Here's our summary of key economic events over the weekend that affect New Zealand, with news more rises to our OCR may be off the table now but that doesn't mean our interest rates will stop going up.
This coming week, the big international focus will be on the US CPI change for June. We get that on Thursday, NZ time and an increase of 3.1% is expected, down from the May 4.0% rate. That would count as good progress, but markets still expect two (or three) more US Fed rate hikes in 2023 based on recent Fed speaker signals.
Later today we will also get China's June CPI inflation report, and that isn't expected to show any. India releases their June CPI result on Thursday.
This coming week we will also get central bank rate reviews from Canada on Thursday where a +25 bps rise is expected, and South Korea also on Thursday. And of course we will get our own RBNZ releasing their decision on Wednesday, and no change is expected here.
Australia's business and consumer sentiment survey results come out this week too and will be influential.
But most influential has been the US headline non-farm payrolls expanded +209,000 when analysts had expected +225,000. That was sharply less than Friday's ADP employment report that signaled +497,000. The headline June expansion is the lowest in almost three years.
Although the headline numbers cooled, economic activity hasn’t slowed as much as Fed officials expected, likely keeping the central bank on track to raise interest rates later this month to combat its persistent and above target inflation. The labour market has their backs for an increase.
Canada also released its June labour force data and that came in better than expected, up +59,900 in June from May when a +20,000 rise was anticipated. In fact, they had a +109,600 rise in full-time employment and a fall of -49,800 in part-time employment. So the net quality of the new jobs improved. This probably paves the way for another central bank policy rate hike there too on Thursday (NZT). Their policy rate it is already 4.75%.
For all its economic recovery issues, China's foreign exchange reserves rose in June when no change was expected. Yes, the rise was small in USD terms but is was a rise. They are now at US$3.193 tln, with less than US$0.9 tln held in US government debt.
Total vehicle sales in China came in at almost the same level as a year ago for June, but that built on their large May recovery. Total sales are now running at an annual rate of 26 mln, making this the world's largest vehicle market by some margin over the second place US. More than 2.5 mln vehicles were sold in June 2023 alone.
Taiwanese exports fell sharply in June from May, down more than -10%, and an uncomfortable -23% lower than June a year ago. Ameliorating the pain was that imports fell even more.
Japanese household spending remained low in May and is falling, with households there prioritising saving. If this trend embeds it will be hard for Japan to maintain its recent economic expansion, and it will be up to their Government to convert those savings into some sort of spending.
Just when you thought the regional bank problems had been smoothed over, now comes news from the UK that OSB (One Savings Bank) is in strife. Its share value fell -29% on Friday alone. They are a British mortgage bank, and investors will recall the bath that some of their brethren took with Northern Rock. For perspective OSB has assets of about NZ$56 bln so very much a smaller player in that market. But it is almost twice the size of Kiwibank (assets NZ$33 bln.)
And back in the US we should note that the Fed continues its quantitative tightening, now having shrunk its balance sheet back to August 2021 levels, down -7.5% from its April 2022 peak. But it is still double what it was at the start of the pandemic emergency.
The latest update to the FAO world food price index shows prices continuing to retreat with the pressures well and truly behind us. It fell for a second month in June and to a fresh low since April 2021. The May increase was downwardly revised. Obviously global food supply and cost pressures have eased a lot since their peak in March 2022, falling by almost a quarter. Meat prices have remained stable since October last year, but dairy prices continue to ease.
The UST 10yr yield will start today at 4.07%, unchanged from Saturday but it is up +22 bps in a week and that is a big move, and to its highest level since the brief March spike and before that, November. Their key 2-10 yield curve inversion is still lower at -88 bps. Their 1-5 curve is little-changed at -107 bps. And their 3 mth-10yr curve is slightly less inverted at -118 bps. The Australian 10 year bond yield is now at 4.28% and up another +1 bp from Saturday. The China 10 year bond rate is unchanged at 2.70%. The NZ Government 10 year bond rate has stayed up 4.90% and that is now a twelve year high.
For all the turmoil, we should note that the Fear & Greed Index is now strongly on the 'greed' side of things. Investors are shrugging off their fears, despite the bond market signals. But an upcoming earnings season that might deliver wavering results could quickly upend that.
The price of gold will start today at US$1924/oz and down -US$2 from Saturday. This price isn't signaling 'fear' either.
And oil prices are holding at just over US$73.50/bbl in the US. The international Brent price is now at just over US$78.50/bbl.
The Kiwi dollar starts today just over 62.1 USc and unchanged from Saturday. Against the Aussie we are still firm at just under 92.9 AUc. Against the euro we are holding at 56.6 euro cents. That means the TWI-5 is now just over 70.3, little-changed from Saturday but up +50 bps in a week.
The bitcoin price has risen marginally from this time Saturday and now is at US$30,276 which is a minor +0.4% shift up. Recall, this time last week this price was US$30,316, so little change from then too. Volatility over the past 24 hours has been low at just under +/- 0.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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67 Comments
Typical Stuff puff piece planted by the RE industry, and unchallenged by the dumb reporter:
https://www.stuff.co.nz/life-style/homed/selling/132510874/this-aucklan…
Just a couple of minutes research reveals:
This property had a QV value of 1.85million as of June 2021 - so that's a massive $600,000 fall from what it was valued at then - or a cool 32% DOWN in just 2 years.In fact it's June 2017 QV value was $1.08m - so it's only $180,000 above it's 2017 value. A 32% fall puts prices back to mid/late 2018 values...............
Often the news articles people think are there to hype things up, are actually to aggrieve people instead. Attracts way more eyeballs.
Another good trick is to have an article about someone young managing to get into property all on their own - by living at home till 25 and getting the folks to go guarantor.
Looks like a good price to me with current median price nearby of 865k. Clearly buying for the land. CV of $1.85 milion is not representative of its true value. The owners cashed in a tidy inheritance.
Yesterday was the busiest day for commercial aviation that we’ve ever tracked. We tracked 134,386 commercial flights on 6 July and today is shaping up to be another busy day. More than 20,000 flights are in the air right now.
You must be happy, all those emissions flowing into the atmosphere and contributing to climate change. Soon we'll have passed the point of no return and our kids will be stuffed, you can then hang up your climate denial propaganda and spend up big on all your earnings. You must be so proud.
And Biden is off to Europe, and a NATO meeting. Under pressure over Ukraine being granted membership and supplying them with cluster bombs.
Re the cluster bombs - I struggle with the hypocrisy of those nations who are lambasting the US of giving them to Ukraine. They would clearly throw Ukraine further under the bus, and damn the consequences! As to Ukraine becoming a member of NATO now. I think that would depend on the rules considering Ukraine is at war. Europe and NATO are now between a rock and hard place here as doing nothing exposes them to further aggression from Russia, and defending Ukraine runs the risk of a escalation to nukes. Something that was always a possibility. They should have played hard ball at the beginning!
Been hanging out at the Sportpalast again Pa1nter?
"...we cannot overcome the Bolshevist danger unless we use equivalent methods in a total war.
...I ask you: Do you want total war? If necessary, do you want a war more total and radical than anything that we can even imagine today?"
To be fair Pa1nter is correct. Russia is pushing it's form of total war, short of nukes even though it has clearly indicated it is prepared to use them. It is already using cluster munitions and targeting civilians, so essentially it has already set the ground rules. Restraining Ukraine only prolongs the war. Russia is launching attacks from outside Ukraine. To argue that Ukraine can only employ provided weapons on it's own territory is tying its hands behind its back. The issue of nukes I suggest is easy to address. NATO and the EU should publically and loudly inform Russia that should they choose to employ nukes at any level in Ukraine or else where, then NATO will retaliate and target both the bases from whence they were deployed and the leadership who authorised their use. The much vaunted Russian military is clearly not the mighty ogre once believed. That message would be clear to Russia that their escalation would bring NATO in and they would lose big time. I don't think NATO would even have to mention nukes, or even use them in that case. But history teaches us that it is no point having a military if you're afraid to use it (as NATO seems to be showing), and aggression is only ever really deterred by a bigger, stronger threat of aggression in response (which so far Russia has not seen).
Oh well, as it turned out, Russia was all testosterone and no brain. Going all in from the start would have been the best option in hindsight. I see stories about Moscow developers being told to send their work forces to the front, or forgo being awarded contracts in the future. Seems workers from the central Asian republics are the next meat for the front. I wonder when the children of Moscow elites will be called back from the cultural capitals of the planet to serve mother Russia under cluster munitions?
Lavrov "Russia is not squeaky clean. Russia is what it is. And we are not ashamed of showing who we are."
https://www.bbc.com/news/world-europe-61825525
This is what you are up against
Your comment intrigued me. I'd be interested in others opinion, but I think the rules of war began around protecting nobles and royalty on opposing sides from the ravages and consequences of their adventurism, while they squandered the lives and welfare of their peasantry.
Personally I think the leadership of the opposing force should be the priority target, irrespective of where they are hiding.
Not wise being an American authorising cluster bombs. Which most countries, including New Zealand ban.
It's quite conceivable that in a few decades belief changes. That some Americans are extradited to the Donbass and after a time in some concrete box, are taken out and hung.
Have to sort out the unexploded US cluster munitions from the 000s of tonnes of Russian ones first. The failure rate in Russian cluster ordinance is around 30%, US 2%. You have seriously got the criminals back the front. Clearing unexploded rubbish from Russia's empire building attempts will take generations.
Their bombs are worse than our bombs therefore our bombs are fine. That's some poor reasoning.
Where on earth did you get the failure rate from different countries cluster munitions? Wait, let me guess, they were estimates from a Western (likely US military) source.
Oh, I just looked, sure enough, the Pentagon is your source from Wikipedia, you neglected to report the next line however ... "However, according to a report prepared for Congress, experts in cleanup operations "have frequently reported failure rates of 10% to 30%.""
Poor reasoning? The Russian fascists need to get the f out of their independent neighbour. Then no one would be dropping bombs on anyone.
I would say bombs dropped in defence have much more legitimacy than those dropped in aggression.
Oh yes and it seems the Russian failure rate is actually higher. 40% and yes, according to the article upgraded US cluster munitions do have a failure rate of 2%
https://www.nytimes.com/2023/07/06/us/politics/biden-ukraine-cluster-bo…
Does that make cluster munitions a wonderful contributer to global humanity? No, but if it gets Russian murders thieves and rapists out of a country suffering a brutal invasion, then it has a place unfortunately.
So who's firing all the artillery? Russia 20000/50000/day, to Ukraine's 4000/7000.
https://euobserver.com/ukraine/156836
Personally I'd be more concerned about depleted Uranium shells. Widespread heavy metal toxicity is impossible to clean up.
Ukraine’s Failed Counter Offensive Paints NATO into a Corner
Charap is a prime example of the failings of political science as a “science.” He ignores the evidence that Russia, unlike Ukraine, has enormous capacity to achieve a decisive military victory over not only Ukraine, but NATO. Ukraine and NATO are running out of artillery shells, cruise missiles, tanks and combat air craft. More importantly, Ukraine is drained of competent, trained soldiers that can operate those weapon systems.
The situation for Russia is the exact opposite. With each passing day Russia’s trained manpower increases along with soaring production of tanks, hypersonic missiles, artillery shells, mortars and drones. Russia is degrading Ukraine’s combat capability and has not yet launched its own offensive using the full weight of the Russian ground and air forces.
NATO has not stomach to let Ukraine join its club. Germany, along with denouncing Biden’s decision to supply cluster munitions to Kiev, declared that any decision about Ukraine joining should be postponed. Hungary and Bulgaria also have signaled their opposition to letting Ukraine get membership status. France is on fire and Macron does not appear to have the political heft to advocate for Ukraine and the pro-Kiev government in the Netherlands is kaput:
The war was obviously completely avoidable (Started way back when US/UK backed the over throw of Pro Russia Ukraine leadership and aggravating Russia with NATO at doorstep). But in the name of great entertainment, do we really care about a few hundred thousand exploding carbon sacks (humans).
Possibly not:
Poland is being prepared as the main staging area and the frontline of a much bigger war that's going to consume Europe eventually if it doesn't reverse its course of the subservience to the US and its reckless anti-Russian policies. Take your time and listen to this man. Link
Is NZ being lined up to be a NATO pawn?
Leaders of the four Asia-Pacific countries - Japan, South Korea, Australia, and New Zealand - that have been labeled as "partners across the globe" by NATO will attend the summit for the second consecutive year. According to Japanese media reports, NATO will elevate its partnership with these four countries to a higher level, giving a strong signal of NATO's expansion into the Asia-Pacific. Who else is unaware that this is aimed at China? The grand chess game played by NATO and the US is certainly not influenced by Lithuania, which is merely a pawn that has crossed the Rubicon, encouraged and pushed forward without considering retreat, and ultimately unable to turn back. Link
So you're saying the Ukrainians giving up their lives to keep the murderous Russian horde away from controlling their country are imaginary? So many commenters here are completely ignorant about Russia.
With whom Ukraine associates is it's own business. Not little Vlads and his band weirdo nationalist Kremlinites.
UK paper berates Biden. Is the special relationship in tatters?
Here comes Biden, the world’s worst diplomat
The President can barely disguise his hatred of Britain
Cluster munitions sit unexploded for decades, until children or farm workers wander into them.
I was biking through Cambodia not 5 years ago and was told of a young 11 year old recently killed by UXO dropped there by the US over 50 years ago. Many of the local villagers were missing limbs also as a result. I suggest you walk across some fields in Cambodia and Laos before rah-rah'ing their use.
The harm on civilians long after the war is ended is severe. Once Russia is eventually ousted from the Ukraine, does America really want to know every time someone is maimed or killed from UXO, it may have been one of theirs? How about being the more responsible party here? If they want to win the hearts and minds of the people they are supposedly fighting for, shouldn't they limit long term damage to them?
Years ago I knew a chap who went to Cambodia to work for a volunteer organisation clearing minefields. I had asked him about UXOs with an origin in the US. He responded that there were some, but over 90% of what they dealt with was Soviet manufactured. He said the anti personell stuff was really nasty. No metal to avoid detection and stayed viable for years. Killing and maiming kids forever were the words he used. He said the bigger stuff they found was UXO artillery shells and they could have just as easily come from Cambodian, NVA or US military. So to say an exploded ordinance was from the US is likely too naive, unless you got a look at it before it went bang. Even if it was Soviet or US manufactured, who put it there could be a little hard to determine. Certainly the US invasion in 1970 will have opened the door for all that. But the NVA and Khmer Rouge would have done their share or worse.
Irrespective of whose UXO it was from, we can all agree UXO is horrific, it essentially displaces people or takes a massive toll on society for the next generations.
So why would we want to promote the use of weapons that WILL cause UXO all over an very well inhabited area? The argument "Well its being done by one side, so the other side should do it too" is a poor one and will lead to even more escalation. It's far better if the US can play the greater country here, then any UXO throughout those areas they can attribute directly to Russia. That's the way for Kiev to illustrate their commitment to the people in occupied areas beyond the length of the war and has a real chance to win hearts and minds, long term.
Russia is already blanketing Ukraine with UXO.
https://www.hrw.org/news/2023/05/29/cluster-munition-use-russia-ukraine…
Getting the war over quickly is the shortest way to save lives!
Russia has set the ground rules for this war. The war can stop at any time when Russia just pulls right out of all of Ukraine. Until then the west should ramp up it supply line to Ukraine and supply it with everything necessary to defeat Russia without restraint until they are gone from Ukraine. Attacking Ukraine from Russian or Belarus sanctuaries should not be allowed either. The origins of any attack on Ukraine or other countries should be a legitimate target.
Sure, but the things we are talking about don't affect just Russia, they affect the population of the country long after the Russians are gone.
If its anything goes, lets start supplying Nukes to Ukraine to explode within their borders to kill all the Russians. That would be fine given your argument that "anything goes".
Some points on the cluster munitions.
1 - You are correct that the reason why they are problematic is because of the after effects of unexploded munitions once the conflict has finished, not because they kill the enemy.
2 - Ukraine is asking for these munitions to defend itself from an invading country. They will be used on Ukrainian soil and the effects of unexploded munitions will therefore mostly fall on Ukranians.
3 - The Ukranians have weighed up the potential consequences of unexploded munitions against their loss of sovereignty and enslavement by Russian forces and decided they would rather deal with former rather than the latter. They obviously object to Wagner and Russian forces coming into their country and summarily executing civilians, POWs and forcibly relocating their children to Russia.
4 - This is very different from using cluster munitions on foreign soil.
5 - Think about the situation is this were Russian and Wagner forces invading New Zealand, would you want the US to provide us cluster munitions to enable us to defend ourselves or would you rather they didn't? (This question is for the commentators that obviously would prefer us to remain a sovereign nation, not the crackpots that wish we were a Russian state)
Wars last a relatively short time compared the the hangover of cluster munitions. Your framing of the question doesn't deal with the complexities nor the times scales involved. The areas in the East/South of Ukraine, even before the war were fairly pro Russian, even the various Western controlled surveys showed many of the Eastern/Southern areas were pro Russia by quite large majorities. Given that context, supplying Kiev with bombs that will invariably affect populations that didn't support them, but will maim and kill them for decades to come (remembering how divided Ukraine was decades before the war), at the worst feels like supplying bombs for them to drop on the Russians and ignoring the UXO problem as it will affect an internal peoples who were non compliant anyway. Because the munitions are indiscriminate and long lasting, it makes a large difference to conventional bombs.
If Russian and Wagner forces invaded NZ, they would have a very tough time as the population here with decently high gun ownership would likely resort to guerilla tactics with an underground resistance. Combined with long interruptable supply lines, it would eventually make it highly uneconomic to continue an invasion. We wouldn't need cluster munitions, nor would I support introducing them given that I would know we would have to last with their lingering effects for a long time after the invaders withdrew. You don't poison your own land to rid yourself of an invader, the action would be self defeating. Much like dropping a nuke in Ukraine would rid them of Russia, but might make the area uninhabitable for generations and there is already enough of that in Ukraine around Chernobyl.
The Ukraine government is currently in a fight for its life. They can't be asked to think straight, the generals run the country now and it's victory at all cost against the enemy. They will advocate for anything that brings them victory. If the US offered mustard gas, my guess is the Ukraine would accept and drop it in huge quantities all the way down Russian lines, bugger the consequences.
I am much more for providing a multinational force on the ground in a negotiated settlement. We have to stop escalating, draw a line in the sand at some point and if its through denial of access to munitions that will have dire long term effects, then that's the line.
After years of denying migration has had wage suppression, policymakers and economists are now expressing relief that migration will break the wage/price spiral.
A BoE paper published last month confirmed that the biggest impact of immigration on wages is within the semi/unskilled services occupational group. Link
More than 10% of workers in NZ were earning under the new minimum wage threshold that kicked in on 1 April 2023 (up from ~8% in 2000), double of UK's workforce proportion of 5%.
The penny has dropped.
Ageing population poses a long-term threat to the economy and will affect interest rates for decades to come, Andrew Bailey has said. The Governor of the Bank of England identified changing demographics as one of two biggest problems facing the UK and similar countries in the years ahead...It would be a serious mistake for central banks to ignore these shocks in their efforts to control inflation and maintain financial stability
https://www.telegraph.co.uk/business/2023/07/09/ageing-population-long-…
Stats from about 10 - 20 years ago indicated that the Boomers demographics will peak between now and 2050 and there after will be over taken by later generations.
The problem though is the rich and powerful are trying to corner all the resources for themselves at the expense of everyone else, and that is where the issue lies as competition ramps up. This is a race to be the last man standing, and the planet or species be damned!
Broadly speaking, the first of the post WW2 generation started to retire in 2011, and the last will be in 2029. So we reached that half-way mark as the pandemic hit, and that probably speeded up the process of more of our ageing toddling off into the sunset of non-productivity with whatever they had as a store of savings to get them through until the last day. As that happens, they will have to sell whatever it is they have/draw down their bank balances to keep consuming. And...the follow-up Generation are fewer per retiree and not as well suited to replacing those who retire. (tried to get a plumber recently, and seen what they want to be paid?).
Asset sales, where New Zealand conned it's ageing to store their savings, are going to increase even as the sale price of them falls. All that as interest rate and the CPI rate keep rising. Yes, there'll be ups and downs, but as you suggest, the line on the graph is clear.
I remember this was an argument of Gareth Morgans and he even had a book that I bought called 'Pension Panic' which talked about it.
This was just before the GFC and property was crazy expensive then but no one ever expected interest rates to get so low leading to a massive increase in the amount banks were letting people borrow.
This is how we're battling the worsening skill shortages in NZ - Teachers stunned after new science curriculum has no physics, biology or chemistry | Newshub. A senior research fellow from the New Zealand Initiative warns universities will have to teach science from scratch if a new curriculum is implemented
The disconnect between policymakers and industry will cost our economy dearly. In my field, technical experts are retiring with rich field experience, local talent pools are running shallow and all we get from the government of the day are new visa categories.
The policy geniuses at MBIE have never left Wellington CBD long enough to understand how certain industries operate. Their mantra is "if something works for hospitality, the same must work for engineering!"
I'm 68, retired process engineer. Still getting enquiries from recruiters via linkedin even though my profile states I'm retired. The proposed science curriculum seems to ignore fundamental knowledge acquisition. Why do they have to make it so complicated. When I went to school we worked from standard text books and did the problems at the end of the chapter. Teachers didn't need to prepare lesson plans or set homework. Exams at the end of the year. If you wanted to avoid failing you made sure you learnt the stuff.
"A senior research fellow from the New Zealand Initiative"
Do you mean the right-wing free market public policy think-tank where one of their senior editors ran a far-right blog for many years?
Hardly surprising they come out criticising public education? If it were up to them only the rich would be educated in private schools.
Latest commercial bank data shows banks just waiting for "it" to start, why regulators and government officials are nervously trying to cushion the blow and hope it all just works out. Somehow. But as recession gets worse, the more trouble there'll be. https://buff.ly/3rlyt2v Link
If domestic food prices follow the trend of lagging global food prices we will see the NZ Food Price Index come down to 8% to 9% this week (from 12% year-on-year). If our index doesn't come down, it will be worth looking at what food items are still driving prices up. Our domestic food producers are getting murdered by high interest rates - they will be trying to pass the extra costs on to wholesalers.
Yeah, I track our bills and haven't stopped buying the same things over the years. We are about 15% off the peak late last year. As cheaper fertilizer prices come through, expect more price drops.
Thats what happens when you sanction energy, the very thing our food supply is based upon.
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