Here's our summary of key economic events overnight that affect New Zealand, with news a quiet end to July as the northern hemisphere holidays in the heat has brought out some tame second tier data. And China chipped in with an underwhelming announcement of how they will deal with their slowdown.
But first, although it improved in July from June, the Chicago PMI that measures activity in the key Mid-West manufacturing region remained solidly negative. And there were also signs of improvement in the Dallas Fed's July factory survey even if it stayed negative as well. But it is the Mid-West one that needs to move up more to indicate a better outlook.
However, we are seeing a good recovery in Japanese consumer sentiment. It still has a way to go to get back to pre-pandemic levels but it is rising quickly now. Meanwhile the Bank of Japan ran an unscheduled bond auction yesterday in a bid to stop yields rising too fast.
China's official factory PMI survey contracted the least in July in the last four months of contraction (49.3). But their official services PMI fell to its weakest level of the year, now with only a tame expansion (51.5). The private Caixin version is out later today for factories, and Thursday for services.
Yesterday's 'big stimulus announcement' in Beijing turned out to be a damp squib, with almost all of it a restatement of previous piecemeal initiatives. But it did show that Beijing is keeping a wary eye on the situation, and it still has its big set-piece direct stimulus options up its sleeve. Beijing wants people to consume more, including buying more cars and investing in property. It also wants people to take more holidays. And it is calling for more private sector investment. But to outsiders, it look like policy makers are just too confident that Party exhortations will work.
China's property crisis which has been going on for more than two years with waves of defaults, is entering a new phase. State-backed developers are now having trouble making bond payments and repaying debt. It's a big deal with more than NZ$575 bln in maturing bonds potentially triggering new stresses.
Singapore's business confidence is now back in positive territory and at its best level of the year.
EU inflation slowed for a third consecutive month to 5.3% in July from 5.5% in June. This was the expected easing.
In Australia, there is some evidence their rising official interest rates are keeping a lid on property prices. They rose in July from June and a fifth consecutive month of gains, but this was the slowest in that set. Year-on-year they are down -3.4%. Listings are up as some stressed homeowners shift to quitting the market. They are seeing a similar easing pattern in home loan borrowing. The RBA will review its cash rate target later today and analysts are expecting a +25 bps rise again, taking their rate to 4.35%, and that may hasten the housing market cooling. However it is no certainty there will be a rate hike today. Recent retail sales data was decidedly weak and the RBA may think it has done enough already.
The UST 10yr yield will start today at 3.96% and unchanged from this time yesterday. Their key 2-10 yield curve inversion is little-changed at -92 bps. Their 1-5 curve is deeper at -123 bps. And their 3 mth-10yr curve is slightly more inverted at -144 bps. The Australian 10 year bond yield is now at 3.99% and unchanged from yesterday. The China 10 year bond rate little-changed at 2.70%. The NZ Government 10 year bond rate is down -5 bps from yesterday to 4.75%.
Wall Street has started its week with the S&P500 little-changed. Overnight European markets closed mixed between Frankfurt's -0.1% dip and Paris's +0.3% rise. Yesterday Tokyo ended its Monday session up +1.3%. Hong Kong rose +0.8%. And Shanghai rose +0.5%. The ASX200 ended irts Monday session up a mere +0.1% but the NZX50 ended up a much stronger +0.9%.
The price of gold will start today at US$1971/oz and up +US$12 from yesterday.
And oil prices are up another +50 USc at just over US$81/bbl in the US. The international Brent price is now just over US$85/bbl.
The Kiwi dollar starts today up more than +½c at just on 62.2 USc but still in its recent range. Against the Aussie we are marginally softer at 92.5 AUc. Against the euro we more than +½c higher at 56.5 euro cents. That all means the TWI-5 has risen +50 bps to 70.2.
The bitcoin price has eased very slightly since this time yesterday and is now at US$29,226. Volatility over the past 24 hours has remained low, also at just under +/- 0.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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30 Comments
From the UK, but likely similar applies across much of the World:
Families took on more debt last month than at any point since 2018, as soaring costs put household finances under increasing strain. Consumer credit jumped by £1.7bn on the month....It comes after inflation hammered workers’ spending power, with prices accelerating above average wage growth.(Telegraph)
And whilst the soaring costs might be used as the reason, more Debt is not what's needed. It's less consumption; less spending, that is. And Debt is only being taken on in the (mistaken) belief that interest rates HAVE to fall from today's HIGH levels. Two things - rates don't have to fall as Debt increases, and interest rates aren't particularly high in historical terms. High, is still some way off if higher wages chase off in pursuit of reduced spending power.
It depends. I've been in that situation where I needed to live off my credit card just to eat very basically. It was early in my career and I'd moved countries and sometimes the paychecks take a while to catch up.
I can say I spent $0 on clothes, travel, or eating out, or other entertainment during that time. The only way you can properly see where its being spent is to look at economic data coming after.
That period actually set me up for life, because I kept my spending way down as pay went up and eventually invested half of my salary over a decade. Life was pretty fun, I just did outdoors stuff. Played 3 sports, camped and hiked, I read a book a week etc. 20 years later I haven't got around to buying a TV but have a NW in the millions.
If you invest 50% of your income, you can retire in about 17 years on the same level of expenses. Early Retirement Calculator (networthify.com).
Meanwhile the Bank of Japan ran an unscheduled bond auction yesterday in a bid to stop yields rising too fast.
BOJ's Yield Curve Control "Tweak" Ends In Disaster As Yen Tumbles, JGB Yields Soar
- Survey respondents reported tighter standards and weaker demand for the all-important commercial and industrial (C&I) loans to firms of all sizes over the second quarter.
- Banks also reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
It's not the unemployment rate, either. Fed keeps citing "tight" labor for needing to hike rates, ignore other really weak data. But in 2019, the unemployment rate was the SAME and Fed was cutting rates. They're just making shit up as they go. https://buff.ly/3qj4hEO Link
In another marker of doom for the incumbent government, a record number now feel negatively about the future, with 29 percent putting New Zealand on the right track, and 60.5 percent on the wrong track.
Mr Hipkins remains chipper about his party's chances, offering a one-word answer on Monday when asked how many MPs he would have after the October 14 poll.
"Heaps," he said.
ROY MORGAN NEW ZEALAND JULY POLL
National - 33.5 (up 3.5)
Labour - 26 (down 4.5)
ACT - 14 (down 1)
Greens - 9 (down 0.5)
Maori - 6 (down 1)
NZ First - 5 (up 2)
TOP - 4 (up 1)
Now that Labour support is deservedly collapsing, I think we will see strategic voting again this election. Those ex Labour voters don't like the Nat/ACT policies of privatizing everything, so will be looking to vote NZFirst as a handbrake on the asset sales. Winnie will need to be polling consistently over 5% though, as people don't want to risk wasting their vote.
Quite a few people would prefer "nothing gets done" when it comes to selling off our roads and hospitals to overseas profit seeking owners. More than half of people according to the referendum we had on it. But John Key ignored that and sold state assets anyway, with bankers pocketing $400m in sales commission. Would love to see who's pockets that eventually went in.
If you want to see the colour drain from Winnies face, ask him why immigration was suddenly cranked up. NZFirst smells, but this election will be about who reeks the least.
Quite a few people would prefer "nothing gets done" when it comes to selling off our roads and hospitals to overseas profit seeking owners.
Just don't ask about the failure to build rapid transit during a climate emergency, worsening congestion and ED waiting times that have blown out to the point where they don't even publish the measurements anymore?
Because the moral high ground matters more than anything actually happening, right? Heaven forbid someone actually follow through on something when you can just invoke the spectre of 'neoliberalism' and overlook the actual decline in services people rely on to live their lives.
"But asset sales/rogernomics/nine long years!" is the left-wing "I'm alright Jack". Just don't ask about the people in emergency accommodation, where the Light Rail is, the 40,000 extra houses or the 500m extra trees we were supposed to get are. Because blue team bad. Blue team bad!
You used a lot of words to say "I support asset sales". Fair enough, but I don't.
And because it looks like you missed it upthread, I do not support Labour. For the dangerous division they have caused in NZ, they have to go before we become Northern Ireland in the troubles.
"In another marker of doom for the incumbent government, a record number now feel negatively about the future, with 29 percent putting New Zealand on the right track, and 60.5 percent on the wrong track"
As significant portion of these people thinking the country is on the wrong track will be people who can now see a realistic possibility of Luxon becoming Prime Minister. I am in that camp
Now that some older, wealthier Kiwis are starting to discuss their move to Aussie, even Herald is paying attention. The latest casualties appear to be small businesses who can set up shop across the Tasman and enjoy direct access to a larger market at lower running costs.
The Front Page: How worried should we be about Kiwis leaving for Australia? - NZ Herald
The $10-20k premium most workers receive upon crossing the ditch is attractive but so is the fact that individuals are also able to claw thousands of dollars back from the taxman at year-end in deductible expenses (transport, electronic goods, childcare, etc.).
I think you'll find most people who are leaving are trying to get out of a cycle of long hours, no pay, taxation that punishes you for getting pay rises and a country that stagnates for two point five years, only to suddenly decide everything is VERY IMPORTANT SUDDENLY when an election cycle looms.
And as far as stagnation goes, the last six years has been an absolute pearler. Nothing to do with National there m8. That's on team red.
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