquidations, weaker economic growth.
HouseMouse
So your prediction was " . . . more job cuts, more liquidations, weaker economic growth" . . . not much kudos in that.
RB Governor said last year that RBNZ are deliberately engineering a recession . . . that is what a recession usually means.
You mean to say that you are now listening to what Orr has to say. :)
Just in time for Robertson's 6th budget!
Yep the saviour will come riding in on his white donkey throwing pennies to the peasants who in turn will repay his kindness by voting him in come October. That's what they will be aiming for anyway. Watch the tax brackets move.
Maybe it will be June rather than May…
https://www.nzherald.co.nz/nz/grant-robertson-announces-fuel-tax-subsid…
Does that cause instant inflation? It will be quite substantial. I guess it is a one off though.
July - 30 June is the end of the government's financial year. The interesting thing is, when the fuel tax subsidy was first introduced, the price for 91 octane was pushing $3. I just bought petrol last night "on special" for $2.28, but the average is about $2.40. Putting the 12.5c back on, that's a petrol price of $2.405/$2.625, still 40c lower than before the fuel tax cut (who said Labour only increases taxes?). I don't think it will be inflationary - people will cut back their travel to compensate, even if the different is paltry, the psychological effect will do something.
Guess it is time to stock up now. On Z Sharetank you can buy 91 currently at ~2.18 per litre ($2.25 and they are also giving an extra 5/10litres free) and can pre-buy up to a max of 1000l
Nice comment :-) Of course important trends play out over months, while journalists are on daily deadlines.
For example, I think there will be a rental shortage unlike anything we've seen before. Why? Macro trends... fewer houses being built, fewer investors buying, more investors selling, thousands of rentals transferring to emergency housing, more transferring to AirBNB, investors being taxed more, and immigration back to record highs. When will this happen? I am picking over the next 6-8 months but there's no magic day when I'll click my fingers and say "there! It happened!" It's just a case of a lot of macro trends layering to create an outcome.
Daily articles about consents, monthly rent changes, house values, RE commissions or anything else really impacts my view. I do look at builders work expectations (instead of consents), reports from property managers about rental applications outside of areas that had a lot of building (chronic), in those cities (pressure rising), plus net migration flows.
That might depend where you are. They seem to be building a lot of houses in Auckland, they are going up everywhere. Many will hit the market in the next few months. A lot will be rentals.
Building fewer houses? Have you looked at any data? We've been building far faster than normal for the last 3-4 years, all whilst population growth has stalled.
And yes, migration is back up, but it goes both ways. Anecdotally most of the delayed OE exodus seems to be scheduled for the next 2-3 months (in time for the Northern hemisphere summer) so it will be interesting to see what difference that makes in the net movement.
A few people at the consultancy my son works for have resigned in the last 2 weeks to do their OE. I think this will be significant. Although how significant? The UK economy isn’t great.
Again, macro trends.
Walk around those building sites and ask what their next project is. The stuff being built now was sold and set up 18 months ago and will be absorbed pretty fast. Builders are calling architects and asking where the next projects are and getting met with a shrug. You can't get lending for anything.
My take - The holding back of China's FDI was probably related to their 2 session in March where Xi got his 3rd term and new administration was set up. Naturally people would wait to see where there will be changes or better policies coming out of this.
I think we are at the top of the OCR, feels like a 50/50 call next meeting and he got in hard and early last meeting. Dependant on data but we are slowing now, The RBNZ must be seen to be firm in the inflation fight, I see no cuts before late 2024 unless the economy falls off a cliff. All bets are off if Labour goes full retard with an election Lollie scramble. I don't think either party can promise tax cuts here.
+ 0.25% my guess. Just so people know who is in charge but believe there may be some credibility in that theory that the last +0.50% was a stymie to discourage the trading banks from actually reducing rates?
Agree with 0.25% just to hammer home the point. Kind of like spitting on the guy you've just beaten into a bloodied, twitching pulp.
I would say RBNZ has government backing to Keep raising the rates aggressively.
Government needs to bring inflation down to be in power and they would use all the tools.
Don't tell me RBNZ is independent.. It might be to a point but always need to listen to masters who hire them.
Reading through the RBNZ documentation this morning:
- They don't expect inflation to abate till mid-late 2024.
- Their inflation target is over the medium-term (which I had thought was defined as a 5-year moving average, but haven't found the definition yet). Given inflation has been high for the last wee while, expect a prolonged period of dampening to counter that, even after it's moved back within band in the short-term.
- Their remit until early 2024 includes "The Government’s policy is to support more sustainable house prices, including by dampening investor demand for existing housing stock, which would improve affordability for first-home buyers" - so any investors holding on expecting interest rate cuts on their behalf need to realise that's not likely to happen. I wonder if this takes note of the difference between a first-time owner and a first-time buyer (once you've bought your house, you're not technically a FHB anymore - do the needs of those who bought last year outweigh the needs of those who want to buy this year - and higher interest rates over the long term favour the latter group).
RBNZ remit as you mentioned "including by dampening investor demand" Has the RBNZ used any tool other than OCR to dampen investor housing demand? If it has used another tool other than OCR, then hasn't it affected FHBs as well?
In this context, it seems crazy they've held off implementing an effective DTI - given the much higher average DTI of an investor vs FHB.
Of course, their recent discussion paper on it used an example DTI that had no effect if interest rates were above ~3.5%...
Other items that could be considered - such as banning interest-only mortgages outside of hardship, shorter loan terms, or no-recourse mortgages - are they fiscal rather than monetary?
They've used the 40% LVR restriction on investors specifically.
What would tax cuts do to the NZD? Anything bad?
would be seen as inflationary , requiring higher ocr, so positive at the margin I think as long as the government can balance its books.... less tax at a time of gov borrowing would be seen as stupid witness UK and how pound got hammered for their stupidity
The government could always reduce its spending *laughing tears emoji* to compensate, mitigating any inflationary effect. There's a fair bit of fat there - scrapping 1st year free tertiary education would save $700m right away.
Or we could save billions a year by introducing means testing on super.
In fact, we could make tertiary education free, and wipe all outstanding student loans, for less than the cost of a single year's super payout.
[To clarify: I would suggest only the first qualification at any given level is free - students can pay for second masters/etc. themselves. And not covering industry quals].
Agreed. The annual drawdown on student loans is less than $1b. I'm sure we could find 5% in savings by means testing super.
Hell, people were up in arms about free public transport. If $63.1m was the cost for 5 months of half price fares, then $300 million per year to 100% subsidize public transport. The only people who receive 100% subsidized public transport is...ironically.....the non-means tested super recipients.
The government's cost estimate at the time of extending the scheme was $63.1 million for five months of half-price public transport.
https://www.rnz.co.nz/news/national/485418/waka-kotahi-concludes-half-p…
Your dreaming IT GUY... the OCR will increase until inflation is below the 3% mark as told to NZ by Orr.
Inflation will rise again next 1/4 due to this government stupidity and the winter changes in prices for food, electricity, etc.
Inflation next 1/4 wil be well over 7%.. Quote me!
Anyone working on Monday?
Rupert murdoch
Sure am. Just had a relatively large restructure at our office, so there's lots to do figuring out what everyone's new responsibilities are.
Does a the usual restructure involve anyone falling by the wayside?
There were quite a few people made redundant if that is what you are asking.
Yeah restructuring is a new corporate season.. It comes every year.
The "uninspiring patch" is going to last for a few more years as we all digest the equivalent massive Christmas lunch.
Will be intersting to run the slide rule over kiwiland.
“It was a bit of a shot in the dark,” Kuitems says. But 28 rings in from the bark, they found the telltale 14C spike: persuasive evidence that Vikings had felled the fir and juniper trees used to build the longhouse in 1021 C.E.
The timing of the Viking foothold at L’Anse aux Meadows heralds a revolution in archaeology: a newfound ability to whittle the age of wooden artifacts from decades down to single years. The breakthrough paving the way for such precision came in 2012, when Japanese physicist Fusa Miyake revealed that a massive influx of cosmic rays caused a big uptick in 14C in a tree ring dated to 774–75 C.E. Since then, at least seven more confirmed spikes, known as Miyake events, have been found so far. The earliest well-supported spike dates to 7176 B.C.E."
https://www.science.org/content/article/marking-time-cosmic-ray-storms-…
Sad to see a few hundred redundancies at Otago University. These significant job cut stories are starting to really add up.
Quite sad I loved my time there.
I wonder how much our falling education standards contribute to this. My son is at school and the level he is held to is very low. The literacy and numeracy standards expected of primary school kids is up to the teacher and a lot of them simply don't teach maths, reading and writing.
I lecture at Auckland Uni and it’s quite striking seeing the literacy standards these days. Pretty average!
Teachers can’t be bothered teaching and just want to get computers to do it for them. Class sizes too big. Too much focus on the worst kids and no time for the others. Those are my observations.
Most of my wife's teachers' meetings are spent discussing problem children - and this is at a private school where the parents are stumping up a fair whack of cash to have them there - how bad is it in the public schools?
Of course, this could just be a symptom of a much bigger social problems. A child is one amongst a class, and parental input will greatly outweigh anything the teacher can do. How much input are parents able to have when they are in messy social settings (multiple households/custody arrangements) and/or both parents are working to put a roof over their head? But sure, let's blame the teachers!
If you want a child to have dedicated teaching, go old school, and hire a tutor. Not that many could afford that.
The low decile schools have to feed the kids these days as the parents can’t be bothered. How are those kids ever going to do well in life if your mum can’t even be bothered making your breakfast and lunch!
There are plenty of responsible people who can’t conceive kids these days. Seems silly to leave these children with useless parents.
"Seems silly to leave these children with useless parents."
Wow, no words ...
The reasons why are worse - enrollments dropping quite dramatically. That's a drop in our future educated people, usually the most productive ones.
I want my kids to study overseas. Unfortunately a focus on Māori culture etc is absolutely pointless. The woke nonsense will ruin the universities in this country. And as for the polytechnics…why would you want a qualification from an unpronounceable entity. That might sound harsh but if you were planning to gain international experience (likely in an English speaking country) a degree from whatever the name is is absolutely pointless.
AYFKM! People really want to put their heads in the sand about this. But this really is 2008 stuff here. Another huge downdraft. Link
Audaxes .....happened so quickly ! so when do you think the SWHTF ?
I heard that ASB conducted its first mortgagee sale in 2 years this week and the banks are starting to enforce their securities.
Construction firm didn't pay GST for six years before entering administration
https://www.stuff.co.nz/business/131824326/construction-firm-didnt-pay-…
Starting to see more IRD liquidations, especially for construction related companies. 2 applications published in the Gazette this morning.
Terrible, but not that surprising.
Yeah and the directors and company owners had no idea...yeah right..Tui billboard right there.
"I told our accountants to handle all of that stuff, they told me it was all good".
Often wondered, what happens to the likes of kiwisaver deductions, are they still paid into the kiwisaver accounts. How would the ird know how much if the info wasn't passed to ird.
Anyway just another liquidation blamed on COVID when it quite patently wasn't. Hopefully the directors are held to account.
So much for the IRDs policing. This doesn't look like a mickey mouse construction outfit either. Internal fraud inside the IRD?
Oops I hadn’t noticed I hadn’t paid tax for 6 years sir. Please slap my wrist and send me on my way.
I took a punt on a gardener that put a flyer in my letterbox. Youngish guy and his mate. He wasn't particularly cheap and sent through his invoice the evening of the day he did the job - it didn't include a GST number (but added GST). I asked him to reissue the invoice with the GST # included. Am yet to hear back.
I sweat if I hit submit on my Xero GST return on the day it's due and not beforehand, let alone getting six years behind.
No GST, income tax for six years? No PAYE for more than a year? WTF? How is that even possible?
Exactly, this shouldn't be a thing that can possibly occur. IRD looks asleep at the wheel, what were their company reports showing? No income? Total bulls#$t that the directors didn't know, they must have had a good "accountant" to get away with this.
Something very wrong in this, surely even the banks would have noticed?
IRD seem defunct to me. They cut staff from 6000 to 4000. I haven't been able to get through on the company line ever since. I wrote to the Revenue Minister (David Parker), and got a reply from the Associate Revenue Minister - which looked very suspiciously like a copy-and-paste of the IRD's published brief for doing so, except with "will" replaced by "have" - at this point I presume it was written by a consultant and not by the minister in question at all.
The response was summed up as "most people can do what they need to online" - with no acknowledgement that those with more complex needs simply can't get in touch with the staff. It's a shame - IRDs business staff were excellent whenever I talked with them previously.
About to submit an OIA request for information on volume numbers, wait times and dropped calls.
Get in quick if you want some governmental transparency, the communications staff might be leaving soon.
Yep,
Angry mob - Govt is wasteful, bureaucrats are useless, sack them all, use the savings to pay rich old people their Super benefit.
Same Angry mob - I demand personalised service, why are our public services in decline?
As someone who has run multiple businesses, I cannot fathom how people operate like this for months and years. I'd be an anxious mess!
Surely this is prison material?
All of a sudden, a capital gains tax is back on the political agenda
The headline of an article on Stuff and Spinoff that overs the planned speech by Revenue Minister David Parker next Thursday with regard to the following;
Behind the scenes, a bold new IRD report has been working its way towards a conclusion. It looked into a very invidious group – 400 of the wealthiest families and individuals in New Zealand, who collectively hold enormous quantities of assets and investments. It’s accompanied by a related piece of analysis from the Treasury, and together these reports are expected to give the most detailed view yet of the financial world of the richest New Zealanders, and just how much tax that wealth generates.
Could rattle a few cages
https://www.stuff.co.nz/national/politics/300857618/all-of-a-sudden-a-c…
That would be a courageous speech. Parker would have the spine, but would Hipkins? I haven't got a read on him yet.
It may put a bit of context around what i thought was the counter intuitive report earlier this week on interest from Oliver Shaw
The following was issued on behalf of tax consultancy OliverShaw, whose Principal, Robin Oliver, is former Deputy Commissioner of Policy at Inland Revenue.
New research shows New Zealand’s wealthiest pay their fair share of tax.
May have been getting their narrative out there early before Parkers speech. Will be great to see the actual numbers.
Define fair share! In a progressive tax system what should we consider fair?
Keep it simple. Everyone pays 10% on their profits. No matter what.
No creative accounting ways to save taxes.
Pay every quarter , 10% of profits.
How about you calculate your net wealth annually and pay tax on the increase from last year. The fairest method I can imagine.
Coupled with GST so you are taxed on both spending and saving. Taxing income or profit just isn’t working.
The trouble with a capital gains tax is that it actually taxes inflation. You are actually no wealthier yet there is tax to pay. I dunno if I want the government to be incentivised to run higher inflation.
Imagine for a moment what would be happening to the government finances now if they relied on a CGT with the fall off in asset prices. Their choices would be to either borrow the shortfall, or stoke up asset inflation again.
This report was pretty stupid, it didn't really differentiate between wealth (as in I have $5m without debts) and high incomes. It touched on it but kept conflating the two which means the authors think that high income people MUST be wealthy, when that's not necessarily true. I know a few high income people who spend all their after tax money paying off overpriced houses at now very high interest rates. And with the main asset they are paying off dropping in value, while their mortgages barely moving, they certainly aren't high wealth and a couple are probably in the negative.
As I suspected it turns out crap houses in Manurewa aren’t worth $1.2 mil: https://www.oneroof.co.nz/news/43444
How did we get to the point where 600m2 of land in a crap area was selling for that much! Insanity.
Very noticable in Hamilton that there is a glut of 2 bedroom units on the market.Nobody wants them.One block of 3 has installed 2 toilets in each and are beyond small.Whoever built them has made a huge error.
Yet the hotels are full of homeless
Time for the govt to buy up some of these developments? (the better ones anyway).
Would be a hell of a lot cheaper and better social outcomes, in the long run.
Might have been a good use for some of the $70b of debt Robbo has added over the last few years. Unfortunately they wasted most of that money on pumping up the banking system and pet projects that were doomed to fail.
They did. Had my 100th percentile 2 bedroom unit in a gated area sold to KO after the developer couldn't find a purchaser for the 1 unit damaged by tenants (who were local business people, it was very surprising). Couldn't sell the one unit privately, so he sold all 23 to KO, and everyone was given six weeks notice of vacant possession. At a time when there were queues of 30+ at the 3 bedroom houses. (Fun fact, we were in the 100th percentile 2-bedder in the first place because the only other person interested, given the price, was a desperate solo mum. I did feel sorry for her, but we needed somewhere to live too).
KO made 22 families who were paying rent homeless to house people who couldn't. And they only report how many they've housed - no net reporting taking into account how many they displaced. We considered putting ourselves on the waiting list and staying put.
I think the OP is talking about buying some of the empty ones that aren't selling. What a total cluster f#%k that situation you describe was, jesus.
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