Here's our summary of key economic events overnight that affect New Zealand, with news tensions are spilling out in China over their struggling property development and shadow banking industries.
But first, US mortgage applications slipped yet again last week, the fourth week in a row it has done that. And that was undoubtedly because mortgage interest rates rose yet again with their benchmark 30 year rate now at 7.16% plus points and back to matching its October 2022 highs. Prior to that, you have to go back more than 20 years to find a higher level.
US housing starts bounced back in July from their disappointing June levels with a better result than anticipated, rising to an annualised rate of 1,452,000 and almost +6% above the level of a year ago. Canadian housing starts came in at a good level too in July, better than expected, but not quite up to the June level.
American industrial production rose unexpectedly in July from June but it is virtually unchanged from a year ago. But other than construction, it would have been a healthy gain.
The Fed FOMC July meeting minutes were released earlier today and they showed most voting members continued to see significant upside risks to American inflation, which could require further tightening of monetary policy. However, there were a couple that cited the risks to the economy of pushing rates up too far.
China's new home prices fell in July from a year ago, and from a month ago they were unchanged. But in their largest 70 cities, prices for second hand homes are falling in 65 of them from the same month a year ago and at a faster pace. The pressure is on their residential housing market in a way that makes property development a losing proposition there.
And investors in their retreating shadow bank funds industry are not happy again. We are getting reports a very small group have taken to the streets in protest at the situation, a 'brave' thing to do in China, but a sign of how desperate some of them feel. The police are out in force protecting the company at the center of the latest crisis. Beijing policy makers are reported to be pressuring funds not to sell into this troubled market. But it will be a tough conversation; when they tried this in earlier financial crises, it did not end well for the companies who held on to dodgy securities in situations like this.
Analysts are marking down China's GDP 'growth' for 2023 now. They will struggle to get anywhere near their "about 5.5%" target.
In Europe, EU GDP rose +0.3% in Q2-2023 from the prior quarter, as expected. And up +0.6% year-on-year. They are holding on to positive growth when the chatter is all about decline.
And confirming that, EU industrial production rose in June when a small fall was expected. But it is still -1.2% lower than a year ago. Still, that is a far smaller retreat than the -2.5% in May and the -4.2% expected. There will be some relief in policy circles.
British CPI inflation fell from 7.9% in June to 6.8% in July in a solid shift lower. That was the expected change however and was their lowest level since February 2022. But their core inflation was unchanged at 6.9% which policy makers would have found disappointing. It was expected to slip slightly.
The UST 10yr yield will start today at 4.27% and up +5 bps from yesterday and now a sixteen year high. Their key 2-10 yield curve inversion is a little less, now at -72 bps. Their 1-5 curve is less at -96 bps. Their 3 mth-10yr curve is a lot less at -111 bps. The Australian 10 year bond yield is now at 4.23% and down -2 bps from yesterday. The China 10 year bond rate is holding lower at 2.59%. And the NZ Government 10 year bond rate is up another +2 bps, now at 5.04% and also its highest since 2011.
Wall Street is lower with the S&P500 down -0.7% at the end of Wednesday trade. Overnight, European equity markets were mainly lower with London down another -0.4% but Frankfurt was up +0.1% with Paris down -0.1%. Yesterday, Tokyo ended its Wednesday session down -1.5%. Hong Kong ended down -1.4%, and Shanghai fell -0.8%. The ASX200 ended down -1.5%, but the NZX50 slipped a relatively smaller -0.5%.
The price of gold will start today at US$1898/oz and down -US$5 from yesterday.
And oil prices are -US$1 lower at just under US$79.50/bbl in the US. The international Brent price is down to US$83.50/bbl. (Local media chatter that our pump prices are rising because crude oil costs are going up is plain wrong. From June till now in either US$ or NZ$, the Dubai crude price is virtually unchanged.)
The Kiwi dollar starts today soft at just on 59.4 USc, down -20 bps and near its lowest since November 2022. Against the Aussie we are a little firmer at 92.4 AUc. Against the euro we are marginally softer at 54.6 euro cents. That all means the TWI-5 is now at 68.5 and down -10 bps from this time yesterday.
The bitcoin price is again little-changed today from this time yesterday and still at US$29,124 which is down just -0.6%. Volatility over the past 24 hours has also been low at just on +/- 0.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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71 Comments
Try ascertaining base-line truths, then build from there. It tends to avoid assumption-skewed arrival at wrong conclusions. Base-lines don't tend to accommodate circularity...
On a finite (therefore bounded) planet, your 'all' was unbounded, and therefore required challenge.
Go well
Straight from Google. Remember to show credit
Many people don't have what it takes or the discipline, to be successful when life hits them between the eyes. Like now.
Yes there are those who check out based on their political beliefs but alot of that is youthful exuberance and brainwashing. In the end they grow older and wiser with it.
My experience is that those who were steeped in the economic mantra - forever growth etc - never bypass the brainwashing.
And if you put the base-line factual stuff under their noses - not opinions of backcasting, but physics and science - they make all sorts of excuses to not read said material. I guess that files under 'immature'.
More shocking death stats. 14% above normal vs a typical 1.4% growth due to aging population. An extra 100 odd people dying a week. Surely we should be locking down, wearing masks, truth podiums and castigating anti vaxxers? Or are the complicit media, politicians and other buyers remorse types going to let this one slide?
"38,346 deaths were registered, up from 36,723" https://www.stats.govt.nz/information-releases/births-and-deaths-year-e…
"There were 36,726 deaths registered, up from 33,486.... The increase in deaths in the June 2022 year (9.7 percent) was higher than the average annual increase over the previous decade (1.4 percent). "
https://www.stats.govt.nz/information-releases/births-and-deaths-year-e…
I think this is bad take. Acknowledge we have an increase in deaths (that effectively impossible to attribute to random chance and is also increasing) and then say we should ignore it because we can't be sure of the exact contribution of each of the hypothesised causes(, using a bunch of flash statistical words).
Really? we should ignore all data unless it can "be made unilinear" (is this a spell check mistake?). Also, why can't we do univariate analysis? (Lack of quality data from governments is the only thing stopping us)
Covid became a political tool. That effect started waring off so its architect resigned. We needed to have some measures, I was always in favour of masking and distancing, not the extreme stay home, go hard go early.
The zero covid approach in China has fully failed
Brilliant! More than a few will choke on this one!
Some interesting quotes; "consensus is not science, citing a lecture on the scientific method by renowned physicist Richard Feynman, who said, “if it disagrees with experiment, it’s wrong.”"
“It doesn’t matter if there’s a consensus; it doesn’t matter if a Nobel Prize winner says it’s true, if it disagrees with observations, it’s wrong,” he said. “And that’s the situation with climate models. They are clearly wrong because they don’t agree with observations.”
"a speech by physician and author Michael Crichton at the California Institute of Technology in 2003 in which he said, “consensus is the business of politics.”"
And then there is the small matter of historical temperature records being changed between the 1990s and now to support the political rhetoric.
But they also state in the article a comment where "Climate Change is not a crisis". On a scientific global basis this might be the case, but on a local basis where weather events are becoming more extreme, they could well be if the infrastructure cannot cope.
Both scientists labelled as "Professor Emeritas" - ie as in Retired , both scientists known for their Contrarian anti climate change views so already exceptions from the main . I guess I'd prefer a report damning the EPA's Climate Regulations to come from currently tenured Professors at MIT and Harvard perhaps - or would they be excluded because they are by default part of the establishment and hence towing the line ?
If you're not open to learning, then why are you participating in a debate? You place judgement on who you perceive to be the messenger, but is just the publisher without assessing the article itself. If you disagreed with what the article presented you could argue your point, but as it is you are just one of the "There are none so blind as those who will not see" people blinded by bias and prejudice.
While we are on the data topic. Just in case anyone thinks net zero is going to save the planet:
https://ourworldindata.org/explorers/co2?time=1987..2021&facet=none&country=OWID_ASI~Asia...
Asia does not care and until they do nothing we do will actually make a difference. Also check our per capita carbon emissions vs China. Lets not kill our exports in a panic.
And it's almost all 60+.
https://infoshare.stats.govt.nz/SelectVariables.aspx?pxID=4e0f86f4-58d1…
except we have done nothing since. no real development on new hospitals, poor working conditions and lack of nurses and doctors, lack of preventative measures. in fact we compounded the poor state of health by celebrating trying to get people vaccinated or to do the census by providing some of the unhealthiest ultra high processed food available. its a mind boggling contradiction where we refuse to make people accountable.
I gave the data link so others could join the conversation. Perhaps we could include the reduced infant/child mortality also?
An extra 9 deaths in 20-24, and 18 in 30-34. If not suicide, how about car crashes and cancer? Respiratory illness exacerbated by vaping? (I didn't look at death by cause). Given the size of the population, these figures aren't even statistically significant.
Overall, an increase of 30 deaths sub-60 - vs 1560 deaths 60+. 2% vs 98% split in the growth.
I can recommend the book 'the Phoenix Economy' by Felix Salmon, which has a chapter on how Covid affected risk-taking behaviour. As you suggest, many young people responded to to Covid by increasing their risk tolerance - financially through crypto and meme stocks, and in some cases fatally through speeding, drink/drug driving, increasing smoking rates etc.
Significant for those age groups which not many people die. Almost all age groups saw an increase in mortality. Given dying from covid was statistically insignificant for healthy under 70's this is significant.
Also the older age cohort you focus on had a 20% increase. Interest needs an article on the funeral sector at those rates!
Do you think the higher deaths in March-June 2022 could be related to that being our peak Covid death rate? Expect another bumper month when July is reported.
https://www.worldometers.info/coronavirus/country/new-zealand/
~3000 additional deaths, most are explainable purely from the Covid death stats.
Accounting for previous decade 1.4% increase in deaths per annum there are around 3000 extra deaths in the last two years that can't be attributed to dying with Covid. You don't have nearly enough covid bodies for the covid wot did it theory.
Given the median age of dying with covid is higher than average life expectancy many of those dying with covid would have died anyway, even from bullets. So you have 1000's more bodies to account for than to say it was just "purely from covid". But hey, who cares.
West and most of it’s commentariat are well behind the curve and looking in rear view mirror. Recession and deflation and defaults coming and process tilted at March-June. China RE is biggest asset class in world and it’s going downhill rapidly.
xi doesn’t want to save it and can’t afford to anyway. It’s crunch time and CCP has no tools left in box. It’s going to be a rough ride down folks. Forget inflation it’s last years problem
Folks in Wellington public service jobs are doing particularly well.
For example, MSD has given a pay increase to all its staff of 8% after 3% each in the past two years. That's a 14.5% in 3 years. The average worker got a promotion every 3 years in the last decade instead of every 5-6 years over the longer term.
You no longer accept lower pay and fewer career growth for job security in NZ's public service. You get all of the above.
Norway springs to mind for a country doing remarkably well. Their wealth fund posted a rather envious returns of US$143 billion profit for H1-23. That is NZ$40k for every man, woman and child in the country over half a year.
Such large investment gains plus a huge jump in hydrocarbon exports allowed their current account surplus to swell to 30.6% in 2022.
For over a decade, the innovative Scandinavian country with a population of only five million has destroyed electric car myths and set new sales records for battery electric vehicles (BEVs). 2022 was unsurprisingly no exception, and the EV market share rose from 64.5 percent in 2021 to 79.3 percent in 2022
Stand Together | Public Service Pay Adjustment - PSA
Work it out yourself. This does not include the pay increase staff received in prior years when they moved up the band during the pay freeze. FYI the pay freeze meant that bands weren't adjusted for two years, but people were moving up a step or two each year.
sounds like the rate outside of the PPSA, but I'm sure it is the case as the MSD was granted additional budget to increase salaries of managers and senior staff in their budget to 'rebase' them after years of 'falling behind'. it won't be hard to find in time as the salary bands will be uploaded.
Beijing policy makers are reported to be pressuring funds not to sell into this troubled market. But it will be a tough conversation;
You'll either be looking at a rifle in your face or looking at someone who has an armed guard standing beside them.
China's only policy is 'do as we say'
...oil prices are -US$1 lower at just under US$79.50/bbl in the US. The international Brent price is down to US$83.50/bbl.
Always a welcome way to start the day knowing the cost of energy is falling. I'll ignore the end of the Chinese asset bubble and focus on that instead.
Can't happen. That energy is what underwrites the dollars, so i can't get cheaper unless less work is being done (thus less demand). Which in turn can underwrite less dollars. So it can never be 'cheaper', beyond a certain point - which we are well past.
The discrepancy is debt and avoided maintenance - they are all there is.
The former increasing unrepayable, the latter a ticking energy-demanding time-bomb.
Cheaper? That's the trouble with measuring in a remote, contrived construct....
Even before sanctions were imposed, China was Russia’s largest trading partner. Against the Yuan, the Russian Ruble declined almost 20% over the last six months. Yes, this has a potential inflationary impact on Russian consumers, but the cheaper Ruble provides a bit of economic help to China, whose economy is struggling. The fall in the value of the Ruble means that China can purchase much needed oil and gas while spending less money. Link
The bus driver shortage has gone: https://www.greaterauckland.org.nz/2023/08/17/the-buses-are-fixed/
More evidence that the difficulty getting staff has decreased and hence wage inflation should decrease.
I doubt the Auckland bus situation is 'fixed'. I take them regularly. Two or three come at once, then a giant wait for the next one.
Also I have noticed (confirmed by others in the office) that the new drivers have lead feet. A few of mine have been charging ahead at 60+ kmh, with consequent heavy braking. A new experience on the bus. But not something that gives riders confidence to use the bus.
I expect China's CCP will simply create a 'fund' to purchase troubled assets and will be the buyer of last resort - buying up anything valuable at rock bottom prices. Sure, the fund will not be profitable for the first few years. But Chinese have much longer investment horizons then we do in the west.
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