Here's our summary of key economic events overnight that affect New Zealand, with news bad-news bears can't catch a break at present.
Overnight US data was quite good again, and is seen underpinning more US Fed rate hikes with the next one on July 27 NZT and just before their summer holidays.
US jobless claims came in lower than expected with a decrease of -18,000 from the prior week. Seasonally-adjusted it was higher than that, but still lower than expected. There are now 1.68 mln people on these benefits.
The third and 'final' calculation of Q1-2023 GDP recorded an expansion of +2.0% which was much better than either of the two prior estimates. Analysts had expected a +1.4% 'final' result. Higher consumer spending was essentially behind this result.
But what really got analyst attention was the higher inflation rate in their PCE version for April. A +4.4% annual rate, and an annualised rate higher than this between March and April would not have been unnoticed by Fed policymakers. And because they had already signaled more hikes in speeches earlier in the week, markets are now bracing for a robust response. Clearly inflation's impulse isn't beaten yet and probably won't be while their labour market is expanding so quickly. The June non-farm payrolls data will come out a week tomorrow and will very closely watched. Bets are being placed now that it will be another impressive increase.
There is one set of negative data today and one not expected; pending home sales in May fell when a rise was anticipated. It wasn't a minor shrinkage either. Perhaps we were wrong to suggest their housing market was showing signs of bottoming out and turning up. Their economy is expanding solidly, but it isn't due to their housing markets.
Meanwhile, the 23 largest American banks passed the US Fed’s annual stress test, and clearing a key hurdle for returning billions of dollars to investors. According to these results, those banks showed they can withstand a severe global recession and related real estate market turmoil and will be strong enough to come out intact. According to the Fed, "This year's stress test includes a severe global recession with a 40% decline in commercial real estate prices, a substantial increase in office vacancies, and a 38% decline in house prices. The unemployment rate rises by +6.4 percentage points to a peak of 10% and economic output declines commensurately" in these tests.
In Canada, the April data shows that their recent 2023 weakness in weekly earnings is behind them, with wages rising back at the same rate it did in 2022. That isn't spectacular, but the recent drag seem behind them now.
In China, their fast expanding EV car industry is facing a reckoning, one their country doesn't need. Many smaller EV manufacturers are either going bust or being swallowed up in a big consolidation drive. But the real problem is that production and capacity is far bigger than demand. Prices are dropping fast, and prices for components like batteries are falling fast too. This is part of a general decline, and the yuan continues to weaken. In theory that should make exports from China more price-competitive.
Japanese retail sales rose +5.7% in May from a year ago and handily higher than inflation's effect, so a real gain. We should note that this expansion has been running higher than +5% for every month in 2023, and that is the longest streak at that level since the late 1970s!
Germany reported a small rise in CPI inflation for May, running at 6.4% and up from 6.1% in April. This was more than expected but the April-to-May rate slipped to about half that.
The Swedish central bank hiked their policy rate by +25 bps to 3.75%, a seventh consecutive increase, and pushing Swedish borrowing costs to fresh post-2008-highs. But is was the increase markets expected. CPI inflation there was running at a heady +9.7% in May and is only seen coming down relatively slowly.
Yesterday, Australia reported their retail sales grew +4.2% in May from the same month a year ago, but given that CPI inflation is running there at 5.6%, those gains are not 'real. A growing level of special 'sales events' did boost the April-to-May increase however.
Saying in Australia, there were 432,000 job vacancies in May, down -9,000 from February, according to new figures from the Australian Bureau of Statistics. While job vacancies have fallen by around -10% over the past year, they were still high – around +90% higher in May 2023 than in February 2020, just before the start of the pandemic. And staying in Australia, Mainfreight says the Aussie freight industry market has peaked and that conditions will worsen in the coming months.
Overall global containerised freight rates fell sharply yet again last week and are now -80% lower than a year ago and almost back to the 2019 pre-pandemic average. Outbound rates from China is where the main weakness is. Bulk cargo rates were a bit softer last week but are essentially holding on to their recent minor recovery.
The UST 10yr yield will start today up sharply at 3.85% and a jump of +13 bps from yesterday and the highest since mid-March. Their key 2-10 yield curve inversion is little-changed however at -102 bps. Their 1-5 curve is less inverted at -130 bps. And their 3 mth-10yr curve is also less inverted, also now by -130 bps. The Australian 10 year bond yield is now at 4.00% and up +14 bps. The China 10 year bond rate is still unchanged at 2.71%. And the NZ Government 10 year bond rate is up another +4 bps at 4.64% and its highest since early March 2023.
Wall Street is closing its Thursday trade with a modest +0.4% gain on the S&P500. Overnight, European markets were mixed with London down -0.4% and Paris up +0.4%. Frankfurt was unchanged in between. Yesterday, Tokyo ended its Thursday trade up a minor +0.1% to hold its big Wednesday gain. Hong Kong fell a sharp -1.2%, and Shanghai ended down -0.2%. The ASX200 ended its session unchanged. But the NZX50 managed a +0.6% gain in an end-of-session burst.
The price of gold will start today at US$1908/oz and that's down -US$4 from yesterday.
And oil prices are little-changed from yesterday to now be just over US$69.50/bbl in the US. The international Brent price is still just under US$74.50/bbl.
The Kiwi dollar starts today at 60.7 USc and little-changed from yesterday. Against the Aussie we have slipped again to 91.6 AUc. Against the euro we are little-changed at 55.8 euro cents. That means the TWI-5 has fallen to 69.2 and down another -20 bps since this time yesterday and a four week low all of a sudden.
The bitcoin price has risen from this time yesterday and now is at US$30,533 which is a +1.3% gain and it looks like it will finish the month above NZ$50,000 for the first time since April 2022. Volatility over the past 24 hours has remained modest at just over +/- 1.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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