Here's our summary of key economic events overnight that affect New Zealand, with news Australia may be facing more rate hikes.
But first, the tight American labour market is still showing its resilience. The number of Americans filing for jobless benefits fell slightly last week to 258,000 when a seasonal rise was anticipated. However the number of people on these benefits rose to 1.89 mln as they are staying on longer now. But these overall levels are very low given their employed workforce is 161.6 mln.
The factory survey in the huge Pennsylvanian rust belt did not improve as expected in July. The Philadelphia Fed Manufacturing Index was little changed and continuing to point to an overall decline in manufacturing activity in the region. New order inflows remained negative.
Existing-home sales dropped -3.3% in June from May to an annual rate of 4.16 mln. Sales were down -18.9% from one year ago.. Sales declined in the South (-5.4% and the West (-5.1%), held steady in the Midwest and rose +2% in the Northeast.
So it will be surprise that a key leading indicator index fell in June. And it wasn't its first fall. The decline was driven by gloomier consumer expectations, weaker new orders, an increased number of initial claims for unemployment, and a reduction in housing construction. This index is pointing out a slowing economy and that it isn't about to pick up.
In China, their central bank left its Loan Prime Rates unchanged after cutting them in June, with the medium-term lending facility used for corporate and household loans still at 3.55%; while the five-year rate, a reference for mortgages still at 4.2%.
Japanese exports rose +1.5% in June, compared with market forecasts of a +2.2% rise after a +0.6% gain in May. This was the 28th straight month of growth in shipments.
Taiwanese export orders sank a whopping -25% in June from a year ago, coming worse than market expectations of a -20% drop and a -17.6% fall in the previous month. It marked the tenth consecutive month of deteriorating orders as demand continued to decline for all product groups, particularly electronic products.
Although it is still deeply negative, European consumer sentiment continues to improve and did so again in July with a solid gain again.
Meanwhile, German producer prices were little-changed in June from both May and from a year ago. That signals that at the producer level at least, they are getting on top of inflation.
In Turkey, their new leadership of their central bank is moving to unwind the disastrous policies of recent years, raising their policy interest rate by +250 bps to 17.5%. But that was less than the 20% rate markets were expecting. The Turkish lira stabilised at its sharply devalued state in a wait-and-see attitude.
The Australian labour market added +32,600 jobs in June, double the +15,000 expected. +39,300 of those were full time positions, and part-time positions fell -6,700. Their jobless rates stayed unchanged at 3.5%. In NSW their jobless rate fell to a remarkably low 2.9%. (New Zealand releases its June quarter labour market data in two weeks on August 2, 2023. Our jobless rate in March was 3.4%.)
And staying in Australia, their prudential regulator has told it superannuation funds that they must reassess the value of their unlisted assets every quarter. That could be an earthquake for that funds industry as they have AU$650 bln in these illiquid unlisted asset classes, especially commercial property.
Unless inflation falls in Australia, the strong jobs market could well mean another RBA rate hike, and that will compound those super fund valuation miseries.
In global shipping we may be at the bottom for freight rates. Rates for containerised shipping rose slightly last week, a second week that has happened. But rates for bulk cargoes are slipping again although they remain near their long run average (which is actually very low because that average doesn't adjust for inflation).
The UST 10yr yield will start today at 3.85% and up +10 bps from this time yesterday. Their key 2-10 yield curve inversion is not quite as deep at -99 bps. Their 1-5 curve is less inverted at -129 bps. And their 3 mth-10yr curve is much less inverted at -144 bps. The Australian 10 year bond yield is now at 4.01% and up +10 bps from yesterday. The China 10 year bond rate little-changed at 2.67%. The NZ Government 10 year bond rate is up +3 bps from yesterday to 4.59%.
Wall Street is in its Thursday trading with the S&P500 down -0.7%. Overnight European markets were up an average of +0.7%. Yesterday Tokyo ended its Thursday session down a sharp -1.2% reversing Wednesday's sharp gain. Hong Kong dipped a minor -0.1%. Shanghai ended down -0.9%. The ASX200 ended unchanged and the NZX50 ended down a minor -0.1%.
The price of gold will start today at US$1970/oz and down -US$8 from yesterday.
And oil prices are unchanged from this time yesterday at just under US$75.50/bbl in the US. The international Brent price is still just under US$79.50/bbl.
The Kiwi dollar starts today down slightly from yesterday at just under 62.3 USc. Against the Aussie we are lower at 91.9 AUc. Against the euro we are firmish at 56 euro cents. That all means the TWI-5 has slipped -10 bps from yesterday to 69.9.
The bitcoin price is still in in its recent yoyo pattern and now is at US$29,748 and down -1.0% from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
78 Comments
Interest rates are going up and will stay up.. the spruikers tried their best to sound the alarm that rates will start dropping by year end...
More people rolling over onto higher rates.
BNZ jumped the gun on cutting the 2 year, but the US2y, is now just 16bps off it's recent high... but they pushed the short end higher..
Won't be surprised if the next round of short end increases start soon.. energy and food prices on the up
What about floating rates with a low equity premium from a second tier lender? Must almost be at 10% already. Such is the problem with wild non-specific 'predictions' from the peanut gallery.
Heh, i just checked Resimacs rates, their rate card goes up to 15%.. Alt doc with bad credit, The prophet is going to have to update his prediction to 20%...
High levels of net migration in Australia (currently running at 2x of pre-Covid levels) could keep CPI elevated for the foreseeable future. Aussie tertiary providers are totally creaming this influx with nearly two-thirds of net new migrants arriving on a student visa so far in the last 12 months.
Nationwide, international students are set to absorb seven out of 10 new homes built until 2028. By 2025 there’ll be 940,000 more international students in NSW and Sydney will host a Canberra.
In 2022, 573,000 student visas were issued by Australia while the United States issued 414,000 Link
The population Ponzi continues to hum in the 'lucky' country despite a high price of entry at the gate!
Lol
Yep enjoyed the black humour. Can I even use that adjective in this precious woke world.
Yesterday I had someone argue with me to pick me up for using the word "woke". They informed me that woke is Marxist and the organisation, a charity, couldn't be marxist/woke 🤥
Great King’s Days Are Numbered
https://dailyreckoning.com/great-kings-days-are-numbered/
A matter of weeks?
I think restricting the total number of posts per day might be more useful. Perhaps this could be part of the interest.co.nz revenue stream.. Non-supporting posters get X posts per day, supporters get 2 or 3x that number.
If posters knew they could only post 20 comments a day we might get a bit more thought, and a bit less repetitive shouty nonsense. Imagine how many fewer posts there would be without the HouseMouse /Retired Poppy /printer8 back and forth nonsense we get regularly.
You can simply not click the links (particularly when the mouseover reveals its a link to some complete trash website), but its much harder to avoid the comments. And some posters eg: Audaxes post interesting links many times per day.
The same article (Hooton) speculates there are good odds of her winning the Tamaki seat. one might wonder too if National might not be all that unhappy about that. The incumbent has become somewhat awkward territory with zealous outbursts which are unrepresentative of the electorate one would like to think.
"zealous outbursts which are unrepresentative of the electorate" - the same outbursts which align with ACT party policy?
I'd hate to live in an ACT electorate, could you be any more self entitled? "I'm rich, my neighbours are rich, we must keep it that way through corrupt planning rules. Now which party is the most corrupt..."
Much better to at least live in an average to above average neighbourhood. Somewhere the house prices start at $1.5Million I have noticed it tends to keep the rif raf out. Sure everyone I have ever met from Remuera has been a dick head so I wouldn't live there but that still leaves you plenty of options.
I'd hate to live in an ACT electorate, could you be any more self entitled? "I'm rich, my neighbours are rich, we must keep it that way through corrupt planning rules. Now which party is the most corrupt..."
You should familiarise yourself with O'Connor's track record. You may want to revisit this statement. Plenty of well-heeled people in Tamaki who fancy themselves as actual liberals have had a gutsful of the electorate being marginalised thanks to imported Republican talking points that are irrelevant to the people who live there. The face of Tamaki is changing and there are challenges that require someone who isn't on the outer with their own party.
Don't forget the 'Free Market' model which the US imposed on too much of the rest of the world was an idealised view of a market invented by an economics professor which ignored human psychology. That's a significant failing by any measure. But many economists still hold to the model. Is that ignorance or wilful blindness?
Do you know of a better type of market?
The housing market is a classic example of a highly regulated market producing terrible outcomes. Compared to say the car or TV market where prices are reasonable, the product is high quality, and there are a large range of options at various price points.
Re the housing market - utter rubbish. what regulation is there is very poor tinkering on the edges. As to a better model - ask yourself what is the role of government? Pro-free marketeers are essentially arguing for anarchy.
A Government's role is to regulate activities within it's society and that includes all aspects of the economy. The housing market is essentially unregulated where is should be and the regulation put in place has been a reaction to the effects of a lack of regulation and has been in the peripheries of the market only. Try comparing that to the regulations around cars.
"the tight American labour market is still showing its resilience"..."In NSW their jobless rate fell to a remarkably low 2.9%."
Everybody's economy is experiencing the same phenomenon - workers are ageing and leaving the workforce en masse, and there is no replacement cohort of sufficient size to do the work. Let alone be qualified to do it. So we are all trying to poach each other's workers to fill the gaps, and along with that comes...ever higher wages. And along with that comes ever higher prices. There is no immediate demographic answer to that, but letting the dreaded Wages/Prices Spiral pick up speed must be fought at all cost as a separate issue.
In the short term, spot on. And how do we achieve that? Ram up the cost of finance.
In the longer term, we have to lower costs. It's not about "how much is in my pay-packet" but what that amount can buy, and if ramming up the cost of finance does anything positive at all, it will be to lower the price of the biggest drain on any pay-packet - the cost of housing. Fix that (as hopefully we've started to) and the rest falls into place more easily.
Agreed. I read an article from an Indian publisher recently that said the country cannot replicate China's economic boom because of the high rates of skilled emigration the country faces.
It wasn't quite a trend for talented individuals to seek career opportunities overseas back in the 80s to 2000s when East Asian nations were going through their high economic growth phases, as it is today.
The article found that the students from elite Indian technical universities are more likely to attend grad school in the US or elsewhere.
A wheelbarrow on Reichsmarks wouldn't buy a loaf of bread, let alone a house at 100,000% pa. Asset become 'worthless'. The nominal price is irrelevant.
Let's also remember that uncontrolled Inflation is actually a bankers' worst enemy. It devalues their main asset - loans. Making it easier to repay them in Real terms is not what they want. So at some stage (soon?) they will react - all on their own - and push rates up to preserve the current value of their loan book.
We're already doing this. But that smaller house is priced at the same level as a 250sqm house used to be, and has a fraction of the land to boot.
So the devaluation of purchasing power is actually going down faster than it seems. "Lowering expectations" is a boomer meme, because no matter how much less you settle for, someone is finding an excuse to charge the same amount that used to buy far far more. So you lose twice. And then when the thing you settled for goes down in value and you find yourself exposed, you get told "Well you should have seen that coming - you know, that carnage we knowingly inflicted on you and could have fixed but chose not to over the course of decades. It's your problem on the way up, it's your problem on the way down and you should somehow be able to work around every possible scenario while we do nothing but question every lifestyle choice you make" - and act like the 25,000 takeaway coffees I'd have to not drink are the actual problem, instead of the choices they made.
It's basically a case of 'settle for less, because we were born earlier and snapped the good stuff already, and the idea of you having the same quality of life as us makes us really angry for literally no reason".
Someone here was asking the other day about the effect of mutliple heatwaves in crop growing regions....
https://www.nature.com/articles/s41467-023-38906-7
Yep, I have often wondered this.
And I also wonder if we need to think big about some of the current projects. Various Rail projects seem like a half hearted attempt, I wonder if just outright committing to spend billions on upgrading the north island main trunk to support high(ish) speed rail, and building a real Auckland light rail network would pay off in the long run. Instead we seem to be preparing to overspend massively on one light rail line by tunneling huge chunks of it through Aucklands volcanic field instead of just acquiring the surface land we need (with large margins either side) and redeveloping the whole area.
I think the tunnelled LR is a Think Big, the tunnel is necessary to join the Airport line with a future North Shore line and North West line and get any decent frequency. But I wonder if they should do City to Mt Roskill and City to North West as phase 1 to show the purpose of the tunnel rather than City to Airport which seems like an expensive tunnel for only one line.
Not quite. The tunneled bits in theory enable frequency but cost an arm and a leg, and then are instantly hamstrung by having street-running sections later down the line. It's the worst of both worlds. And the reality is a far cheaper surface level system could have generated the same frequency along the key bits of the route - the end-to-end additional journey time would have affected a small single-digit percentage of passengers who would go from the Airport to the CBD. The vast amount of the 'frequency' power users would have come from in between along the route, and the better access street level services would give probably outweighed the fraction of the extra journey time they would have been subjected to vs. street level running. And that becomes hypothetical anyway, because a street level system that's cheap enough to build beats a tunneled one that costs $30b for a single branch line every single time, by virtue of actually being possible to build.
But someone wanted an expensive tunnel, so we're getting an expensive tunnel. It's the worst of both worlds. Well, actually the North West is the worst of both worlds because they aren't getting anything at all. No work happened on the NW route at all.
I don't think you can have any kind of frequency or speed with a street level system going down Queen Street. It would probably be alright for one line, but for 3 it would be an issue. But building something imperfect is always better than not building perfection, they probably should have at least started with surface and undergrounded later if there were capacity issues. City to Mt Roskill was meant to be done by the previous America's Cup, but we don't even have a design yet.
You can, you just have to actually make some tough calls about whether you keep trying to share Queen Street with cars or you go the whole hog and turn it into a transit mall. Similarly, the Council has been told repeatedly through surveys that Queen Street should be car-free, but whenever it 'redesigns' the space, it never gets close something you that could be used as a proper transit mall.
If you did that properly, Queen Street would be fine - don't forget you have the CRL serving the top end of town at K Road too, so you won't have to carry 100% of users through Queen Street from the NW branch either. It would certainly be easier to give Aucklanders what they actually want in Queen Street than spend tens of billions of dollars drilling through basalt, which may not be possible in some areas (and still isn't known, despite us already committing to use tunnels - tells you all you need to know about how much information we had to make the decision to use tunneled over surface running).
You would also still have the option of Beach Road/Symonds Street/Great South or Manukau Road for another branch down the line if you so desired, which could feed in at the Beach Road end. That's much harder if you stick to tunneling for little actual benefit.
Pretty sure they kicked off the Northern Motorway, which was very lucky because if it had not started before Labour got in then Labour would have killed it. All labour successfully did was lock us all up for Covid, which as it turned out in the end was pretty much a waste of time and totally wrecked the economy but hey obviously you are happy to foot the bill for that.
Let me tell you about the $9b the RBNZ's Covid response has cost us so far, with no formal independent review of their actions and a healthy pay bump for the bloke who oversaw it (and the subsequent blunders around forecasting and inflation running 100% about the very top of the PTA window).
The northern motorway opened in 1959. I don't think My Joyce can claim credit for that!
https://en.wikipedia.org/wiki/Auckland_Northern_Motorway#History
Wow what can I say, reading interest.co.nz is starting to get pretty depressing. Honestly I can see why people have voted with their feet and moved to Australia because they have given up on NZ and its steady fall down the OECD ladder. If Labour get back in next election then its confirmed, the majority left here are the dim wits.
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.