Here's our summary of key economic events overnight that affect New Zealand, with news that without both the US and China in a healthy economic state, it is hard for the world to prosper. Commodity prices measure that pullback.
As the US heads into its long Memorial Day holiday weekend, negotiators are still unable to sort out their made-up debt limit problem. Credit rating agencies are getting antsy. Stories about a deal being 'close' continue to circulate but that is probably just political spin. Still, at some point they will reach a deal. But even after they do, the costs will linger - probably with a higher risk premium for US debt meaning higher interest rates.
Meanwhile, US initial jobless claims were little-changed from the low 202,000 of the week before. There are still 1.6 mln people on these benefits. This data does not show the expected easing in their labour market.
The Americans released a second estimate of their Q1-2023 economic activity and this revised their initial estimate higher. The US economy grew by an annualised +1.3%, slightly higher than +1.1% in the advance estimate. Consumer spending rose more than originally estimated.
Also improving was the Chicago Fed's National Activity Index which reported a strong improvement, and one that wasn't expected. But it is consistent with the GDP result. The next regional Fed factory survey reported an improvement from their prior one.
US pending home sales disappointed in April however, which isn't anything new for their residential real estate market. They were unchanged in April after a -5.2% slump in March which was the biggest decline since November 2022. Analysts had expected a +1% rise in April.
Meanwhile US corporate profits fell -6.8% to US$2.3 tln in Q1-2023, the lowest since Q2-2021. Analysts had expected only a -0.9% slip following a -2.7% fall in the previous period. It was the largest decrease in corporate profits since the provision-heavy Q1-2020 when they slipped -7.4%. Then you have to go back to 2009 for a larger retreat. So that paints a picture of an American economy with economic growth but a profit recession. A strong labour market will do that.
Across the Pacific, China's post-pandemic rebound seems to be running out of steam. Yes, they are reporting good year-on-year results but that is only because of a weak base. But their recovery is patchy at best, and their currency is weakening even against a weak USD. They have growing labour problems. And they are no longer the engine other countries in the region can rely on to bolster their activity.
Singapore's economy shrank -0.4% in Q1-2023 after virtually no growth in the prior quarter. It was a worse result than expected. They were weighed down by the manufacturing, wholesale trade, and the finance and insurance sectors, which contracted in response to weakness in the global economy and the electronics downcycle. They say the risks are to the downside from here so they are facing falling into recession in Q2-2023, which of course they are well into.
Germany said its economy is now in a recession. They contracted by -0.3% during Q1-2023 after a -0.5% drop in Q4-2022. Persistent high price increases and a surge in borrowing costs hurt household consumption which shrank by -1.2%. However exports were a bright spot.
Global container freight rates fell a little faster last week, driven as usual by the weakness in the trade from and to China. Freight rates for bulk cargoes, which had been holding up over the past few months, fell as well. They were down -9% in the past week, a chunky decline.
The UST 10yr yield starts today at 3.82% and up +9 bps from yesterday as investors discount US Government debt on the debt ceiling risks. Their key 2-10 yield curve is more inverted at -69 bps. Their 1-5 curve is at -135 bps and little-changed. And their 3 mth-10yr curve is less inverted at -186 bps. The Australian 10 year bond yield is now at 3.74% and up +10 bps from yesterday. The China 10 year bond rate is little-changed at 2.73%. And the NZ Government 10 year bond rate is at 4.44% and up +4 bps bp from yesterday.
Wall Street has opened its Thursday session with the S&P500 up +0.9%. Overnight, European markets all closed lower by about -0.5%. Yesterday Tokyo closed its Thursday session up +0.47%. But Hong Kong was down -1.9% continuing is volatile run. Shanghai ended down -0.1%. The ASX200 ended its Thursday session down a stiff -1.1% while the NZX50 found things much easier, falling a mere -0.1% on the day.
The price of gold will start today at US$1943/oz and down -US$19 from yesterday.
And oil prices are a lot softer from yesterday, down -US$1.50 to be just under US$72/bbl in the US. The international Brent price is now just under US$76/bbl.
The Kiwi dollar is again softer against the USD from yesterday, down -½c and now ay 60.6 USc. Against the Aussie we are down less at just on 93 AUc. Against the euro we are down less again to 56.5 euro cents. That means the TWI-5 is has fallen -30 bps to 69.6.
The bitcoin price is little-changed today, now at US$26,349 and up a mere +0.2% from yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
46 Comments
Agreed. He needs to believe, that one, eh? Mush have some irons in the ......
mud.
The RB have no - repeat no - ability to counter ultimate scarcity coupled with overpopulation. Worse, they operate in a chosenly-blind paradigm; no inputs, no outputs, no limits. What could possibly go wrong?
https://surplusenergyeconomics.wordpress.com/2023/05/15/256-a-path-of-l…
'We know, then, that the authorities must speak reassuringly about the economy and the financial system, because it would be the height of irresponsibility for them to do otherwise. But we don’t have to take their word for it, when the alternative exists for us to work things out for ourselves. We have a choice here between two hoary old sayings – many might opt for “ignorance is bliss”, but some of us prefer the adage of “forewarned is forearmed”.'
https://consciousnessofsheep.co.uk/2023/05/25/hidden-in-plain-sight/
'In this, the IMF are far from unique. Western central bankers have been predicting “soft landings” and even no landing at all in recent months, even as they pursue interest rate rises which are – by definition – intended to generate the very recession that they keep pretending will not happen. It is notable, for example, that the apparent apology by Bank of England Chief Economist Huw Pill, for telling Brits that they were just going to have to accept being poorer, was for the way he said it rather than the intention behind his comment. As Bank Governor Andrew Bailey put it: “[His] choice of words was not right.” '
Westpac estimates NZ is on track towards a 2.5% increase in population by Q3-23.
On paper, those new arrivals are workers that "hopefully" relieve labour shortages. The majority of incoming migrants are likely dependents and are going to add more to demand pressure than to the supply side in an economy already reeling with high inflation.
The majority of incoming migrants are likely dependents and are going to add more to demand pressure than to the supply side in an economy already reeling with high inflation.
I think it's a stretch to say that the majority of migrants are dependents. The few that I've met have either come on their own or with a spouse who is also working.
Absolutely Advisor, do we actually get hard and detailed data on immigration? How many qualified nurses coming in?How many backpackers with work visa to man the tourist industry already facing declining tourist numbers as the international economy tightens?
I imagine the pacific island fruit harvesters should be heading home at this time of the orchard cycle.
I was in Middlemore Hospital the other day,...lots of delightful asian nurses in view but no sign of flocks of trainee kiwi nurses busy getting their work experience. I haven't heard of our polytechs gearing up for nurse training under an emergency program. In fact our polytechs and universities seem to be facing tough times of reducing student intakes.
Of course any government will likely choose the immediate "sugar rush" of more immigration and ignore the longer term downsides as you pointed out.
Is it remotely possible that we could elect MP's who might embrace some temporary austerity and start getting realistic about our high unemployment numbers (albeit nicely hidden under various statistical headings)?
If you got an invoice in your inbox to pay US$ for some imported goods this morning, and you have to toddle into your friendly bank to pay for it, your exchange rate will likely start with a 0.59.... If that bill were to arrive in a few weeks time, given the 'end of rate rises' mantra, the rate will likely start with a 0.49.
Goes both ways doesn't it? If imported goods drop in value, so does export margins.
If an exporter imports materials in USD, and exports finished product in USD, then the exchange rate *should* be cancelled out. It's the margin component where it makes a difference. A $100 USD margin @ $0.4 is better than at $0.6. Argument could had that your cost of living is up 33% due to $0.4 against the USD, but not all living costs are exposed to exchange rate movements.
"Absolute crap guess pulled out of your ass
Others here make claims that the USD is going to collapse. So fcken make your minds up"
What timeframe are you talking here HW2?
6 months, 6 years, or 60 years?
This would be a great book for you if you want to calm the nerves a little about what is unfolding and what the possible outcomes are:
https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audi…
I believe the question was asked what Westpac economist would say.
AMD graphics only really works well with AMD processors. Used it for years with INTEL but it was shit compared to NVIDIA. The support was also terrible as windows changed, they just drop all updates after a couple of years. Using an old GTX750Ti and its still getting near on monthly updates like 5 years later. Just looked it up, in fact that's nearly a 10 year old GPU in Feb next year.
I am tempted to get an AMD card when I build my next gaming set up:
"With Smart Access Memory, AMD Ryzen processors can access all the VRAM. This allows the CPU and GPU to run more efficiently, and when combined with AMD's Infinity Cache, it gives a 10 to 15% performance boost on many AAA titles.
I moved away from AMD processors after I had an FX Piledriver. The performance was terrible, mainly because they advertise 4 cores (2 being "logical") or 6 cores ("3 logical"). Severe bottlenecking in games, solved when I replaced with an I5-4690k.
Things do change though, and may revisit next upgrade. Currently paired a 3080 with I7-10700k which should last a couple more years. I don't fancy buying a dedicated power supply for a 4000 series Nvidia card /sarc.
So that paints a picture of an American economy with economic growth but a profit recession. A strong labour market will do that.
I don't think so David, profits are just reverting to mean after a bumper late 2021 and 2022 - the data (tables 9 and 10 in the release) is quite clear on this. Also worth noting that a lot of the retreat is is in financial services ... banks maybe?!?
What this shows is that inflated margins are backing off a bit, and this is showing up in prices. Profits are as much of a cost as labour - in fact in many NZ businesses, the labour and profit share of costs are very similar (wholesale is a good example - about 8% clear profit margin and about 10% labour costs).
No mention of Finland's electricity prices going negative because they started their Nuclear Reactors they have been building for 14 years?
"Finland is now dealing with the opposite problem of poor energy supply: energy operators may no longer be able to operate normally if the electricity is worth less than the cost of producing it.
"Production that is not profitable at these prices is usually removed from the market," Ruusunen said.
Because hydropower cannot be slowed down or turned off, other producers like nuclear are looking to dial back their production to avoid losing money on energy production.
Ruusunen said this meant Finns could happily use all the energy they wanted."
This is the future humanity should be striving for :)
https://www.energymonitor.ai/sectors/power/live-eu-electricity-generati…
The only countries with stable production rates are the ones with nuclear. France is basically propping up Europe's energy grid. Then compare it to Germany who have shut down their nuclear reactors, look at those swings in production. That is the opposite of what electricity grids want.
Hi there :)
Bitcoin is the first scarce digital asset because of a process known as the Difficulty Adjustment.
The Bitcoin network is programmed to mine a block on averages every 10 min.
As more miners come onto the network to mine, block production might increase to say every 8 min, or increase to 12 if people leave.
To adjust for this, every 2016 blocks, or around 2 weeks, the network makes it easier or harder to fond a block to bring it back towards the 10 min average block time.
So unlike gold, or copper etc, where if the price tripled the number of people looking for it would increase, and so the inflation rate would increase, Bitcoin has absolute scarcity because no matter how many people are "looking for it", no more than 21,000,000 Bitcoin will ever be created.
Check out this chart, it illustrates the amount of computing power that is aiming to mint the next block. This is also what secures the network from outside attack, as you would need to maintain over 50% of all of this energy to rewrite a block (and the transactions it contains) that has already been added to the ledger (or blockchain).
So miners compete on a global scale to find the magic number, and as a reward for burning real energy, they get paid in Bitcoin. Obviously mining has a break even price, and since electricity is their most significant cost, they need access to cheap power to be competitive. Hence why they co locate next to solar, wind, hydro, nuclear power production. Or Stranded gas well where the gas is just flared. They can put it through a generator and use it to mine Bitcoin.
It is an amazing technology and is a fantastic tool for power grids and future energy production.
Hope that helps :)
Yea, or the idiotic German leaders could reopen their open perfectly good nuclear power plants that they just shut down and produce their own. Instead of draining their citizens wealth and prospects and punishing their manufacturing sector by buying another countries energy.
And their collective response can be found in the inverted yields on government bonds which – for the first time in history – have been simultaneously inverted across the western states. Only once, in the mid-1960s, has a yield curve inversion not been followed by a recession. And even this can be misleading, because the 1960s inversion was followed by an eight-point fall in GDP.
I certainly take the view that we are heading for a recession and not as shallow as Mr. Orr seems to believe. If neither Singapore nor Germany can avoid it, why should we? Of course I may be wrong, but I am positioning a significant proportion of my own money on the basis of a recession here, if not immediately then after a lag of 6/9 months. I now have money in government stock, the Local Authority funding Agency and in longer-term PIE TDs. As interest rates fall-and sooner than the RB thinks- these will look increasingly attractive.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.