Here's our summary of key economic events over the weekend that affect New Zealand, with news the fizzling Chinese economy is looking for a big policy boost from Beijing.
But first, in the week ahead it will be all about the labour market. We get our June data on Wednesday (expect only minor change), the EU on Thursday, and the US releases its July non-farm payrolls report on Saturday. Canada too. Before that there will be a flurry of PMIs for July, Australia will review its cash rate target tomorrow (and England on Friday), and there is another dairy auction on Wednesday morning. Q2-2023 GDP estimates will flow through more broadly. Locally we will get business confidence data (today) and building consent data (tomorrow).
In Beijing, they said that at 4pm today (NZT) a senior official will announce new measures "to restore and expand consumption" in the government’s latest effort to engineer a revival in their economy. There have been a number of measures announced over the past few months with nothing effective so far, and all have fizzled against a backdrop of people prioritising savings as they turn cautious about their future. If this one is to be a gamechanger, it would have to be pretty dramatic.
Emphasising their problems, new data released for the June quarter showing that household mortgage balances were lower than in March as borrowers prioritised paying down this debt and took out much fewer new home loans. That is the first time that has ever happened. Rising household saving and aggressive deleveraging will make it harder for their economy to expand. When households lack confidence to invest and expand, it is then all down to the private, and especially the government sectors. Their "dual circulation" strategy is failing. The pressure is on Beijing.
And staying in China, we all know the north of the country has suffered through heat-dome conditions recently with its extreme temperatures. In the South it has been very heavy rain. Now new rains are hitting the north and they have issued 'red' alerts.
Taiwan said its economic activity (GDP) rose +1.5% in Q2-2023 to be +7.0% higher than a year ago. These results were better than expected, and interestingly outshone the mainland China results.
The Bank of Japan tweaked its monetary policy framework on Friday, providing more flexible bandwidth for government bond yields to fluctuate. Long-term interest rates rose sharply in the bond market ahead of the policy announcement, with the 10-year yield crossing the BOJ's ceiling of 0.5% for the first time in more than four months. But they claimed the move was a not a step toward giving up its ultra-lax monetary policy.
Over the weekend, the parallel inflation measure the US Fed prefers shows that inflation is easing there, but also not yet back to its target range. Core PCE prices, which exclude food and energy, went up by +0.2% in June from May and in line with market expectations. The annual rate rose by +4.1%, the lowest since September 2021 and less than market expectations of +4.2%. When including food and energy costs, the PCE price index rose +0.2% from the previous month and +3.0% from June a year ago, the lowest increase in 27 months. The headline rate fell far faster than the core rate because oil prices decreased sharply.
Meanwhile personal income rose +5.5% from year ago levels, and personal spending rose +3.7% on the same basis. Household savings rose. They seem to be in a goldilocks period.
EU sentiment continued its decline in July, with both consumer and business sentiment easing. Employment expectations are down too.
German economic activity was unchanged in the June quarter after falling -0.1% in the prior quarter. Technically that isn't two consecutive quarters of decline so no 'recession'. But it isn't a great result and Q2-2023 has ended down -0.6% from the same quarter a year ago so no way can you say that is progress.
German inflation slowed to +6.2% year-on-year in July, down from +6.4% in the previous month and in line with market expectations. It was slightly lower in May so that suggests stubborn embedding at these levels - which is why the ECB needs to keep the pressure on.
In Australia, cost of living pressures are being felt in their retail trade, with retail sales unexpectedly falling in June and by -0.8% which was enough to mean that there was no gain in retail trade in Q2-2023. And they were only up +2.3% from a year ago. This means, because they have inflation at 6.0% there are 'real', volume reductions in retail turnover there.
Australian producer prices rose at just a +2.0% rate in Q2-2023 from Q1. Year on year they were up +3.9%, which is a fast slowing from the +5.2% in Q1 on the same basis. That confirms the recent shift lower.
Staying in Australia, Victoria, which has the highest use of residential gas in Australia, said it will ban all new homes that require a planning consent from connecting to gas. And in a separate report, the Aussies found that the least expensive way to build more generation capacity has shifted to renewables.
The RBA will review its policy rate again tomorrow in its monthly schedule, and analysts are coming to the expectation another +25 bps rise will be announced, taking their policy rate to 4.35% which will be its highest since 2012. But the pressure will be on to avoid another rate rise especially given the retail sales decline.
The UST 10yr yield will start today at 3.96% and unchanged from Saturday. A week ago it was at 3.84%. Their key 2-10 yield curve inversion is unchanged at -93 bps. Their 1-5 curve is holding at -119 bps. And their 3 mth-10yr curve is slightly more inverted at -142 bps. The Australian 10 year bond yield is now at 3.99% and down -2 bps from yesterday. The China 10 year bond rate unchanged at 2.69%. The NZ Government 10 year bond rate is up +1 bps from Saturday to 4.80%. A week ago it was at 4.69% so a big move back up.
The price of gold will start today at US$1959/oz and down -US$1 from Saturday, but very similar to levels both one and two weeks ago.
And oil prices are up another +50 USc at just over US$80.50/bbl in the US. The international Brent price is now just over US$84.50/bbl. But these levels are +US$3.50 above week ago levels (+3.9%).
The Kiwi dollar starts today little-changed at just on 61.6 USc and very little different to week-ago levels. Against the Aussie we are firmer at 92.7 AUc. Against the euro we unchanged at 55.9 euro cents. That all means the TWI-5 has held 69.7. A week ago it was at 69.5 so a mere +20 bps higher than then.
The bitcoin price has firmed very slightly again since this time Saturday, still in its long yoyo pattern. It is up +0.3% and now is at US$29,397. A week ago it was at US$30,023. Volatility over the past 24 hours has remained low, also at just over +/- 0.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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93 Comments
Every where I see is more and more debt and debt to prop up everything. Is this sustainable?
We do not have the amount of resources to clear that debt around the world unless we inflate the value of resources. And then debt again increases. What a doom loop this is.
God save NZ
Fanboys will flip flop between saying it's a National Party success while blaming Labour for the quality of the finished product. Even though all the design and engineering work is typically done before awarding a contract. And Governments don't actually build the roads.
It's a bit tongue in cheek but also a technological solution to current problems. So a good way to have a great result while growing technical skills and a potential export industry. It would cost loads wherever you put them of course. But that doesn't mean it's not money well spent.
Ah yes, duplication of an existing connection should definitely be the highest priority instead of making sure your back-up option actually functions. The North Western is buggered most days, and that's before you decide to send all of the traffic going north up it.
Why don't we just pour the entire National Transport Fund into more connections between the Shore and downtown Auckland. It's not like other parts of the city exist or have actual needs, is it?
We a port at Marsden Pt that is under utilized because of a lack of resilience in the transport networks. SH1 is buggered every time there is a slip on the Brynderwyns and there are no SH alternatives. The local roads are not maintained at a level required to take extra heavy vehicles.
the train line has already been upgraded to carry containers, it is only the final stretch to the port to be completed and once that is done then northport can compete with auckland for container ships ala port of tauranga and ,metroport on a level commercial footing , kiwirail would have to build another metroport out west which is not a bad thing
No, it can't. The entire proposal centered around a depot in the North West of Auckland, which in case you haven't noticed, is absolutely rekt from traffic. So not only will you have the delay of getting stuff off boats and into Auckland, you're then going to add more by putting your freight hub in the most congested bit, and with no viable alternatives for people to use to the road like viable public transport. Delays = $$$, even more cost for Aucklanders at the checkouts on top of higher rates after having an asset stripped from them.
Plus, the Northern Auckland Line was badly damaged in the floods and has been under repair for months. If this was our main freight link into the city, we'd be stuffed. There's real question marks over how viable it is going to be in the face of increased weather events.
https://www.kiwirail.co.nz/assets/Uploads/Our-Regions/Northland/Newslet…
The Port boondoggle is nothing but a seat-buying exercise from NZ First. It belongs in the past with them.
I'm not saying that you're wrong but North West Auckland would seem like the kind of area you could widen a road if you needed to?
Like it still seems like a good plan to me, these are not South Africa scale problems with the plan. Not necessarily bad to do construction in stages.
Which roads? SH16 already fills the corridor. There's intensive housing development along both sides, because the central suburbs pushed back on intensification so it's ended up where land is cheapest and most available. There's thousands of houses being built there with no busway like the North Shore, or Simeon Brown's electorate in Pakuranga. The ferries are massively oversubscribed. It's an hour and a half coming home at peak, with little alternative.
So sure, it's a good plan, if you're still gullible enough to believe the government has the ability to build the public transport to get the cars off the road in the West (it's already gone from Light Rail to a busway, to bus lanes and we're actually getting painted bus shoulders) as well as the ability to make the rail line they already tipped millions into resilient enough so that it doesn't get closed by months at a time by slips, which it currently is.
Given we are currently at 0/2 in those areas already, ripping the supply chain out of Auckland based on a track record of stuffing every part of it up for years at a time is a pretty big gamble.
I love it how their own road projects seem to have very conservative pricing, but when it comes to light rail they have more than doubled the estimate assuming it will go over budget.
"This is a man who wanted to spend $30 billion on light rail" vs "The ministers said the new line would be designed, consented and built by the early 2030s at a cost of $14.6b."
When the discussions for the new SH2 Mangatawhiri ti Maramarua came up in the mid 90's I wrote toll highway Whagarei to Wellington, Pokeno to Tauranga. Discussions of the plan for that SH2 upgrade, I asked about tolls, and was told - "didn't even considers'.
SO the new Waikato Expressway is 4 lane - look at all the overbridges absolutely no provision for expansion to 6 lanes. Check the time and money going into expansion of Southern Mway Takanini to Drury and the cost of stretching those bridges to take extra lanes, all started years ago with the Orams Rd bridge at Manurewa.
Great idea National just please future proof the damn thing. Totally agree re Harbour Bridge and second crossing.
This will be an interesting auction. Purchased for $735k in April 2021. Can’t see it getting that much this time around. Two for rent in the same place. $550p.w. And $650p.w. For 2Bdr.
In recent weeks I have really begun to question if we do have an under supply of housing in this country. In Hawke’s Bay there is a lot for sale/rent despite the recent events which took a lot of stock…. I get the lists are growing for KO, but that’s a different issue.
https://www.trademe.co.nz/property/residential-property-for-sale/auction-4246939941.htm
Prices at the pump up over 40 cents across major urban centres since the beginning of July.
That comes to a nearly 20% increase in transport costs for households on fuel bills (100% for public transport commuters).
The CPI print for Q3-23 will be pushed up by council rates and transport costs.
I got a real shock filling my car this weekend. Stunned for 10 minutes sitting in the car looking at the per litre price of petrol before I could gather all my energy to get out and fill my car.
Had to buy an energy drink to get the energy back so I could drive. I was tempted to push the car rather than start it as it will use petrol. 😢😢😢
For anyone interested in the actual data:
Fully electric vehicles are FAR FAR FAR LESS LIKELY to catch fire than a Hybrid or Petrol vehicle, with just 25.1 fires per 100,000 sales. That’s compared to 1,529 ICE fires and 3,474 Hybrid fires per 100,000 sales respectively.
(2022 data from the National Transport Safety Board)
$4b in Wellington on their transport networks - what is Auckland going to get? Other the dumping of Light Rail, I'm not hearing of any plans for rapid transport to the South West and North West, which currently have nothing.
Given National's desire to build on the fringes, and that there's apparently plenty of money for major projects in Wellington, this is something they need to be pressed on.
the problem with the roads of national significance is last time they robbed peter to pay paul, they downgraded the maintenance budget and moved those funds to new road building and even then they were built so badly most had to be rebuilt or repaired very soon after opening not to mention the repairs for the rest of the roading network that are now in catch up mode
so for me even though it sounds nice the small print lets them down
Yes, I do realise that. And $7B for Wellington while huge parts of Auckland languish in transport poverty (at the same time as paying a regional fuel tax that Wellington doesn't) was a scandal. Didn't Wellington also just get a massive cash contribution for new trains?
And as for the Auckland bit, the Stuff/Post reports from this morning had very little to say about it. Now that it's out, I'm quite happy to see it includes a North Western busway that might actually happen, as opposed to tens of billions of dollars 'budgeted' for a cock-up of a light rail program that was never going to happen.
Ukraine-Russian conflict seems to be ramping up with Zelensky acknowledging drone attacks on Moscow.
"Zelensky said attacks on Russian territory were an "inevitable, natural and absolutely fair process" of the war between the two countries" the BBC reports.
The risks of further escalation seems likely and troubling. In the short term there is also likely to be significant economic consequences with increases in food prices due to recent grain situation and increased oil prices seem inevitable. Upside risk to inflation however is probably the lesser issue.
The risks of escalation started the day Russia (Putin) began contemplating an invasion of Ukraine! Ukrainian attacks on Russia are just inevitable defensive moves that should have been entirely expected. There will be no end to this war until and unless Russia realises the costs are not worth paying and that will only happen when Ukraine defends itself by attacking the places that are the launch point for attacks against it. What also needs to happen is the aircraft and ships which are launching the long range missiles at Ukraine get shot down and sunk. Eliminate Russia's ability to wage the war and then it will stop. the threat of nuclear escalation is countered by a threat of escalation in kind against military and political targets if Russia chooses to escalate. The only way to stop a bully is to get in their face and face aggression with aggression. With Russia and China, peace can only occur when they realise they cannot win if they choose to attack, and that will need the US, Europe, NATO, Aussie and NZ all to stand firm against aggression.
Murray. ".... The only way to stop a bully is to get in their face and face aggression with aggression....."
Consider instead that it was Russia countering Ukrainian aggression. Minsk agreement one and two broken since 2014. Ukraine killing it's former citizens in the breakaway regions of Donetsk and Luhansk.
But it's important not to take sides in such ethnic conflict. Really it's just brothers and cousins murdering each other.
Ukraine was threatening to invade Russia? In 2014 Russia invaded and annexed Crimea. Ukraine was facing an armed insurrection on it's own territories by pro-Russian separatists backed by Russia, how were the agreements supposed to be equitable? Reports indicate that both sides broke both agreements, not just Ukraine. Looking at the data of the agreements and taking in the big picture, the uprising actually looks like an invasion by stealth by Russia. They were in it boots and all. After all they had already taken Crimea, why stop there? This has the same shape as the war in Georgia with only minor differences.
Complete BS - breakaway regions were just a Russian invasion without saying so. Regardless it hardly justifies invading, destroying and killing tens of thousands of your "cousins" - some of whom happen to be relatives
And I doubt that the Poles or other ex Soviet satellite's would agree with you in the slightest -maybe ask the Georgians or Belarussian people if they think its Ok for Russia's military to be in their countries
No. A "tactical" nuclear weapon is a reference to the size of the explosion being comparatively small with very limited range of damage. These weapons could be launched from artillery or small, short range rockets.
But in part you are correct in that the choice to use one, no matter how small will still be considered an escalation.
As to the escalation I agree. Once that line is crossed it will be very hard to go back. Nukes will poison the land and the atmosphere and any user will eventually find the radioactive fallout in their own back yard. Neutron bombs are just a slightly different issue but not by much.
As we can't go back and uninvent these things, the only real solution is to make the potential user so afraid of the consequences of crossing that line they will never go there.
It's curious. I watched the Oppenheimer movie and ponder on the very questions he did. Should the US have used them at all? Without their use would they have been a deterrent? In the end I tend to be of the opinion that the world had to see what they were capable of in anger to fear them. If the US hadn't been the first user, I suggest the Soviets would have been. Even the Japanese didn't believe the US could make more than one until the second one was dropped. But with the knowledge of the weapons evil, the question is how do we stop rogue players from using them, without having some of 'our' own?
Chris Trotter
Meanwhile personal income rose +5.5% from year ago levels, and personal spending rose +3.7% on the same basis. Household savings rose. They seem to be in a goldilocks period.
The feds (not Fed) introduced a mass of "savings" in 2020 and 2021. Once they ran out (and migrated to a few lucky huge corporations), that was it for "inflation." The transition doesn't happen all at once, though. Incremental and slow...at first. https://buff.ly/3q0CjxO Link
The reason for the widespread disinflation starts with slowing consumer spending (and business spending, too). And the reason for weaker consumption is the horrible shape most people are in. W/out Uncle Sam, Americans are tapped out. https://buff.ly/3q0CjxO Link
Since 1970, federal debt has grown at four times the rate of GDP. Worse, tax revenue grew even less than GDP. Lower interest rates helped bridge the significant spending vs. income gap. Since 1970, the effective Federal interest rate has shrunk from 8.5% to 3%. Consequently, the massively expanding debt load was “affordable.”
The debt scheme has worked, but the recent surge in interest rates presents an insurmountable roadblock if they remain at current levels. Paradoxically, it is also for this dire consequence that we are bullish on bonds. Link
Went car shopping on the weekend - never seen the main car dealers so dead on a nice sunny Saturday afternoon. Interestingly, one dealer didn't want to know about a trade in as "we have too much stock already" - the yards were overflowing.
Of course despite this, nobody wants to do a deal.
Depends on what you want to buy I guess. Some new ICE cars are unobtanium due to huge demand, the dealers don't need to do a deal. If its already sitting on the lot as a used car then they probably will want to do a deal to shift it but maybe they are not interesting inn trade ins only cash.
Trying to sell as used car can be a nightmare with all the tire kickers and test pilots out there. Depends on what you are trying to sell, many people will happily take a couple of thousand less to get rid of it, not to mention if it has "Problems" which is why many people want to get rid of it in the first place, why sell a perfectly good car ? A trade in on a brand new car can make perfect sense.
Pretty much this.
The car I'm looking to trade in is getting a bit long in the tooth. I could sell it for say $5000 private sale on Trademe, but I do not want the risk of "come back" (has happened to friends and family where they sell a car in as-described condition, three months later some type is banging on the door wanting a refund in a threatening manner because it failed the next WOF or threw a big bill).
If I miss out on a few grand but it solves a problem for me, it's not the end of the world.
where they sell a car in as-described condition, three months later some type is banging on the door wanting a refund in a threatening manner because it failed the next WOF or threw a big bill).
Yikes if that happened to me I’d be calling the police. There’s a reason everyone lists ‘as is where is’ since after the sale goes through and ownership is changed, there’s no liability for the seller. Who has the nerve to try get a refund on a private sale 3 months after the fact. Pure jokers.
"And in China....taking out much fewer new home loans."
They need to embrace the solution they are pondering in the UK! It's coming to us all, in one last valiant attempt to revive the Debt backed assets markets, by encouraging the debtors-of-last-restort to enter the markets.
Could 40-year fixed mortgages solve first-time buyer crisis? First-time buyers in Britain who cannot afford short-term fixed rate mortgages could be offered more 40-year deals under a plan being considered by the Government....which offer one interest rate for the entirety of the loan.
Hello yes I would like a mortgage priced at 30% of my entire career's earnings for a starter home, and I am just going to hope like hell I don't get divorced, sick or die young, which are all things that happen to perfectly normal people all the time.
At a certain period in our history, this would have earned me a free white overcoat with some buckles that was designed to be worn backwards - as well as free board and food. Now it just gets you some lousy policy analyst role.
Hosk was complaining about recent stats showing an increasing number of young skilled workers moving offshore, leaving us a further reducing pool of people society needs in NZ, and also needed to pay tax in NZ. He added that 3 of his 4 kids living were over seas and not wanting to return. I found it Interesting that Hosk, as a self proclaimed property investor, cannot draw a parallel between investor price driven tax rinse behavior, and that outcome.
"No... I will not stay and pay your bloated rent or your expectation of excessive capital gain."
Yip the first order thinking often drives me crazy. There is regularly very little 2nd order level thinking where you go - 'if I get what I want (e.g. house prices doubling every 7 years), how is this going to impact society and my childrens generation' 'Oh well, as long as I get what I want in the short term, who cares about the long term consequences?"
Jesus that was the fastest policy announcement U-turn ever.
National walk backs it's four lane Tauranga to Northland announcement before the print is even dry on the media release.
It was a stinker of an announcement anyway but quite a few will have been sucked in. For anyone who isn't in the transport industry, a motorway between Tauranga and the North is completely unaffordable
https://i.stuff.co.nz/national/politics/300939736/national-announces-fo…
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