Here's our summary of key economic events overnight that affect New Zealand, with news the Australians look like they have finished their rate-hiking cycle.
But first up today there was another dairy auction overnight and it wasn't a good one. Overall prices fell -4.3% in USD terms, although they were down a much lesser -2.1% in NZD terms. It was the dominant WMP price that took the main beating, down -8.0%. All this comes with volumes sold almost the most of 2023. Buyers were out for bargain WMP and they got it. Fortuitously, all the other products offered basically held the line. And it would have been much worse if the NZD wasn't sharply lower than at the prior event.
Elsewhere the economic data out overnight was quite mixed.
In the US there were two factory PMI's released for July. The widely-watched local ISM one came in with a lesser contraction than in June, but its ninth straight month of contraction. The internationally-benchmarked Markit version was less negative as well. If there was an upside, it was that the 'best bit' was that the new order contraction eased in both surveys.
Similarly, pressures have evaporated in their supply chains with the LMI easing again in July.
Pressure is also easing in their labour markets with the June JOLTS report showing the number of job openings fell by -34,000 from a month earlier to under 9.6 mln, reaching the lowest level since April 2021. The number quitting their jobs also fell and layoffs were low, so workers are now tending to stay put. We get their overall labour market report for July this Saturday, NZT, and the expectation is that it rose by another +200,000 in July, a further solid gain.
Meanwhile the Redbook survey of sales at bricks and mortar retail outlets actually rose last week from a year ago. It was a rise far less than inflation, but it was their first weekly rise in a month. That's something I suppose, perhaps an indication it has reached a bottom. We should perhaps also note that the year-ago base was unusually high.
It is holiday season in the US (or 'driving season'). This period runs until their Labor Day weekend (Monday, September 4, 2023). Petrol prices often rise during this period, but this year they seem to be running -11% lower. They are higher than the 2015 to 2021 period, but they are only back to what they had in 2014. Petrol prices there are no inhibition to summer holidays.
Across the Pacific, the economic news just keeps sliding lower for China. Yesterday the Caixin China General Manufacturing PMI fell, now contracting in July after a small expansion in June. Market estimates expected another small expansion but it hit its lowest reading in six months. It also confirmed the official factory PMI contraction. It was the first Caixin drop in factory activity since April, as new orders dropped after growing in the prior two months, and export sales contracted the most since September 2022.
Germany's jobless rate edged down to 5.6% in July, which was lower than both the previous month and the market expectations of 5.7%. Unemployment levels declined by -4000 to 2.6 mln people, defying market forecasts of a +20,000 increase. Given the surge in Ukrainian refugees in the country, this is actually a very resilient result.
In Australia, the RBA kept its cash rate target at 4.1% following a cooling of inflation pressures (including retail sales), while keeping the door open to future hikes. It was a second month of a rate pause, and wrong-footed most economists but it was in line with financial market expectations. The longer pause suggests the RBA may be approaching the end of its tightening cycle and that sent the AUD sharply lower.
The AFR is reporting that the Australian Taxation Office has used artificial intelligence on an industrial scale to identify more than AU$0.5 bln of unpaid tax bills and stop AU$2.5 bln being fraudulently claimed. The agency’s deep learning models had helped staff identify AU$295 mln in superannuation guarantee underpayments, and natural language models had scoured leaked documents, such as the Panama Papers, to detect AU$242 mln owed by tax evaders since 2018.
Look out for the NZ labour market data at 10:30am. We will have full coverage of this key indicator. Our jobless rate is expected to stay low at about 3.5%.
The UST 10yr yield will start today at 4.05% and up +9 bps from this time yesterday. Their key 2-10 yield curve inversion is lower at -86 bps. Their 1-5 curve is lesser at -116 bps. And their 3 mth-10yr curve is much less inverted at -134 bps. The Australian 10 year bond yield is now at 4.05% and up +6 bps from yesterday. The China 10 year bond rate unchanged at 2.70%. The NZ Government 10 year bond rate is up +3 bps from yesterday to 4.78%.
Wall Street is little-changed with the S&P500 down -0.2%. Overnight European markets closed down -1.2% although London only fell -0.4%. Yesterday Tokyo ended its Tuesday session up +0.9%. Hong Kong fell -0.3%. And Shanghai ended little-changed. The ASX200 ended its Tuesday session up +0.5% but the NZX50 ended down -0.6%.
The price of gold will start today at US$1945/oz and down -US$26 from yesterday.
And oil prices are little-changed at just over US$81/bbl in the US. The international Brent price is now just under US$85/bbl.
The Kiwi dollar starts today down almost a full -1c to just on 61.3 USc. Against the Aussie however we are almost a +½c firmer at 92.9 AUc. Against the euro we are -½c lower at 55.9 euro cents. That all means the TWI-5 has fallen -40 bps to 69.8.
The bitcoin price has eased again since this time yesterday and is now at US$28,934 and down -1.0%. Volatility over the past 24 hours has been modest at just under +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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35 Comments
It is holiday season in the US (or 'driving season')
Is it though? Mates who live there don't get enough time off for a proper holiday (isn't it only 2 weeks a year for most in the US?), so what they do is drive their kids to summer camp where they stay for 2 months 😟
(Law states employers don't have to provide vacation leave, obviously most do but it's about 10 to 14 days a year https://www.indeed.com/career-advice/career-development/average-vacation-time . Brutal)
Bless the peak oilers.
"Texas production, which accounts for about 40% of the nation’s crude oil output, climbed to 5.49 MMbpd in the period, the highest in monthly government data going back to 1981. Meanwhile, oil demand in the U.S. surged to 20.8 MMbpd, the highest-ever seasonal level, according to Energy Information Administration figures released Monday.
The rise in production in Texas, which makes up a large chunk of the prolific Permian basin, is coming at a time when global supplies are in deficit following cuts from Saudi Arabia and its OPEC allies. As oil majors ramp up operations in the U.S., output from Texas is likely to grow further. Oil and gas production from Exxon’s Permian wells reached a record equivalent of 622,000 bbl during the April-to-June period and is on track to increase 10% this year."
https://www.bloomberg.com/news/articles/2023-07-31/texas-crude-output-s…
..you love piking those cherries.
I'm surprised he put it up. If you read it all - be very afraid.
Since 2005, ONLY US fracking has spanned the widening gap between global depletion, and global demand.
And fracking doesn't last long, nor are there many sweet spots.
He must be a tad desperate...
The USA is producing so much oil that they have drawn down nearly half of the "strategic" petroleum reserve in the last two years. Now down to levels last seen in the mid 80s.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCSSTUS1&f=M
I thought Biden was trying to screw the US oil industry into the ground. Californication imports most of its fossil fuel to make it look good. NZ also indirectly did the same when JA and GS decided to shutdown future new exploration off Taranaki and I think elsewhere in NZ
He has to pretend to, but in reality he can't. Nothing replaces fossil energy - unfortunately that includes fossil energy....
The gap between what is do-able, and what is desired, is widening. We're going to see 'voting out' rather than 'voting in', from a growing cohort of the disenfranchised. Then real trouble...
Shut down exploration? ... with 99 years left on permits? At least the vehicle fleet has ramped EV adoption.
Peak oil does not relate to running out of oil. It is the cost of production increasing to the point that you need an increasing amount of energy to extract a smaller amount of it. The easy crude oil deposits have been tapped. Shale oil is expensive to produce in both labour and capital and environmental impacts.
Thanks for painting the latest dairy auction as positively as possible.
But whole milk powder down 8% is seriously bad.
All existing economists' forecasts for our Fonterra payout this season are based on an increasing China demand and rising auction prices to season end.
The exact opposite is happening.
Economists and policymakers weren't too worried about our current account situation, pinning all hopes on those optimistic scenarios of China's milk and tourism import demand recovery.
What now? At what point do we admit that importing more mouths to feed in such large numbers to prop up a sagging economy is a horrible idea?
Perhaps let's just wait for the markets to sort this one out as well. We all know how accommodative markets can be when it comes to unsustainable debt and trade deficit levels - ask Greece, Spain or Lebanon.
Surely the end result of this and other export oriented economic signals will be for the $nz to tank. Just better hope the FX division sees it coming.
and watch inflation shoot up...and interest rates
Petrol prices there are no inhibition to summer holidays.
BP’s £2bn profits cause anger amid climate crisis
Oil and gas company to return another $1.5bn to investors through a share buyback
Only 2 billion quid for a quarter? PAH! Banking in NZ is more profitable than that!
Ironic though isn't it? A global petroleum producer making a bunch of profit from global fuel sales is pissing people off (yes I know it's about climate change) while our big four private banks are each taking over a $billion in profits from a country of between 4 and 5 million people, and people don't seem too concerned. Economies run on fuel, but I guess it is the banks which have ultimate control!
What's also ironic is our virtue-signalling governments preaches the world on basic human rights, while back home oligopolies suck bumper profits each year out of people's basic needs such as food and shelter without even getting a slap on the wrist from authorities.
We've been reminded recently by Robbo in meaningless bureaucratic-speak that "banks and supermarkets have a social license to operate in good faith". Their rich owners/shareholders must be shaking in their boots at such threats.
UK's BOE gilt sales are a multibillion-pound mistake
State assets haven’t been disposed like this since then-Chancellor of the Exchequer Gordon Brown liquidated over half of the gold holdings at $275 per troy ounce
Great application of AI from the ATO.
Rather than taking GST of fruit and vegetables, which is complex and difficult to administer, with cost of compliance approximately what people would get in return (and that tax would have to be made up somewhere else).
Why not just give every income tax payer a tax free benefit of $1000 p.a.
Example: a family of 4 purchases $400 of groceries per week, which is approximately $36 of GST, (nearly $1900 p.a.), 2 people paying PAYE per family, $1000 each.
Simple and effective. Someone please tell Labour.
No we want them gone.
Aside from the fact that most of the GST savings will go straight into the profit margins of the supermarket duopoly, the GST removal in theory is meant to incentivise Kiwi households into buying more healthy food items.
I personally don't think cost isn't the biggest barrier here. Eating out isn't cheap in NZ and has been the fastest rising category in food inflation for the last 5 years with prices jumping ~19% between 2018 and 2023. In comparison, fruit, veggies, meat and fish combined grew 13.5%.
Yet Kiwi households are spending more on eating out than ever before. Auckland households spend over a-third of their food budgets on eating out.
Making a 3-egg omelette with a couple of slices of wholegrain bread and a handful of rocket leaves followed by a piece of golden kiwifruit is still cheaper than buying a crappy BigMac meal.
At Countdown, Apples are $3 - $4 per kg. Frozen vegetables $4 - $5 per kg. Potatoes $4kg. Carrots $3kg. An hour for a 3kw oven, call it $1 worth of power.
Meanwhile, a packet of potato chips is $1.90 per 100gm ($19kg). Frozen pizza $12 - $16kg, a Big Bens pie $17kg. A big mac combo is what $13? the burger is 200 grams and another 150 grams for the fries so call it $40kg.
People are just own goaling themselves with pure laziness.
Exactly. Tap water is free and yet we spend over a billion on sugary drinks each year. A survey from 2018 found 17% of our non-alcoholic liquid intakes comes from carbonated sodas, fruit juices and energy/sports drinks.
The high hidden cost of that is more frequent visits to dentists to get your teeth fixed (we almost have to swap out a kidney for a root canal these days).
Agree. Every issue in society these days is blamed on poverty when it clearly isn't the cause. Poverty, health issues, crime etc are all effects of low education, morals, determination, self worth, etc.
and robbed - In 1839 Māori landowners around Nelson sold 151,000 acres of land to the New Zealand Company on the condition that 10 percent of their land would be reserved for Māori in perpetuity.
That agreement was never upheld. Rather than setting aside 15,100 acres, the Crown reserved less than 3000 acres.https://www.rnz.co.nz/news/national/494948/nelson-tenths-maori-land-case-set-to-go-back-to-high-court
I agree, but I guess if fruit and veg sales went up even slightly there would be a health improvement and reduction in health cost. Although that reduction is probably offset with an increase in NZ super cost so they can't win really.
Exactly. It doesn't need to be a precise amount. Mind you, what is the outcome they're trying to achieve? Is the removal of GST on fruit and vegetables supposed to encourage healthy eating, or are we just focusing on the cost of living?
If the former, then why not go down the track of a points/rewards type scheme a bit like Flybuys which seems to work quite well?
Its just political. Give everyone a $2 a week tax decrease and it sounds stingy, give GST free fruit and veg and it sounds like it will save you serious money when it wont.
It is also regressive too as rich eat more fruit and veg.
Problem there, it could be argued, that will include high income tax payers, a break they don’t really need. Better concept would be a year end 31/3 tax rebate to earners say under &50k pa. Would be a simple claim on each tax return. Also a save as you go method, the recipient would then get a lump sum which might well be handy.
Why not simply take GST off ALL food and then whack a massive sugar tax on soft drinks. There is a whole isle of this rubbish at the supermarket that I don't even walk down. Yes I have the occasional Red Bull so I guess I will have to pay extra for that. Massive health savings, reduced obesity, reduced dental care costs and it pushes people towards better choices.
Across the Pacific, the economic news just keeps sliding lower for China
China's Economic Struggles Are Representative of Global Struggles
But that’s not just a reflection on China. Whereas the Soviet economy was largely isolated even at its peak, the Chinese economy is a representation of global conditions even today; in fact, that’s the whole problem in a nutshell. This was once its miracle and now the curse. We aren’t doing well so China can’t do well.
LOL. Treasury plans to sell ONE TRILLION in debt during Q3. Just Q3. That # is up a f-ing ridiculous $274 bln since May estimate. Janet Yellen just decided three months later she needs a quarter trill more. Because the economy is fine, obviously. https://buff.ly/3YhEHfZ Link
Fitch has the US Gov with the same credit rating as little old NZ now
Ute-o-meter:
- Yesterday: 8,323
- Today: 8,371 (up 0.57%)
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