Here's our summary of key economic events overnight that affect New Zealand, with news markets seem to be ignoring American debt default risks.
But first in the US, inflation expectations slipped lower to 4.4% at the one-year-ahead horizon but increased slightly to 2.9% and 2.6% respectively, at the three- and five-year-ahead horizons, according to the New York Fed's April Survey of Consumer Expectations. The one-year-ahead result was 4.7% in the March survey, so that is a meaningful easing. The Fed seem to be making progress with its messaging and policy settings that inflation will be beaten back to its target range. Remember, about a year ago, these inflation expectations peaked at 6.8% for one-year-ahead. We are now that year on and the picture is very much different. The April CPI data will be released on Thursday, and analysts are picking an unchanged 5.0% rate.
The Fed's senior loan officer survey reported tighter standards and weaker demand for business lending and for households it was the same tighter standards and weaker demand for both housing and consumer debt applications. Access to business funding for SMEs may become an issue. This will become a very major issue if the House Republicans continue to block a resolution to their debt-limit standoff. You can measure market nervousness by the spike in the short-long yield curves. This intransigence could go horribly wrong, although we have been here many times before, and the [artificial] limit always seems to get raised. It just that this time there are more isolationists in Congress who don't care if the financial system gets shut down.
American wholesale inventories were virtually unchanged in March from February but that masks a +8.6% rise from year-ago levels. And the inventory-to-sales ratio rose rather sharply in March after a decline in February. That rise was enough to put it at its highest since the pandemic and a ten-year high if you ignore tha pandemic spike. There is now an inventory-overhang problem at the wholesale level, one being caused by weakening demand.
In China's east, nearly 500,000 people across 43 counties in Jiangxi province have been hit by torrential rains that triggered floods and forced thousands to evacuate.
Taiwanese exports actually rose for a third month in April, and taking them back to November 2022 levels, although still well below year-ago levels. But at least they are on the move up, an encouraging sign for them that the Mainland grip isn't suffocating them.
The Japanese service sector is expanding at a good solid pace, and their best since this survey began in 2007. The growing expansion is underpinned by rising new orders.
Australia's business confidence improved marginally in April from March but remains well below its long term average. Despite that improvement, the economists behind the survey expect things to weaken as 2023 progresses. They see 'conditions' as resilient but the business community without conviction that will continue, which is why they are downbeat looking ahead.
In Australia, the first quarter of 2023 saw the lowest number of building approvals since 2012, just as their population growth reaches a record high. Workers there are going to need all their extra pay increases just for rent and mortgages. Higher pay across the ditch (than here) isn't everything for everyone.
It is Budget Day in Australia, and details will be released late in the day NZT. A strong labour market is expected to return their long-run deficits into a rare surplus.
We have noted this before, but it is worth repeating. The price of lithium has slumped from its November 2022 peak and now down -70% from then. The high price juiced up supply, and it made battery manufacturers look for alternatives.
The UST 10yr yield starts today at 3.52%, and up +8 bps from yesterday. Their 2-10 yield curve is little-changed at -47 bps. Their 1-5 curve is also little-changed by -134 bps. But their 3 mth-10yr curve is now less inverted than yesterday, now by -189 bps. The Australian 10 year bond yield is now at 3.41% and up +1 bps from yesterday. The China 10 year bond rate is up +1 bp at 2.76%. And the NZ Government 10 year bond rate is now at 4.19%, up +6 bps in a day.
On Wall Street, the S&P500 is little-changed in its Monday session from its Friday close. Overnight European markets changed +/- 0.1% except London which was up +1.0%. Yesterday Tokyo ended down -0.7%. Hong Kong ended its Monday session up +1.2% and Shanghai bested them, up +1.8% on the day. The ASX200 closed Monday up +0.8% while the NZX50 ended with a late burst, up +0.5% on the day.
The price of gold will start today at US$2023/oz and up +US$5 from this time yesterday.
And oil prices have risen +US$2 from yesterday to be just over US$73/bbl in the US. The international Brent price is just under US$77/bbl.
The Kiwi dollar is up against all-comers. Against the USD we are now at 63.5 USc with more than a +½c rise. Against the Aussie we are up +¼c at 93.6 AUc. Against the euro we are firmer at 57.6 euro cents. That means the TWI-5 is now at 71.1 and up +50 bps from this time yesterday.
The bitcoin price is lower today, now at US$27,812 and down another -3.9% from this time yesterday. Binance halting withdrawals for a time yesterday isn't helping sentiment. Volatility over the past 24 hours has been 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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47 Comments
Looking for opinions on our three NZ credit bureaus; Illion, Equifax, Centrix.
I'm planning on going through the credit file suppression process, and would like to end up with full block on two, and notifications on the final third if credit is applied for under my name.
Has anyone done this, and have any tips or thoughts - especially around which one they'd 'kept'?
And we wonder why the economy is so distorted.
Singh comes from a hospitality background, .... but he and his business partner decided to invest in property after attending a seminar. They ran into strife when a different lender backed out at the last minute leaving the pair short $13 million.
https://www.stuff.co.nz/business/300872711/auckland-man-says-627699-fee…
Oh gawd….
Gonna see a lot of this in South Auckland involving this ethnicity.
Lots of dodgy business has gone on for years.
“attending a seminar!” should have gone to spec savers.
Lol
The irony would be if the shoe is on the other foot with this fella. He'd have no issue screwing every last dollar out of people, claiming it's "just business".
Dude's just had a big lesson in "just business".
What a racist comment to make!
6.3H for $20mil.... he paid $317 per sq m, way too much
Bubble behaviour IT…. Greed + naivety /dumbness - dangerous combination
A high level of greed and a low level of intelligence is, as a combination, about as odious and unwelcome you can get in any one being, and especially in family.
"........high level of greed and a low level of intelligence ......."
But folk made money with those at the time of the property bubble.
But since the pop .......
Anyone can make money in a bubble if they have access to capital.
We are seeing the very healthy process of capitalism now at work, where all the dross gets cleaned out.
You only see who is swimming naked when the tide goes out.
Folks lose money......
Exactly. We had an acquaintance, a self styled entrepreneur. Amongst all the hype and general BS we soon came to realise that whenever this character was making money, someone, somewhere else was losing money.
That is the crux of the issue, in regards to housing affordability.
Why was there so little land available...that these guys felt compelled to pay so much?
One might assume these guys would pay as little as they needed to ??
Ordinary farmland ..say $70000/hectare.
Zoned farmland over $3 million/h
As Dale Smith says...this is where high cost housing starts.. with the land price.
I think the really smart developers buy cheap farmland and then get it rezoned...( Thru their connections/ influence..etc)... and pocket the huge difference in values..
Yes, it's all about the zoning. But he paid so far over the top it's nuts. You can run the farm you mentioned as a tax loss business as well..... even land a bit further out suddenly becomes more valuable as Lifestyle blocks as the urbanisation creeps towards you....
The problem with that approach now is that the MDRS and the NPS-UD have made land on the outskirts far less attractive.
The population is overshot.
Grossly.
So any talk of expanding is stupidity.
From whatever angle.
That's a great white biting the arse of a hammerhead.
The movie The Big Short is accurate and playing out again here (remember when Steve Caroll was interviewing a stripper who had like 4 houses or something?). Plus the two goof ball bros that were writing loans and leaving the income sections blank.
This part is telling: However, he said the experience had made him “lose confidence” in property speculation.
He is a cry baby (like Swarbrick was, and he was late to the Ponzi).
He is a bag holder.
He needs to try Gold as its just starting , bitcoin feels mid Ponzi. (Hides under tin roof from incoming abuse from non normies.....).
Bitcoin has already been through the capitalistic wipenout process last year, and stands to benefit very well off the coming US printing press restart.
The aerial photo of the land in question is pretty margin farm land with an in filled stream over it.
And amateur investors are building housing out there ?
They clearly didn't know anything about the deal that Labour and Nation were cooking up (or had it been done by then?) .. They should have seen the writing on the wall though with the NPS-UD and the effects Akl's 2016 unitary plan were having.
The city’s three-month rolling average also increased from an average decline of 1.2% to 3.7%, and the average price was down 10% in the year to April.
It was Christchurch’s first double-digit annual decline in 14 years. Link
So Christchurch's prices have gone down more than they did after an earthquake devastated parts of the city. Newsworthy.
Most places lag Auckland most of the time. Had one or two cocky people here talking up regional markets 6 months or so ago.
As Pa1nter says, boomers will leave Auckland and move to the regions for retirement, but they will leave Auckland with a hell of a lot less...... the regions are farked.
Net internal migration has been out - out - of Auckland for decades.
Not a new thing.
I worked with people who were buying these regional properties site unseen.
Upon returning to my regional town over the last 5 years they were all pumped about how well they were doing - their houses prices had come out of the doldrums, contractors tradies all busy etc.
I tried to point out it was cart before the horse stuff - that the growth was not from new industry and the need to cater for them, but it was fake, created by mass immigration and low interest rates.
What new economic foundations will be left when this ends I asked?
Bewildered looks.
Totally correct Rastus. I too have tried to explain the realities of the market to locals here in Whangavegas, but most just don't want to know. I think there is a psychological bit that gives them a thrill from being 'worth' more than they ever dreamt of, without the understanding that the 'worth' is a house of cards that can vanish really quick, and that it just ends up costing them more..
Wangan i......where the only thing missing is u.
The regionally city i was referring to.
Unique in so many ways!
Heh. I have this conversation with family in the far north from time to time - "prices here can't drop because cashed up auckland retirees will buy us out"...
so I pointed out all the houses for sale in their town that have dropped asking prices by up to 30% (so far) .. and their response was "of course, those places are crap, and the neighbourhood is bad, no one in their right mind would buy those!".
There seems to be a bit of cognitive dissonance going on in the regions.
Most of the boomers I know of that region hopped are now looking back to the big cities.
The regions are good for early retirement, when still mobile, healthy and able to travel. But once you hit the mid 70s, they aren't so desirable.
Health Care is poor (e.g. no Oncology in Taranaki) and the grandkids don't visit as much.
Yes, everything lags Auckland (except Wellington this time), but that's not my point. The point is Christchurch had the slowest price increases around the country for many years after the earthquakes, and the price falls now exceed what they were when the city fell apart. I would have thought an earthquake would do more to dent house prices than interest rate changes.
Interesting release by RBA from a few years ago suggested that non-mining investments in Australia as a share of GDP fell from ~14% in 2005 to just above 3% in 2018.
Moreover, >40% of those investments comes from large and very large firms, despite small and medium businesses making up 99% of all private non-mining firms.
Goes to show the 'strength' of the economy across the ditch is very much linked to the investment sentiments of their large companies.
" Australian big business is not Australian at all"
https://australiainstitute.org.au/wp-content/uploads/2022/06/LNG-Foreig…
In The Summary:
" BHP is described as the “big Australian” but, at 94 per cent foreign owned and 82 per cent American owned, it would be better described as the “big American”. Australian ownership is a measly 6 per cent. The Commonwealth Bank of Australia is thought to be very Australian, yet it is 81 per cent foreign owned and, as it happens, 55 per cent American owned.
The examination of BHP is repeated for the top 20 listed companies in Australia and they are weighted by market value. This procedure finds that the average foreign ownership is 80 per cent and American ownership is 56 per cent. On these figures the American ownership is almost three times the Australian ownership..."
I meant to add this in first:
" Who are the ASX’s biggest mining companies?
According to the ASX, the largest mining company in Australia, and the world for that matter, is none other than BHP Group Ltd (ASX: BHP).
The mining giant boasts a market capitalisation of $261.62 billion and is by far the biggest player on the ASX...."
https://www.fool.com.au/2022/04/13/here-are-the-top-10-asx-mining-compa…
Also, at the end of the summary of the Australia Institute paper:
" These findings have implications for Australian democracy as well as the question of the national interest in the modus operandi of foreign owned companies. When the mining industry lobbies the government, it is necessarily acting for its foreign owners and likely to be inconsistent with Australia’s interest in the mining industry."
Could the US balance it's budget (i.e. emergency tax increases and spending cuts) and muddle through? If I where a Democrat I'd call the other sides bluff and announce an emergency bill to balance the budget.
House prices are still falling but it has a way to go still at the current rate to get back to 2020 prices. Reality is a large number of people who were switched on are not going to be affected. If you purchased in 2020 and went long before rates went up you are sweet. Prices are going to bounce off the bottom, just watch, I'm expecting it to turn quite quickly.
You are believing what you want to believe, to suit your position.
I have nothing to lose or gain from what happens to the market. In fact, as someone who bought only 3 tears ago, it’s probably best for me that the price falls stop soon.
But I certainly don’t think they will for quite a while.
Everyone thinks to suit their position, doesn't change your current position tho does it. Like I said still has a way to fall and if you look at the big picture, its not going to make a big difference to most people when they look back in 10 years time. Its all really about keeping your job and moving on up and just meeting the mortgage repayments.
I always feel a trifle sad when I read ignorance.
Try doing some pragmatic homework?
Where I live has had a 2% value rise in properties in the last year. Maybe one should be careful where to buy one's properties.
The inventory build-up has a lot of implications. Prices dropped to move product, fewer orders for more product etc.
Nk..
Doesn't work that way with houses. Many people will sit for yrs, waiting for the mkt to hit thier price.
Motivated sellers might be only a small proportion of overall accumulating inventory. They are the ones that " meet the mkt ".
Just my view..
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