Here's our summary of key economic events overnight that affect New Zealand, with news American inflation and consumer spending remain at levels above where the US Fed needs them to be.
But first, actual American jobless claims came in at a low 192,000 last week, lower than expected and there are now under 1.8 mln people on these benefits. This is a good way to head into their Labor Day holiday, with only the August non-farm payrolls report due now. That is out tomorrow and is expected to show a modest increase of +170,000 jobs created.
US PCE inflation was confirmed at 3.3% in July.
American personal income rose by +0.2% from the prior month in July, after a +0.3% increase in June. This was slightly below market forecasts of a +0.3% rise. But the growth in wages and salaries rose by +0.4%. Year on year, these are up +4.6%.
Meanwhile, personal spending jumped by +0.8% in July, the most since January and above market expectations. Year on year, these are up +6.4%.There is consumer resilience here that the Fed will have noticed. Note that the difference between income and spending is actually little different in dollar terms, only marginally less savings are being recorded and only a marginally lower savings rate.
Elsewhere, the Chicago PMI came in much "better" (less worse) than anyone expected and a large improvement from July, even if it is still contracting. Only just, now however, which is quite a turnaround from the recent trends.
In China, their official August PMI data is out. Their factory activity gauge improved marginally in August, but was still below the 50-point mark that separates a contraction from an expansion amid a global economic slowdown and sluggish domestic demand. Their service sector expansion cooled again and is barely at the 50 benchmark now (51.0). New export orders are weakening although new orders generally are at a steady state (50). The private Caixin equivalent monitoring is not out until tomorrow (factory) and Tuesday (services). Recently that has been marginally more optimistic than the official data.
In China, the minimum deposit for a home purchase is currently 30%. They are moving it down to 20% for 'first home buyers' (after redefining this very loosely). Interest rates are falling too. These are the practical steps for the previously announced loosening, to try and get their housing markets functioning again as an engine of growth. Developers there are facing broad insolvency risks, so the 'need' is urgent. Their financial system cannot afford property prices to fall.
Hong Kong retail sales rose +14% in July from a year ago, but this is all about the very low base in July 2022. But they fell from June to July. These retail sales actually decreased by -7.0% in the three months ending July 2023 compared with the preceding three-month period. Hong Kong is shutting down today ahead of Typhoon Saola's arrival. It is a big one.
We should keep an eye on the long-simmering border dispute between India and China. China released new "official maps" of the country which publishers worldwide are expected to respect (or face tough sanctions). But this latest version creeps the Chinese border into India and which brought a strong protest from New Delhi who had thought the issue had calmed down. Interestingly, these same maps have extended the "nine dashed line" in the South China Sea to now ten dashes. China has lost every claim in international arbitration over the sea claims, but that isn't stopping their expansion ambitions. The creeping has all the hallmarks for potential conflict.
India released its Q2-2023 economic growth data and it came in at an impressive +7.8% from a year ago. But it has to be noted that this is dominated by investment activities and the personal consumption side of this is under +6%, still good though. It is certainly a stark contrast to China. But there is growing weather stress there. The monsoon has been weak this year. Monsoon rains irrigate about half of India’s farmland and are crucial for crops such as sugar and soybeans. Food prices are under severe stress. India has more than weather-related problems however.
EU inflation was unchanged in August at 5.3% when a dip to 5.1% was anticipated The ECB is facing stubbornly embedded inflation there. Germany and France are keeping it up. Greece, Spain, and the smaller northern nations are all running much lower inflation rates.
Last week, container freight rates resumed their falls, although it was only minor in the latest update. Bulk freight rates were unchanged.
The UST 10yr yield will start today at 4.09%, down -3 bps from this time yesterday. Their key 2-10 yield curve is unchanged at -77 bps. And their 1-5 curve inversion is little-changed at -116 bps. Their 3 mth-10yr curve inversion is fractionally deeper at -130 bps. The Australian 10 year bond yield is now at 3.99% and down another -4 bps from yesterday. The China 10 year bond rate is still at 2.60%. And the NZ Government 10 year bond rate is now at 4.93% and down -7 bps.
Wall Street is up a mere +0.1% on the S&P500 today and struggling to find direction. Overnight, European markets were mixed with Frankfurt up +0.4% and Paris down -0.6%. Yesterday, Tokyo ended up +0.9%. But both Hong Kong and Shanghai ended down almost -0.6%. The ASX200 ended its Thursday session up a tiny +0.1% while the NZX50 was up +0.3%.
The price of gold will start today at US$1940/oz and down -US$4 from yesterday.
And oil prices are +US$1.50 higher at just on US$83/bbl in the US. The international Brent price is now at US$86.50/bbl.
The Kiwi dollar starts today fractionally softer than yesterday at just under 59.6 USc. Against the Aussie we are softer as well at 92 AUc. Against the euro we are firmer at 54.9 euro cents. That all means the TWI-5 is still at 68.6 and again, essentially unchanged.
The bitcoin price has fallen back today, wiping out almost all the earlier gains and is now at US$26,319 which is down another -3.1% from yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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46 Comments
In other 'you can't escape the squeeze' news, rents rocketing throughout Europe
https://youtu.be/mavRpBC2dA8?si=kvuBe_LUeghfq861
I honestly thought we had a few more decades....
Inflation causes everything to go up in price. Whodathunkit?
With the rents, it's tied more to diminishing stocks of rentals, and higher interest rates being passed on.
Good headwinds coming into a house building slump.
Yup. Talked to 9 young fellas last night, paying $7000 for a week's house accommodation AirBnb while snowboarding. Why rent long term with that sort of money lying around?
$7k / 9 / 7 = $111 per person per night. That is not too bad is it?
As long as you get an actual bed. The price was probably calculated on a per person basis, not a fixed rental.
diminishing stocks of rentals
Fortunately, we have bought in skills to show us how to handle a lack of rental stock.
Migrants in overcrowded Auckland house face eviction in the midst of INZ investigation (msn.com)
Bonus GDP bump for additional services required (seen standing around on the footpath in one of the photos). If only we could tap into the offshore revenue stream, then we'd really be cooking with gas (like they are with gas bottles for heating and cooking provided). Being kind never felt so good - I reject the premise that NZ should shoulder any responsibility for these people taking on a lifetime of debt to come here since we don't make the rules on who comes here (covid excluded obviously - that was a serious life and death situation).
Good gosh - likely to hear more and more stories like this over the next while.
Don't question immigration though - you'll be a racist / xenophobic / anti-low wages for workers / pro businesses here having to train people / anything other than concerned about causing harm to people via what is nothing more than human trafficking at this point.
Maybe the answers a bit closer to the middle.
Not that I'm hiring, but the exposure of taking on a young Kiwi is pretty high.
Rejecting NZ should shoulder any responsibility would only be defendable if this was a totally new and unexpected occurrence. But it has been reported regularly ever since I arrived as an immigrant 21 years ago. Reported in our newspapers but also reported in the Philippines and India and identified by Prof Stringer's report on worker exploitation in Dec 2016. NZ govts both Labour and National and their coalition partners are all to blame. The Bible's tale of the good Samaritan starts ""“As a man was going down from Jerusalem to Jericho [ a dangerous 17-mile trek through desolate territory], some robbers attacked him. They tore off his clothes, beat him, and left him lying there, almost dead."" he is then ignored by those who claim virtue until the Samaritan stops and helps. Please complain to whoever is standing in your electorate - it is not too difficult to resolve - increase Visa charges, advertise in foreign countries; employ more visa inspectors.
Chinese consumer confidence is shot
Security and saving is in form of buying apartments. These are cratering due to Xi trying to deleverage debt. Trying to get these folk to spend or want to is not easy and cuts to rates won’t do trick
Stuff carrying an article on current MP pay and conditions. The facts behind how much they have looked after themselves before the country, despite the rates being frozen since 2017. A Prime Minister's spouse getting an annuity after they die of $11500 for every year they were PM, capped at $57k. Why?! Kiwi save employer contributions are 20% when everyone else only gets 3%. Ripping off tax payer funds big time. Note that I am not saying employers should be paying more, I am pointing out that MPs are dipping into taxpayer funds for their own personal benefit. Is this not corrupt practices?
It's a double edged sword.
- Ideally you need to offer incentives to attract better political candidates.
- In general, the quality of the actual candidates is pretty suss
If our politicians were awesome, it wouldn't be a problem.
Therein lies a solid pointer as to why our parliament is beset with so many career politicians and therefore alongside that, a culture of what’s in it for me.
You can make that case for most jobs.
But yes it's certainly a good place for people who can't walk the talk to camp out.
I do get a bit sick of people criticising other careers / salaries / etc. If you think they have it so great then you are free to do it yourself. That is the beauty of Capitalism, we don't need to set pay rates based on how hard the job is or how important it is to society (which seems to be a popular opinion on these forums), supply and demand set the pay rates based on how many people want to / can do the job.
https://smartwealth.sg/salaries-singapore-president-ministers-mps/
Singapore PM is on $2.2M, worth every $
Its one of those jobs where you get paid well if you make it to the top, but you can also make bugger all if you don't.
The PM doesn't get paid that well compared to say the CEO of a bank, the perks make up for it. Being the PM would be a significantly harder job. And you can only really be PM for a few terms (voters get sick of you) whereas a CEO can be in the trough for various companies for decades.
Until you go on a board of directors.
Try telling the population that $163K base rate as a back bencher, who really only has to do what they're told, is 'bugger all'. It's not. It is much more than bugger all, even more so when you factor in the benefits.
But you raise the question again about CEO pay rates; why should they get paid so much?
Do a graph of starting teacher's, nurses, and backbencher's salaries over the last 50 years. One is shooting up way faster than the other two. Correct. Backbenchers.
Agree there plenty of CEOs in NZ on 1 million or 2 million, 3 million. Makes the PM's salary look like chicken feed, but the ironic thing is the PM and there party can have a massive influence of these CEOs companies they control. All a bit lop sided.
They have the option to do it too if it is so easy and well paid.
I have met a number of CEOs, all of them were significantly more impressive than your average Joe (obviously some better than others). Companies wouldn't pay so much if they had thousands of great candidates knocking at their door.
To be honest looking at the ability and the work ethic of some of the people I work with (probably on $150k - $200k) compared to a tradie or someone working in a factory, I actually think the people on the higher salaries are underpaid in comparison. A generalisation of course, there are good and bad employees in all jobs. I know someone who has to pay $70k for the most basic of roles, they skive off with the slightest excuse, always "sick" on Mondays, fail drug tests all the time, have about 2 brain cells to rub together. None of that happens at the higher end of the pay scale.
I agree and disagree, there is plenty of White collar crime in NZ from those at the higher end.
Like I said those were generalisations, but I don’t think a significant percentage of employees commit white collar crime.
The difference in ability between our CEO and myself or my peers, let alone compared to an unskilled worker, is vast. He can make things happen and can solve problems that very few other people could.
So are you saying back Bencher MPs earn their salaries and benefits? I think in time some might, but in the end this is not about what you do for the country but your personality and getting elected, or re-elected.
I would suggest that if all MPs pay and benefits where linked to the median pay and benefits of ordinary Kiwis, they they might be a little better at delivering value for the country. Instead they've been driving it into a hole which will be very difficult to extract us from, creating a racist and divisive society, all the while being paid extremely well, with even better benefits, all at the expense of the tax payer whom they seem to a degree of contempt for.
There wouldn’t be any MPs would there? Why would you campaign etc without income in the hope of getting one of only 120 jobs that pay the same as any other job?
have you ever talked to an MP? I have, most seem like pretty clever people, even the ones where I disagree with their ideals.
by your logic why not make open heart surgeons get the same salary? I think it’s been tried before.
I've actually had plenty of interaction with a number of MPs in my time. Most impressed me as being mostly ego, and couldn't handle being challenged on their reasoning. On or two I would agree were capable. One, Chester Borrows whom I had known well from before he became an MP, was humble enough to admit he wasn't sure on a subject and listen for your reasoning. Mostly I would just categorise them as ambitious, and most of them, their actions tended to demonstrate they were good at presenting an image, but didn't really care about others opinions and would do what ever it took to get what they wanted. Of course if you sucked up to them in the appropriate manner then you might be their best friend for the moment.
If you want those perks you can stand for election. It is easier to be elected than to become a star All-Black or a highly paid consultant surgeon.
- There are plenty of examples of huge salaries, but they still got monkeys.
No need for any politician to be paid more than 200K. (Or public service CEO for that matter.)
And the long trail of benefits needs to stop as well. That bit is extraordinary.
Back in the day, when government department managers' job titles names were changed to fit in with private sector, their salaries leapt away up. All it did was attract people who liked being paid more. None did a better job than previously. Now it turns out that they are all party to their own salary plus benefits level decision making. Who would have thought they would use this to benefit themselves?
That is an odd comment. Why would anyone decent take on a stressful public service CEO role with high work hours and responsibility if they can get as much being a plumber or 10 times as much in the private sector?
Because they want to be there to make positive changes and invest their time to try and achieve it, which is clearly what we've lost, if it was ever there.
In China, the minimum deposit for a home purchase is currently 30%. They are moving it down to 20% for 'first home buyers' (after redefining this very loosely). Interest rates are falling too. These are the practical steps for the previously announced loosening, to try and get their housing markets functioning again as an engine of growth.
Others have a differing view:
Though central banks purport to follow something like Knut Wicksell’s natural rate theory, in reality they have changed it around such that everything is viewed via the “demand” side; and thus nothing actually makes sense including the behavior of market interest rates.
This is what Milton Friedman called the interest rate fallacy, and it indeed refuses to die. We can tell what monetary conditions are in the real economy, as opposed to financial liquidity, though the two can be linked, by the general level of interest rates. When money is plentiful, interest rates will be high not low; and when money is restricted, interest rates will be low not high. The reason is as Wicksell described more than a century ago:
[The natural rate] is never high or low in itself, but only in relation to the profit which people can make with the money in their hands, and this, of course, varies. In good times, when trade is brisk, the rate of profit is high, and, what is of great consequence, is generally expected to remain high; in periods of depression it is low, and expected to remain low.
When nominal profits are expected to be robust, holders of money must be compensated for lending it out by higher interest rates. Thus, the same holds for inflationary circumstances, where nominal profits follow the rate of consumer prices. During the Great Inflation, interest rates weren’t low at all, they were through the roof well into double digits and higher by 1980. At the opposite end in the Great Depression, interest rates were low and stayed there because, as Wicksell wrote, the rate of profit was low and was expected to be low well into the future. High quality borrowers were given as much money as they could want while the rest of the economy was deprived of funds; liquidity and safety being the only preferences in what sounds entirely familiar. Read more
Meanwhile, personal spending jumped by +0.8% in July, the most since January and above market expectations. Year on year, these are up +6.4%.There is consumer resilience here that the Fed will have noticed.
US Consumers Paid For July Spending Spree By Burning Through $150BN In Savings
Auckland Council sold about $835m worth of its holding in Auckland Airport yesterday by the looks.
EU inflation was unchanged in August at 5.3% when a dip to 5.1% was anticipated The ECB is facing stubbornly embedded inflation there. Germany and France are keeping it up.
Clown show continues: EU imports of Russian LNG were up 40% between January and July in 2023, compared with the same period in 2021, prior to the start of the Ukraine war. Bear in mind, this is Russian energy which is far more expensive than that piped through NordStream 1 and could have been also through NordStream 2. Higher energy costs also causes systemic inflation risks. Link
Yes all the good intentions but it doesn't work in practice. I thought the Germans still had a couple of Nuclear power stations that they were going to moth ball, probably not then ?
Blame the Americans for blowing up the pipelines. Pretty desperate move by them that is now backfiring. Everyone need the energy for industry and to keep the lights on. As soon as you get like South Africa or Lebanon its all over.
Citation needed
Their financial system cannot afford property prices to fall.
I'm sorry, was this about China or NZ?
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