Here's our summary of key economic events overnight that affect New Zealand, with news today that markets are assuming a US debt deal will be done soon to avoid a shutdown and default.
Well, equity markets seem to be assuming that. Bond markets aren't so sure although yield inversions are either easing back or not getting worse. But long-term rates are rising slightly.
Last week's new American jobless claims fell back unexpectedly to +216,000 and there are now 1.6 mln people on these benefits. Analysts had expected higher levels, not lower levels. The strength of the US labour market is not done yet it seems. Markets noticed, thinking this will give room for another Fed rate hike at their June 15 (NZT) meeting.
The next regional Fed factory survey, this one from the manufacturing heartland by the Philadelphia Fed was far less negative than the New York one. It improved in May sharply from its April low although to be fair it is still not 'positive'. The indicators for current activity, new orders, and shipments rose, but all three remained in negative territory. The firms surveyed continue to indicate overall increases in prices paid and decreases for prices received. The survey’s future indexes still suggest "tempered expectations" for growth over the next six months.
Meanwhile, existing-home sales faded -3.4% in April to an annual rate of 4.28 mln. That is their largest drop in more than a decade. Sales fell more than -23% from one year ago. Unsold inventories rose.
Leading indicators for the US economy remain mildly weak, but little-changed.
In the period leading up to round one of the Turkish election, investors voted with their feet, betting Erdogan would not concede and would remain. The country's foreign currency and gold reserves fell another -US$17 bln. The run-off round of voting there is on May 28, 2023
In Australia, their jobless rate rose to 3.7% in April from 3.5% in March. It was a rise that wasn't expected. At the same time, employment -4,300 when a +25,000 rise was expected. Full-time jobs fell -27,100 while part-time jobs rose +22,800.
And staying in Australia, Westpac has banned customers from transacting with Binance. And Binance was stripped of its ability to accept PayID funds transfers from Australian clients. The global crypto firm is fighting to retain banking services in Australia. It is a firm accused of knowingly facilitating money laundering in other jurisdictions, especially the US, and no-one wants to get caught up in that.
The latest global container freight cost eased yet again last week and is now -83% below the peak reached in September 2021. It is also -36% lower than the 10-year average which of course includes that peak. However it remains more than +20% higher than average 2019 pre-pandemic rates. The current weakness is spreading to more than just the outbound rates from China. Bulk cargo freight rates eased but are still in their recent general range.
But air passenger travel is ramping up, anticipating a surge in demand. That translates to thousands more aircraft and new pilots. Boeing estimates that the world will need more than 600,000 new pilots between 2022 and 2041, and the biggest requirement is in Asia. Pilot training is a huge new growth industry, it seems. Aircraft manufacturers are salivating.
The UST 10yr yield starts today at 3.66%, and up another +8 bps from this time yesterday and a two month high. Their key 2-10 yield curve is a bit more inverted at -60 bps. Their 1-5 curve is unchanged at -132 bps. But their 3 mth-10yr curve is less inverted at -177 bps. The Australian 10 year bond yield is now at 3.57% and up +9 bps. The China 10 year bond rate is little-changed at 2.73%. And the NZ Government 10 year bond rate is at 4.36% up another +11 bps from yesterday.
Wall Street has opened its Thursday session with a +0.6% gain on the S&P500. Overnight European markets were mixed with Frankfurt up a strong +1.3% and London up a lesser +0.3% to bookend these markets. Yesterday Tokyo closed up another strong +1.6%. Hong Kong recovered +0.9% after yesterday's big fall and Shanghai was up +0.4%. The ASX200 closed its Thursday session recovering +0.5% and the NZX50 ended up +0.2%.
The price of gold will start today at US$1957/oz and down -US$24 in a day.
And oil prices are down -US$1.50 from yesterday to be just under US$71.50/bbl in the US. The international Brent price is now under US$75.50/bbl.
The Kiwi dollar is a -½c lower against the USD from yesterday and now just on 62.1 USc. Against the Aussie we are little-changed at just under 94 AUc. Against the euro we are also little-changed at 57.7 euro cents. That means the TWI-5 is now under 70.8 and down -20 bps from this time yesterday.
The bitcoin price is lower today, now at US$26,477 and down -2.2% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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85 Comments
Labour productivity in New Zealand’s construction industry increased 23% in building construction, 25% in construction services, but only 5% in heavy and civil engineering construction. This compares to economy-wide labour productivity growth of 30%
A mate mentioned that there are at least 13 pair of hands involved in even the basic capital funding models/memos just at Ministry of Health before these are further discussed by many more at the health minister's office, Treasury, finance minister's office, DPMC, etc.
The worst part is very few of these bureaucrats have a background in finance, infrastructure, etc., the majority being comms stooges and generic people managers.
Realistically, the editors probably have to do it (edit: I see your original comment changed - below is in response to the up and down nature of the headlines)
This is a fantastic site, especially when you compare it to contents of Stuff, the Herald etc which the journalistic equivalent of the contents of a plane's toilet tank.
The problem is that presumably a key component of the revenue for the site comes from display advertising (those banners I keep seeing for a certain type of blue pill and exotic singles in my area ... you guys see the same right? right??)
Because of the niche nature of the content audience the site attracts (all of TOP's voters, desperate real estate spruikers and cashed-up world-is-ending doomers) the "CPM" - the rate the ad network will pay out per 1000 views of the content - is probably on the higher end of the scale but ultimately you need to still drive a lot of pageviews to make the endeavour worthwhile, particularly as it's not like this is a hobby blog in the vein of wolfstreet.com or something like that where the costs would be minimal.
Therefore, you've got to get people coming back to the site and checking in regularly. The somewhat schizo headlines for the briefings help with that.
Don't hate the player, hate the game basically. The same game is also why mainstream journalism is so rubbish and headlines about Masterchef judges, Harry & Meghan or the optimal number of swingers parties to attend per week for mental health drown out the important news (well here in NZ we also have the added factor of the government paying media outlets not to give them bad press ... but that's for another day)
Probably the only solution would be for us all to subscribe/donate so the site has stable revenue - I really must get off my chuff and do that.
by HW2 | 19th May 23, 8:19am 1684441168
Ex agent, indie observer
Some of these comments come with a special personal agenda 🥸
And HW never has a personal agenda to any of his posts does he! Yeah right! Nearly every comment HW2 has made on this site for years has come with a personal agenda....spruiking house prices for his own financial gain!
That's the joke ;)
For my sins I used to work in the digital ad technology space (and have an interest in a couple of businesses that generate revenue from ad placements) so I understand how the targeting works ... always amusing when somebody has 'dodgy' ads showing as it's usually because of their search and browsing history.
June 2022 cpi of 1.7pct will drop out soon. March 23 cpi was 1.2 and some of the drivers will have eased except food, making the June cpi read 1.2 or lower
We could be down to 6 percent inflation by July.
I am still worried by the RBs trigger finger.
TA has made a bold prediction of HPI growth, looks out on a limb for now.
Funny how no one except Seymour brought up our dire current account deficit situation in yesterday's Budget debate.
Labour thinks more centralisation is the magic bullet, National believes kicking the can down the road with public service cuts (as done in the Key era) will solve it.
Given we lack the economic capacity (and fundamentals) to export more, the real choices are between consuming less and ignoring the situation until foreign creditors force us into austerity.
https://www.statista.com/statistics/740147/active-pilots-airline-indust…
Maybe not such an impossible number?
Considering that a large number might be retiring over that period as well
Over the next 20 years it will be on the planes airlines already have or have ordered.
I know you can see the world running out of fossil fuel but it wont happen in the short term and until it becomes ridiculously expensive or there is a wholesale change in attitude we will continue in the same direction its going now - although by the time we cannot afford fossil fuel travelers might have already moved to the retirement travelling cruise ship anyway
In the period leading up to round one of the Turkish election, investors voted with their feet, betting Erdogan would not concede and would remain.
Interesting propaganda piece. I cant say I would want to live there, but the country is still in a great position to benefit from development and trade. IF they can sort their currency and financials out. Their central bank monetary policy is even crazier than having a central bank in the first place.
Global debt grew by $8.3tn to a near-record $305tn in Q123, mainly driven by non-financial corporates & govt sector, IIF has calculated. Global debt is now $45tn higher than its pre-pandemic level & is expected to continue increasing rapidly. Combination of high debt levels & rising interest rates has pushed up debt service costs, prompting concerns about leverage in financial system. Link
"And staying in Australia, Westpac has banned customers from transacting with Binance."
Not quite true, they are blocking direct payments.
Hmm I wonder if they allow a person to use credit cards to buy lotto tickets or at the casino
The whole country is about to turn into a lottery.
A Three-Page Bill for Nuclear Reactors in Australia & The De Facto AUKUS Inquiry
“The Australian public were blindsided when they woke up about two months ago and found out that the Labor government intended to spend $368 billion on nuclear submarines. In fact, one of the real offensive parts about that is that the Albanese government has not told the truth about the real cost. It turns out that $368 billion only gets you the first five of the AUKUS subs, and the last three happen outside that budget envelope, bringing the real cost of the nuclear submarine project to close to half a trillion dollars.”
Good to see that our comments and support of TOP are getting some traction, and good to see that the media are beginning to take an interest as well. Our comments are obviously working, so keep up the fight.
In case you missed this press release from Raf Manji about the VANILLA budget I include it.
The Opportunities Party (TOP) has expressed disappointment in the Government’s 2023 budget announcement - criticising the lack of long-term ambition in addressing New Zealand’s systemic problems. Leader of the The Opportunities Party, Raf Manji, emphasises the missed opportunity to secure a fairer future for all, especially our young people.
Manji believes “Labour's sixth budget, whilst helpful, still does not address the structural deficits in our infrastructure and core public services. There is a lack of ambition in addressing New Zealand’s key issues. We believe in investing in our future and creating a fairer society for all New Zealanders."
Four key areas have not been addressed:
- Our tax system remains unbalanced and unfair.
- More investment in our young people is needed.
- There is no serious commitment to fund the community housing sector.
- And no clear long-term plan to invest in our infrastructure.
We would:
- Introduce a tax-free threshold of $15,000 through our Tax Switch - we will build a fairer economy where all of us can afford the essentials, work is rewarded and those doing it toughest are fairly supported.
- Invest $1.5 billion in our young people through the Teal Card, which will deliver fully funded public transport, fully-funded healthcare and a universal savings boost paired with a national civic service for people up to the age of 30.
- Establish a $3 billion development fund for Community Housing Associations to build homes and communities.
- Implement a $200b 30-year infrastructure plan to deliver strategic investment in key areas, supporting the needs of our future generations.
Manji concluded, "The Opportunities Party is a party for fairness. We believe all New Zealanders deserve a genuine opportunity for a good life but to get there, we need to confront our systemic problems with bold, smart policy. That’s exactly what we will deliver.”
"Increase the annual land value tax on residential land (established in Phase 1) to 1.25%." (eg. $6kpa on the average $1M house assuming 50% LV)
"unless you're a lower income homeowner"
Go check out the recent Reddit NZ thread on TOP's tax calculator - full of people who thought TOP's tax policy was a great idea until they realised they'd be paying through the nose tax-wise to live in their own home.
Go after the real problem; using capital gains as leverage to buy more properties ... not ordinary people who happen to have one house with more than a postage-stamp sized piece of land.
Yep.... people don't like fair when they suddenly realise that being fair means it hits their pocket.
You think it's fair a renter pays off a home but title ends up with the landlord?
Fair will hurt...some. Because the ones hurting know (for which the system is not fair) will not be hurt so much.
Fair enough?
When has renting something ever entitled you to ownership unless it's a rent-to-own scenario?
The problem with renting - as somebody who did so for a decade before buying - is that rents are too high (for a whole host of reasons from insufficient supply to rental subsidies to short term accommodation taking stock like AirBNB) and there isn't enough security for renters. There is always going to be a cohort in society who have to rent, who will never be in a position to buy. We need to make renting as affordable and stable as possible for this group so there is dignity and a decent life in doing so.
In terms of empowering those renters who are close to buying, surely a change to the system should be to target the ownership of multiple properties, particularly when it is achieved using leverage to give you an unfair leg up. That way if you are currently a renter you aren't competing against leveraged investors when going to buy your first home.
Having to stump up thousands per year in extra tax - effectively making you rent your home off the government or rack up some big arrears as a retiree - because you have the audacity to own a single family home doesn't seem fair to me at all (particularly when commercial, rural and iwi land is excluded ... maybe I'll sell up and buy a nice big lifestyle block).
And they 💩 in your garden. Imagine if i flung my dog's crap over the fence! 🤬
Bank of England Won’t Return Balance Sheet to Pre-Financial Crisis Levels, Bailey Warns
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Officials accused of missing inflation and widening inequality
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Bailey says balance sheet won’t return to pre-2008 levels
The QE program is incurring losses as it is being run down and the BOE is under pressure from the Treasury to deliver “value for money” as the assets are redeemed or sold. The BOE currently projects the program to cost the UK taxpayer about £100 billion over its lifetime.
At some stage (soon?) this will unwind. If so, brace for a much higher OCR etc.
The Bank of Japan to back-out of the policies that have resulted in it owning more than half its government’s bonds and about 7 per cent of its sharemarket. With the current inflation and economic growth numbers, those policies – already under pressure from the market – appear unsustainable. Actual change to the (low interest rate) policies could see a flood of money back to Japan in a great unwinding of decades-long trends.
https://www.smh.com.au/business/the-economy/japan-is-rising-again-it-co…
Are we spending a lot of money on "No Functional Classification" these days?
"Social Security and Welfare $46B
No Functional Classification $33B
Health $28B
Education $21B"
https://www.stuff.co.nz/national/politics/132083751/budget-2023-nationa…
Tony Alexander says the worst is over: Why Treasury’s predictions of further house price drops are wrong
You know when the market has hit the bottom when agents can find the time to "work for free" on other tasks such as "weeding, water blasting, cleaning gutters and painting to building a petanque court, trimming and removing trees."
Probably took one look at his CV and thought "Crap".
https://www.news.com.au/finance/economy/australian-economy/every-aussie…
Every single person, home and business in Australia is impacted by this and it’s also screwing inflation – yet no one seems to be willing to stop it.
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