Here's our summary of key economic events overnight that affect New Zealand, with news central banks seem to have called time on their [brief] interest rate pause signals.
Just like the RBA on Tuesday, the Bank of Canada did the unexpected and hiked their policy interest rate by +25 bps to 4.75%, saying their monetary policy was not sufficiently tight enough yet "to bring supply and demand back into balance" and return inflation sustainably to their 2% target. Essentially they admitted their earlier guidance that they had done enough was wrong.
Growing global concerns that inflation is stickier than expected strengthened expectations that the US Fed will also deliver another rate hike when they next meet a week from today. Currently financial markets price a 2:1 chance that the US central bank will deliver at least one +25 bps rate hike at that meeting or the next. Investors now await the key US inflation data due Wednesday next week, with a hot reading set to solidify another Fed hike after the latest payrolls report showed that the US added a remarkable +339,000 jobs in May.
It is not only Canadian interest rates that are affecting Americans. Bad air quality drifting down from Canadian wildfires is blanketing the eastern states and airports are having to close. China isn't the only place with bad air at present.
US consumer credit levels rose a bit more than expected in April, but at about the same pace as in March, with the gains equally split between revolving (credit cards) and nonrevolving (car loans etc). There are no stress signals in this data.
Separately, there is still no light at the end of the tunnel that is the American residential housing market. Mortgage applications fell yet again even as interest rates slipped back last week, with their 30 year fixed for at 6.81% plus points.
US exports fell -3.6% in April and imports rose +1.5%. Their trade deficit in goods and services came in at -US$74 bln for the month, less than expected and that was far below the -US$105 bln in the same month a year ago. Their imports from China have fallen a long way and China's share of American imports has fallen to its lowest in seventeen years.
Across the Pacific, China's exports grew +8.5% in April from a year ago. But they slipped back -7.5% in May on the same basis. Imports fell -4.5%. As a result China's trade surplus shrank sharply.
Taiwanese exports fell sharply on a year-on-year basis, down more than -14%. But they did rise in May from April, suggesting the steep pressure is easing.
German industrial production rose in April in real terms but that was mainly because construction was up. Otherwise industrial production volumes are meandering along as they have for years with little change. They seem unable to get back to the strong expansion they had in the four years prior to the pandemic. But they aren't going backwards either.
And we should note that the Turkish currency, already depreciating fast, has sunk dramatically further in the past few days.
The Aussies released their Q1-2023 GDP data today and it wasn't too special. They expanded +0.2% in Q1-2023 from Q4-2022, below market forecasts of a +0.3% increase, and after an upwardly revised +0.6% rise in Q4-2022. This was the sixth consecutive period of economic growth but the softest pace in the sequence, as household consumption rose the least in six quarters due to persistent cost pressures and elevated interest rates. As the RBA feared, productivity slumped. The household savings ratio fell to 3.7%, the lowest since Q2-2008, from the prior 4.5%. Year-on-year, Q1-2023 was +2.3% higher. New Zealand's GDP result which will be released next week on June 15, 2023.
We should probably note that Australia's new 4.10% official policy interest rate is being talked about as a level that will trigger a wave of house selling as distressed borrowers find their mortgage payments too much to cope with. Remember, most Aussies are on floating rate mortgages so these increases hit almost immediately. The RBA has pushed through an extra +4% from May 2022 with relentless rises up from +0.1%. And they are probably not done yet.
The UST 10yr yield will start today at 3.79% and up a sharpish +9 bps from yesterday. Their key 2-10 yield curve is less inverted however at -77 bps. Their 1-5 curve is also less inverted at a -126 bps. And their 3 mth-10yr curve is at -120 bps and very much less inverted. The Australian 10 year bond yield is now at 3.95% and up +15 bps in a sharp move. The China 10 year bond rate is little-changed at 2.72%. And the NZ Government 10 year bond rate is at 4.50% and unchanged from this time yesterday.
Wall Street is in its Wednesday session and down a minor -0.2% on the S&P500. Overnight, European markets were all little-changed. Yesterday, Tokyo pulled back -1.8% on the day. Hong Kong rose +0.8%. Shanghai was up a minor +0.1%. The ASX200 ended its Wednesday session down -0.2%, but the NZX50 ended down a full -1.0%.
The price of gold will start today at US$1944/oz and down -US$21 from yesterday.
And oil prices have risen +US$1 today from yesterday at just under US$73/bbl in the US. The international Brent price is now just over US$77/bbl.
The Kiwi dollar starts today -¼c lower at 60.4 USc. We seem to be matching the weakness of the Chinese yuan. Against the Aussie we are lower too, down at 90.8 AUc and near a four month low. Against the euro we are lower at 56.4 euro cents. That means the TWI-5 is down another -30 bps at 68.8 from where we left it yesterday, and that's a six month low.
The bitcoin price is little-changed at US$26,505 and down a mere -0.7% from this time yesterday. However, volatility over the past 24 hours has been moderate at just on +/- 2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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78 Comments
Rory McElroy was offered 800m to switch to LIV golf which he turned down to stay true to the PGA.
Now that the PGA has had a rethink, NZ red radio asks "The PGA ... do they have blood on their hands. They do"
Umm what blood, Rory MacElroy lost out some cash, but he is philosophical with it. I prefer raving conservative hosking to this nuttiness.
Off with your head!
Quite sick really, all that money to smack a small white ball around green fields and they are still complaining.
The blood on the hands refers to the broader sportwashing program from the Saudis. Saudi Arabia has an atrocious human rights record. The PGA has just joined an ever growing list of sports that are willing to ignore these issues in the pursuit of financial return and some form of glory (setting aside the PGA showing a massive middle finger to the players that stood by them). So yes, in a sense, the PGA does have blood on its hands (as do a lot of football clubs, and FIFA).
Lydia Ko & Danny Lee have continued to play in SA in the last couple of years to assist their sportwashing agenda.
"Dirty deeds, done dirt cheap..."
https://www.abc.net.au/news/2023-06-08/there-is-no-pga-tour-liv-golf-me…
The experts have told us interest rates won’t rise in little ole NZ.
Let's look at the COL/inflation pressuresI
Imports up cos NZD down
Fuel subsides gone
Fuel up as the Saudis cut production
RATES UP MASSIVELY
ELECTRICTY UP Massively
UNEMPLOYMENT GOING TO RISE AS Retail DIES.
food up more due to above and winter weather curtailment of supply
Govt spending pre election up
Green policies will add cost to everything.
Debt recovery will be the big driver.
Blah blah blah
Orr will raise the OCR big time
Bust! NZ housing market crashes
NZ is going to see the peeps go into spending lock down and by December inflation will be closer to 10% than 7% and a fully blown recession will be on!
Aussie have just learnt this lesson and even the RBA governor has said. " Stop increasing wages! It's driving inflation up!"
Robertson and Orr are using faulty Fiscal optics
US central bank will deliver at least one +25 bps rate hike at that meeting or the next. Investors now await the key US inflation data due Wednesday next week, with a hot reading set to solidify another Fed hike after the latest payrolls report showed that the US added a remarkable +339,000 jobs in May.
Est Survey hours don't just fall for no reason, at least not for a period as long as four months. How rare is that? Only happened twice outside of declared recession and the first time was Oct '07. Is labor use accelerating or actually contracting? https://buff.ly/43Idtka Link
More Est. Survey data: employment in manufacturing & wholesale have ground to a complete halt. Cyclical industries. Businesses in them aren't cutting workers, they're cutting hours hoping the economy picks up later this year. Once they realize it won't... https://buff.ly/43Idtka Link
Just like the RBA on Tuesday, the Bank of Canada did the unexpected and hiked their policy interest rate by +25 bps to 4.75%
Well thankfully we know that won't happen here, since the news media assures us that Adrian Orr himself has promised no more rate rises. We even got a reminder yesterday on this very site:
[the RBNZ's] decision to hold the Official Cash Rate at 5.5% for now...
See? It has already been "decided".
https://www.interest.co.nz/property/122390/bnz-economists-say-if-they-a…
Yeah, categorically can’t happen….
The "decision" was actually a "projection", which are notorious for changing from one MPS to another. But because this particular projection is one we so dearly want to come true, we act as if it was a promise.
It's frankly juvenile. Any parent knows you don't say you'll take your kid to the park "if we get time later", because if you don't get time later, the response will inevitably come back "but you promised!".
We're behaving like kids.
The Contagion Effect. I wonder how many Aussies have investment property in, say, Queenstown that might be first on the chopping block when times get tough back home?
Australia's new 4.10% official policy interest rate is being talked about as a level that will trigger a wave of house selling as distressed borrowers find their mortgage payments too much to cope with.
I suspect Qtown properties are owned by very high net worth individuals and there won’t be much impact.
Could be. But if you look at the Aussie press, it's awash with property transactions by 'high net worth' individuals that are financed by an awful lot of Debt, that's about to get a lot more expensive. Then...it will get even more expensive. Just as many investment properties in the Regions are owned by out-of-towners (the Mythical Auckland Buyer) and when time get tough they look to sell non-core assets, we'll have to wait and see if the same applies this time.
A strong recession there could have an impact, but I doubt increasing cost of debt alone will.
It's not going to be just a strong Recession.
Last time, we fortuitously had the BRICS to fall back on. Got them to ramp up Debt and Productive capacity to rescue the rest of us. Who is it going to be this time, given we are all now soaked in unpayable Debt? It's supposed to be The Developed World that leads when time get tough, and just as it was 15 years ago, they have a crippled their capacity to do so.
That's right. Since the GFC, most developed countries, barring a handful in the Far East and central Europe, have slashed their productive capacities and grown their economies off asset inflation.
This has concentrated more of the income and wealth in the hands of a few. Take NZ for example, an increasingly large proportion of our workforce is engaged in low-wage jobs, dependent on rich Kiwis and foreigners splashing their money on lattes, takeaways, etc. A pull back in this discretionary spending could spell financial doom for all those households.
Never underestimate how much financial reinvention state authorities will undertake.
How many spins of the wheel they have left, is anyone's guess. Could be centuries, with diminishing returns each and every time.
Just love the KW quote at end of article
This, is likely to escalate and already fragile situation
Russian soldiers were swept away by floodwaters following the Kakhovka dam breach as they tried to flee the east bank of the Dnipro River, Ukrainian sources claimed. When the dam collapsed on Tuesday “no one on the Russian side was able to get away,” Captain Andrei Pidlisnyi, an officer in Ukraine’s armed forces, told CNN. “All the regiments the Russians had on that side were flooded.” He said that many Russian troops were killed or wounded in the chaos.
But still the media dutifully report Ukrainian claims the Russians blew the dam.
Just as the media repeat the Ukrainian claims that the Russians shell the nuclear power station. Which is odd because the Russians have occupied and fully controlled the station for well over a year.
The whole war zone now has the format of Anzio in WW2. Where one side hasn’t the power to advance and the other the power to throw them out. Where it differs here though, is the vast tract of wide open territory that is involved.
Tanks for that insight - maybe they're just Kursk?
Tanks a million said Milligan somewhere in Libya speaking to a paratrooper just returned from a highly secret mission drop, that came to nothing, the only thing there were the Arabs waiting to buy the parachutes.
FG. A balance in firepower became the case at Anzio but principally because US generals were overly cautious about advancing off the beachhead. Sure the Germans knew the general landing area and had created formidable defensive positions but allied hesitation allowed the Germans time to exactly position these resources to devastating effectiveness. Not convinced the Anzio analogy, where the invaders eventually prevailed, is going to play out in the coming UKR offensive however. As you point out it's a vast 1500KM front which means multiple breakthrough points can be relatively easily achieved by UKR. After that the battle will pivot more on tactics and logistics effectiveness than materiel volumes. Possibly a replay of the Arab/Israeli Yom Kippur war, where a much bigger invading enemy was defeated by clever strategy, bold front line officer level tactics and deeply motivated troops.
Aye certainly different too compared to WW2 here, the great encirclements the Wehrmacht eastwards, then the Red Army westwards. Satellite and similar surveillance hooked up to artillery etc makes large land formations easy targets and the old maxim of air superiority has been hugely diminished. Russia has evidenced little ability to do any better out of it than where they are at now, therefore if there is a Ukrainian counter offensive in the making, it remains to be seen what exactly they have got behind them and how well they can use it and agree there is an opportunity of that Israeli capacity to hit hard where it is most effective.
I'm happy with that theory. The Ruskies need to go home and focus on overthrowing their lunatic system.
Apparently they're destroying their own gas pipelines, bombing their own dams, firing missiles at their own power stations, and flying their own drones into the Kremlin.
Sounds like we just need to leave them to it and let the problem take care of itself.
Wouldn't it be nice if they could be left alone to take care of themself............and they left their neighbours alone instead of trying to rule over them with KGB tyrant.
But still the media dutifully report Ukrainian claims the Russians blew the dam.
Russian MFA Spox Maria Zakharova: On October 21, 2022, Russia's Permanent Representative to the United Nations, Vassily Nebenzia, sent a letter to the UN Secretary General regarding Kiev regime's plans to destroy the Kakhovskaya hydroelectric dam. So the question for the UN Secretary-General is: what has been done? Link
Russia always AstroTurf their plans by telegraphing plans as opposition initiatives. How stupid are those parroting Kremlin propaganda? Closet totalitarians?
C'mon Audaxes. We know you are a Putin apologist but this is pretty shit even by your standards.
The Russians sent this letter when they were still technically in control of Kherson just before it was liberated in November.
If anything it gives weight to the idea that the Russians blew the dam. Why would Ukraine flood the city that was under their control?
My feel is that the dam blowing is all Russian. There are some interesting new developments on the Nordstream pipeline blow up and that it was Ukraine with a blind eye from the US. Probably only really know 50+ years from now when official secrets are lifted.
Yeah, I watched russian and western propaganda last night and in this case, on balance of probability, i think the Russians blew the dam to make Ukrainian offensive harder in the south.
So when Biden said the US would stop the Nordstream Pipeline, the Russians thought let's help dear ol Joe and did it for him. Silly Russians.
You mean the damn that allows vast area of Ukraine to irrigate itself into an area that provides a huge chunk of their food supply?
And making the offensive more difficult.
Scorched earth tactic of long ago.
Yes, balance of probabilities is strongly against UKR having deliberately done this. But RU also has little to gain - unless they spotted a build up of landing craft on the UKR coastal side of the Dnipro that were are unaware of. Unintentional RU incompetence is a likely explanation.
Exactly right Rastus. Not enough Occams Razor thinking here… it’s a Ukrainian energy asset, a water reservoir, and if breached it floods Ukrainian towns and turns the fine earth into mud in summer (again, after winter) making Ukrainian offensives harder.
A little look at history will inform you how expendable the Kremlin finds it's citizens.
That's not actually what is happening.
The AFU are shelling Russian materiel around the power stations - not the power stations themselves - the guns the AFU are using are pretty accurate and the area is well mapped. To the best of my knowledge the power stations and important buildings surrounding them were hit by Russia at the beginning but no hits since then.
Ergo - your conclusion - that media is biased - is dubious at best - completely wrong at worst.
So "Chrisofnofame". When the shells land that you say are fired by the Ukranians, why is it reported as Russian artillery.
The artillery projectiles used by UKR would make little impression on the concrete section of this huge dam. It's possible a lucky hit on just the right place on its steel floodgates could have caused them to collapse but these are massively built structures so you'd have to think this unlikely. It's known the Russians had the dam mined. It's also known their military has been spectacularly incompetent in its UKR invasion so an artillery round detonating these live mines is quite possible.
KH.The flood water there has a Russian sensing molecule which only sweeps away Putins troops. UKR personnel are immune.
This, is likely to escalate and already fragile situation - Indeed
Retired Australian F/A-18 Hornet jets a step closer to joining Ukraine's war effort
Pity we can't pitch in with some skyhawks.
Whatever happened to our fighter planes ? last I heard we turned down an offer to sell them and instead threw a tarp over them because we couldn't even afford to put them in a hanger. They will be a complete write off by now.
The venerable Skyhawk jets that served as New Zealand’s last combat aircraft are coming to the end of their second life as ”adversaries” for foreign militaries.
After the Government decided the air force no longer needed an air strike wing in the early 2000s, its fleet of 17 A-4 Skyhawks were put up for sale.
In 2012, after 10 years in storage, eight Skyhawks were bought by United States military contractors Draken International which provided “enemy” fighters to go up against American air force pilots. Skyhawks are still being used for training purposes by some contractors in other parts of the US.
Now over 50 years old, the Skyhawks were quite a formidable aircraft in their day, but now no match for the US 5th generation F-35s and F-22s.
Speaking of Russia/Ukraine, whatever happened to Carlos67? I remember some joking that he should go and volunteer for Wagner as he was so pro-Putin, but he seems to have vanished ... maybe he took the joke too far?
Putin's playing 4D chess, remember.
If 4D chess is played using hundreds of pawns, with no rooks, bishops or knights.
Who benefits from the dam's destruction - both sides have pros and cons . I'm more inclined to think that the dam has been compromised a some point during the war and Russia has allowed the dam to fill as a defense against a river crossing by the Ukrainians (they would release the water if there was a river crossing) but due to the compromise the dam failed.
Err, there's video evidence of the Russian demolition of the dam.
The question is how does Russia benefit. And what does Russia lose. By blowing the dam Russia has lost irrigation for Crimea. The intake for the canal is just beside the dam. While it is entirely possible Russia is willing to throw Crimea under the bus in order to hold what they have captured water for Crimea is not coming back anytime soon (unless Russia is abandoning Crimea - and there is evidence that the Black Sea fleet is leaving Crimea).
Russia do not need the population of Crimea who could start turning on them at any point. They just want the land so they have a strategic port and land corridor. Russia couldn't give a monkey's if the local population have to evacuate due to lack of water.
The population of Crimea wanted Russia. Especially so after the killings of Russian speakers in Odessa. That said, it's all madness as in any ethnic conflict. Cousins and brothers murdering each other.
Wow, you have been deep soaked in Soloviov spittle! Russia ethnically cleansed Crimea and replaced them with military personal. Once Crimea goes back to its rightful owners Russians can go back to beating up their own citizens, within their own borders.
"The occupiers immediately began a campaign of persecution against the Tatar community...... numerous human rights violations against the Tatar population, including torture, disappearances, and psychiatric abuse." "Vladimir Putin has described Crimea as Russia’s “center of spiritual unity.” In reality, it has been home to more than 100 nationalities, and was brutally “Russified” by Joseph Stalin in the 1940s."
https://www.wilsoncenter.org/blog-post/crimean-tatars-and-russification
Actually Russia's cultural obsession with Crimea runs deeper than just its strategic value.
https://www.youtube.com/watch?v=N6CGbYQIVJs&ab_channel=VladVexler
Crimea was without water since 2014. It's only when they invaded the supply was restored.
https://en.wikipedia.org/wiki/North_Crimean_Canal#:~:text=Ukraine%20shu….
According to Russian propaganda Crimea is awash with water.
https://tass.com/emergencies/1628163
Russia obviously worried naval assets could be within range as the front line moves south.
Can you please link it?
Sorry Yvil, I didn't get back to Interest yesterday. Hope this is still relevant?
Seems the govt run propaganda channel fancy taking out more dams.
Warning Russian troops would have also warned the Ukrainian military. Russian mobiks are expendable, as evidenced by their use as front line meat.
Wait a minute why will these Aus home owners be stressed they make all this money and houses are cheaper and cost of living way better apparently. Haven't had a flood of distressed vendors here so why there. Maybe it ain't as great as what people say
Haven't had a flood of distressed vendors here so why there.
- Aus are more likely to be on floating rates so the pain hits faster.
- Australian agencies also tend to be a more forthright (read open and transparent) with their analysis, predictions, and communications.
Don't think for a minute that we are tucked up safe and sound here in lil' ol' EnZed. There is a big monster under our beds, it just hasn't shown its face yet.
- Australian agencies also tend to be a more forthright (read open and transparent) with their analysis, predictions, and communications.
What, like "these low interest rates will hang around till 2024 guys"
I said "forthright" not "right" ;)
Ours said keep on spending, inflation is transitory.
I don't but everyone says how bad NZ hourly earnings is in comparison to Aus and how much cheaper everything else is if so with it being so great over there you wouldn't think any home owners should be in financial distress. Maybe the old analogy should be taught. It's not how much you make but what you do with what you make.
Bank of Canada hiking again. I feel the urge to share this chart: Canada today has more private sector debt than Japan at the peak of the 1990s real estate bubble. Not sure how this ends well for the Canadian real estate market and economy. Link
If only Japan knew back then that importing working age people in large numbers can help avoid the financial reckoning from excessive private debt. Canada is on track to bringing in more than a million net migrants in the year ended June 2023 (2.5% population growth).
The economies of Canada, Aus and NZ are trapped in a vicious circle. Productivity has stalled since the mid-2010s when low-wage migration to these countries picked up. Now we all need more workers to make up for lost productivity and so it goes.
German foreign minister says 8 to 10 million migrants will be flown into the country for free via thousands of chartered planes. Link
The Chinese bombed a dam to stop the invading japs millions died
RBNZ must increase immediately OCR to 20% without delay.20% OCR should be minimum interest for all developed countries. Every RB should know that 5-6% OCR is no longer working. a Aggressive action needed . 20% OCR or more for 20 years is the only way to fix the problem .
Some would think you jest. Those that recall the late 70s don't.
Those who don't have selective memories of the 70s - would remember that inflation then was way higher than inflation now and far, far stickier as most central banks were 'playthings' of the ruling political party.
the missing ingredient at the mo is higher oil prices. That could change in an instant.
And also Britain had just kicked little old NZ into touch and joined the EU. It was dearer to buy the 22 bullet to shoot the sheep than the sheep was worth. Imagine if China kicked us to the kerb. Then these smart ones will realize what old Muldoon was trying to do with the think big projects. Keeping us self reliant. And they complained because we were in debt compared to now we are up the s... creek without a paddle
To soft. Go 100,% Argentinian stylz bro.
Yeah em a lesson 😂
Please tell us why, chicken little.
Two bits of interesting building info from the coal face:
1. "We're getting developable sections for a song now." Comment made by a developer friend (well capitalised). Land prices in many areas in Akl have fallen considerably. This means the finished price of a new dwelling will drop too. The areas indicated would not be considered 'prime' but not 'miles away from anything' either. (They're seriously pissed at the National Party for withdrawing from the MDRS.)
2. "I told [a supplier],[another supplier], [another supplier] and [another supplier] that we couldn't build anything that would sell at those prices as we'd make no money. I asked they drop by [between 10% & 20%] and they all did! We might actually be able to build!" From a small to medium sized builder doing mainly 2 and 3 story terraced houses who is well also capitalised. (They too are seriously pissed at the National Party for withdrawing from the MDRS.)
Ergo - new house prices will continue to fall in price and the building industry continues to tick along albeit at a reduced pace.
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