Here's our summary of key economic events overnight that affect New Zealand, with news a damp, colder tone is descending on the global economy.
First up we should note that partisan Congressional stupidity is on full display in Washington DC, and there is a chance that there would be an unexpected American Government shutdown due to the inability to pass a regular funding resolution. Markets deem the risks low, but the display is very unseemly. (It seems the idea is to defund law enforcement so that the cases against Donald Trump have to be abandoned. But like a lot of ideas in the wacky wing of the Republican Party, it actually wouldn't be true anyway. In any shutdown, prosecutions and trials continue.)
In the real world, the updated September Markit PMIs for the US paint a steady-state picture of no significant expansions nor contractions. Their factory sector is reported to be contracting very slightly but that is its 'best' reading in 2 months. Their services sector is marginally expanding, but that is a very light slip from August.
And it isn't going to improve, with the autoworker's union expanding its strike to 38 factories owned by GM and Stellantis (Chrysler) sites across the US and Canada - but none for Ford yet.
In Canada, retail sales may have slipped very slightly in August, it their overnight update. But they are up +2.0% from a year ago. That wasn't enough to account for inflation of course, but in Montreal they did. They were weakest in Vancouver.
Japan said its CPI inflation rate in August was little-changed at 3.2% from 3.3% in July, but that was its lowest reading in three months. Prices continued to rise for food however, up a sharp 8.6%, offset by even sharper falls for fuel, down -12.3%. Outside these, core inflation was unchanged at 3.1% and that makes it 17 straight months core inflation has been above the Bank of Japan's 2% target. They must be ready to change policy settings. In fact, the central bank met yesterday and didn't make any headline change in a unanimous decision. The lack of any clear sign of a shift in its policy stance puts a damper on market speculation over the prospects for a near-term interest rate hike. And it is fueling pressure on the yen.
The latest Markit PMI for Japan shows factory activity contracted a bit faster in September than the previous month, and sharper than market forecasts so they now have a fourth straight month of fall in factory activity and the steepest drop since February. But their services sector is still expanding at a healthy rate.
China has found a new temporary way to boost its private sector; it is ordering the state-owned enterprises to pay outstanding bills to their private contractors. Apparently, dragging settlement for suppliers is a favoured tactic to save costs by SOEs.
In Europe, the Markit services PMI reported an improvement even if it is still contracting. The EU factory PMI is also contracting but at an unchanged rate. What is a worry there is that new order levels are falling at their sharpest pace in three years.
Meanwhile in Australia, their services sector shifted out of contraction - just, but their factory sector is still contracting, extending that to a 3 month low.
For all the economic activity shifts over the past week, the most substantial one is the rise in benchmark interest rates, triggered by a hawkish American central bank.
The UST 10yr yield starts today retracing -4 bps at 4.44%. But that is up from a week-ago level of 4.33%. Their key 2-10 yield curve is little-changed from yesterday at -68 bps. And their 1-5 curve is now at -88 bps and fractionally more inverted. Their 3 mth-10yr curve inversion is a but more too at -95 bps. The Australian 10 year bond yield is now at 4.33% and back -2 bps from yesterday. However, the China 10 year bond rate is up +2 bps to 2.71%. But the NZ Government 10 year bond rate is now at 5.26% and up another +3 bps.
Markets now have a full +25 bps priced in for an RBNZ rate rise in early 2024. Globally, higher rates for longer is the trend setting in, and that will continue to weigh on asset price valuations
Wall Street ended down -0.2% on the S&P500 in its Friday trading and was down -2.8% for the week. Overnight, European markets were little-changed except Paris was down -0.4%. Yesterday, Tokyo fell -0.5% to be -3.1% lower for the week. Hong Kong ended its Friday session up +2.3% to be unchanged for the week. Shanghai was up +1.6% to be up +0.7% for the week. Singapore was unchanged yesterday but ended down -2.3% for the week. The ASX200 was also unchanged on the day, but ended down -2.9% for the week. But the NZX50 distinguished itself by rising +0.5% with an end-of-session surge, to be up +0.2% for the week
The Fear & Greed Index has shifted to the 'fear' side this week, after being neutral for the past month. But although the VIX index of volatility rose, it is still low by historical standards.
The price of gold will start today at just on US$1923/oz and up +US$3 from yesterday. A week ago it was at US$1922/oz.
And oil prices are +50 USc up from yesterday at just on US$90/bbl in the US. The international Brent price is unchanged, still just on US$92.50/bbl. A week ago these prices were US$90/bbl and US$93/bbl, so not material change in the past seven days (despite all the chatter). In fact with the NZD rising, the cost of oil in our local currency is lower.
The Kiwi dollar starts today on the up to end the week. It is up to 59.6 USc, a +¼c rise from yesterday and up more than +½c for the week. Against the Aussie we are another +¼c higher as well at 92.6 AUc (remembering we started the week at 91.7 AUc). Against the euro we are up over 56 euro cents and we haven't been this high since late July. That all means our TWI-5 is up +40 bps on the day to 69.3 and up +80 bps for the week and a 45 day high.
The bitcoin price has retreated again from this time yesterday, but this time only marginally and it is now at US$26,566 and down just -0.4%. A week ago it was at US$26,369 so the net shift has been insignificant. Volatility over the past 24 hours has been very low too at just over +/-0.4%.
Daylight savings time kicks in this weekend. Clocks will go forward by one hour at 2am Sunday, September 24. Daylight Saving time will continue until 3am Sunday April 7, 2024. If you are working when Daylight Saving begins and the clocks go forward, you actually work an hour less, but you are entitled to payment for your normal hours. For example, if you were meant to work from midnight to 8am you will only work 7 hours, but you are entitled to be paid for 8 hours of work. If you are working when Daylight Saving ends and clocks go back an hour, you are entitled to any extra hours that you work. For example, if you were meant to be working from midnight to 8am, you actually work 9 hours and you are entitled to be paid for 9 hours of work.
The easiest place to stay up with event risk is by following our Economic Calendar here ».
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66 Comments
It's the U.S. Democrats who are wacky, not the Republicans who want to get spending under control. The U.S. cannot simply go on printing money. It is inflationary and will also at some point cause a lack of confidence in the U.S. dollar.
Whole damn shooting box is too big and what goes on in the shooting box goes far beyond, just shooting.
It isn't inflationary. The EU and Japan have been printing far more proportionately than the USA.
The USD keeps going up. Demented goldbugs have been predicting hyperinflation - where is it?
I guess the problem is what if it starts going down (from other factors). You can't unburn the powder. I mean I'm sure they have ideas but I don't know what they are? (edit: I mean the dollar value going down)
Like what borrow more to buy back currency.. oh wait
Asking those that created the problem(s) to fix the problem(s) is a big ask.
The previous grifter did his bit "The national debt increased by $7.8 trillion during Donald Trump's presidency."
Neither of them want to get spending under control. The republicans borrow as much if not more money than the democrats. And last election under trump they didn’t even have a policy platform, literally no plan just vibes.
The last one to get spending under control was Clinton
Pity he didn’t control his own output, so to speak. Probably would have had a more stable 43rd president and a less destabilised Middle East and more.
Your comment is wacky
One of President Donald Trump’s lesser known but profoundly damaging legacies will be the explosive rise in the national debt that occurred on his watch. The financial burden that he’s inflicted on our government will wreak havoc for decades, saddling our kids and grandkids with debt.
The national debt has risen by almost $7.8 trillion during Trump’s time in office. That’s nearly twice as much as what Americans owe on student loans, car loans, credit cards
Trump is an idiot, you get what you vote for. So you think the damage was bad the first time around ? There is still a high possibility that he could get voted in AGAIN. They deserve everything they get if they vote him in again.
Both Democrats and Republicans add to the national debt when either is in power. The narrative to ‘get spending under control’ is a bit of a double standard. Be careful where you get your news on US politics:
https://www.allsides.com/media-bias/media-bias-chart
Lastly, government shutdowns are about leverage, not budgets. The last one occurred during the last republican administration, leading to many federal workers to be unpaid for 35 days and all national parks had to close, etc. It’s a bit ludicrous for federal employees to need a ‘rainy day’ fund for when the government shuts down, but politicians often rely on that leverage to pass their agenda.
https://en.m.wikipedia.org/wiki/January_2018_United_States_federal_gove…
The Republicans agreed with the spending, they are just kicking up a fuss over the bill.
So, more false wishful finance led drivel hopes dashed then
Meanwhile among the other 90% of real life wage dependent folk, reality continues. Called an economic cycle and too much debt
It was a fools paradise to think rates were going to drop.. all those in that bucket are brought back to reality..
Welcome to Higher for longer..
"Globally, higher rates for longer is the trend setting in"
The real question now is where is the peak ? The next rise will come in November for us now or will they try and hold off until the New Year ? another 50bps ?
Yes NZ 10 yr 5.26%, has been holding strongly over 5%.
by Dgm | 23rd Sep 23, 9:20am Welcome to Higher for longer.. "Globally, higher rates for longer is the trend setting in"
by Palmtree08 | 23rd Sep 23, 9:25am The previous grifter did his bit "The national debt increased by $7.8 trillion during Donald Trump's presidency."
These are linked by inflation which basically miniturises debt. Though the servicing cost is not easy, its worthwhile leveraging assets.
Go for it.
I'll just be back here with the laggards and the cowards scraping by until things are clearer, cheering you on.
Most NFTs now worthless...
https://www.theguardian.com/technology/2023/sep/22/nfts-worthless-price
Makes you wonder if other digital tokens will follow suit and what the ramifications of that might be...
Sometimes you just need to take a step back and use your common sense.
NFTs similar to FIAT...worthless in time...it's just common sense.
About 95% of collections worth less than $3000 (1 eth) Collections usually have 10,000 issued. So very little value.
Although 5% retains very high value.
About the same as the art world and physical paintings? And books, and music. And everything.
Wow these briefings are full of hope one day, and full of pessimism the next!
My take is things aren’t good at all. But there are little patches of good results that momentarily suggest things aren’t bad.
Things are not good overall and for most people its on the slow decline. The sheeple are fed with what it is they want to hear by the politicians.
A big chunk of kiwis are yet to come off mortgage rates starting with a 2. We’ll probably get a little summer / Xmas tick up, but come February / March…..For heavily indebted households with school age children, Xmas followed by start of school combined with re-financing the mortgage will be really hard
Those people are doing great right now, their debt is being inflated away nicely.
I liked inflation when our mortgage was fixed at 2.5%, it’s not so great now that its not.
Debt is never inflated away unless you as an individual earn more in order to pay more. Then you could consider your private economy to be in greater shape.
Our economy is not growing, our aggregate income is falling, individual incomes are rising with about the increase of CPI, but the cost of servicing debt has more than doubled in 2 years. Meanwhile the asset this debt is held against has had a haircut and equity has deflated away.
The majority of the inflation you’re thinking of in terms of more money entering the economy ended at least a year ago. The cashflow value of debt has skyrocketed and there is massive overhang where that debt cannot be passed on to a new security as we simple do not have the economic growth.
Our debt to income ratio is significantly lower due to inflationary pay rises. Yes the equity has also deflated, but it’s still up on 3 years ago. If we were still paying 2.5% I’d be very happy, but now we are paying closer to the inflation rate it’s not so great.
But it’s not really ‘significantly lower’ when those pay rises have been more than gobbled up by inflation. It’s a mirage.
Correct you would need a massive pay rise to offset that mortgage rate increase. A 7% pay rise doesn't offset 7% inflation when your mortgage rate more than doubles. You need to forget about percentages and look at the ACTUAL bottom line dollar increases, that's money you now have to find from somewhere.
Depends on how long the high interests rates last. The decrease to the mortgage is permanent.
I was talking about the people still fixed at 3% or so. Anyone who went 5yrs is sweet. If your mortgage is fixed and half your expenses and you get a 7% pay rise, you actually get a 14% pay rise as well as your debt being inflated away.
Yeah. Also a 5-6% pay rise (for example) is not as good as it sounds, as the tax man gobbles a good chunk of that.
esp. if you're in higher pay brackets, or get WFFTC.
Though, your after tax reduction is not as much as you might think - a 6% pay increase will be negligibly close to a 6% after-tax increase as long as you're not changing from 17.5% to 30% tax.
Well, I'm paying 2.89 % on my mortgage and I have a six figure sum that I could use to reduce this mortgage. But instead of doing this, I have it invested with the same bank in a term deposit paying 5.50 %. During this time my income is increasing faster than inflation, so yes, my mortgage is definitely being "eaten away" as a result of inflation, malamah.
Yep so, as I said, if you’re earning more it may feel like your debt is being inflated away. But debt in total is never ever inflated away. It is only ever paid for by more debt. In your scenario, JimboJones is paying a high premium on their new money mortgage and some of that is paid to you, which you are using to pay your mortgage too. Congrats. Jimbos mortgage can only keep being paid if jimbo keeps getting paid, so if money keeps coming in. For that to happen more debt to pay the premium on old debt. All the way until incomes can no longer service the securities they’re created against and it breaks.
We run a massive trade deficit, aiming for govt surplus and rates higher. Money is soon to be leaving the economy, therefore money is “worth” more, therefore existing debt is worth more not less. This is deflation and it can work the exact same way as inflation has but in the opposite direction. Look at Japan since their 90s debt, it was lower than ours in real terms if I recall correctly.
It’s like the inflation they had in the 70s. It sucks at the time, but eventually you come out the other side with a much smaller mortgage in real terms.
The last dying embers of our democracy right there. Magnificent speech by @Jacob_Rees_Mogg before the treasonous 'Online Safety Bill' went though. We do not live in a democracy, we live in a DICTATORSHIP. @RobertBuckland @RishiSunak #RishiSunak #Swindon Link
Magnificent speech by @Jacob_Rees_Mogg ...thats impossible??
Govt's latest changes to work Visas: ""Little said the infrastructure sector was struggling to fill gaps in its workforce as more projects loomed on the horizon. "They still have many gaps, the infrastructure build is ramping up and we need those skills in place." Corrections officers were also added to the list. More roles were also added to the Construction and Infrastructure Sector Agreement, which lets employers recruit migrants at a lower wage than under the Accredited Employer Work Visa. These included driller's assistants, earthmoving labourers and road traffic controllers.""
Does NZ really have no one for jobs as skilled as this?
Voters have little choice, it's mass low skill immigration all the way. And while they might boost the numbers of road traffic controllers, they've worsened the shortage of skilled people to cater for them.
I wonder how many GP's they got in the last batch of 100,000, not many I'm picking.
It's always interesting when you see "struggling to fill gaps" and "lower wages" in the same story.
To answer your question, yes we have the skills here. Heck, I'll go drive a bus (got class 5 and P endorsement) or hold a stop/go sign for $50 per hour. Raise the wages and more will show up to do the job. Use immigration to hold/lower the wages and less and less locals will want to do it. The fix, let the market set the price (wage rate) - we're interfering and stuffing it up by pandering to the least efficient businesses which require the cheapest labour to survive.
New roles added to the CISA:
- Road Traffic Controller [that's right, we now need to import people from foreign countries that often don't even drive on the same side of the road to direct traffic now]
The CISA, in place since last October, lets construction and infrastructure businesses employ migrants at a lower pay rate ($26.69 per hour).
Government announces changes to immigration settings (msn.com)
Upon reading the above title I thought it would be fixing the problems many of us have been posting about over recent times. That is, the credit creation from at least 30k to do so. No, residence visa provided by the taxpayer. Then the business may decide to pay fee and get as many workers as the want OR train a local of which we have plenty unemployed.
I used to do that work.. for minimum wage, before it was raised. If I had been getting $30 an hour or even $26.69 then I would have stayed for years.
But Robbie said today on Jack Tame they 'Labour" have got old kiwis into apprenticeships!
That very fact Willis only lifted her eyebrows was very 'kind'.
The dodgy agents only got pinged 11k when the remediation might be circa 100k?
Mind you, sounds like the purchaser didn’t do proper due diligence
https://www.nzherald.co.nz/nz/barfoot-thompson-realtors-waited-until-sa…
A slap on the wrist on the way out the door.
"The authority also found that Barfoot & Thompson’s supervision of the highly-inexperienced Chen and of Zeng was insufficient and also classed as unsatisfactory conduct. It has escalated this aspect to the Real Estate Agents Disciplinary Tribunal which handles complaints of a more serious nature."
One Agent's first sale, supposedly supervised by quote "well trained" Agent.
Barfoots MD Peter Thompson did not wish to comment.
What a joke. Should have punished them with suspension at least.
"Tough on crime" yada yada yada
They could have at least taken their whole commission on that sale. Toothless!
Americans want car manufacturing in the country, then go on big strikes. MAGA?
An individuals immediate wants take precedence but ultimately that will cost jobs and careers
The American car industry has been on the slide ever since it died in Detroit. The Chinese are eating their lunch and are making like 75% of all the EV's. You cannot afford to let the business go in the first place because its just too hard to get it back. China now has the economy of scale, the USA lost but are not willing to admit it.
Hmm..biggest selling EV brand in the world...give you a clue starts with a T.
China Says Fossil Fuel Phase-Out Is Unrealistic
China, as well as India, has fought to have “phase down” instead of “phase out” in the language at all summits on climate and energy in recent years.
True, but fossil fuels are probably too important to squander on personal car travel.
A hawkish US central bank - and one that appears to have totally lost the plot. Look what is actually happening....
- Effective rate on US mortgages is currently around 3% (compared to around 5.3% in NZ) - mortgagors in the US all fixed for 30 years when rates were low!
- Businesses also fixed their debts cheap at long rates (very different to NZ) - so high rates are only really scuppering property investments etc. Govt is busy investing in tech and industry of course
- High rates mean that Govt is pumping literally billions of dollars a week out in interest payments on reserve accounts
- Households and businesses with savings are getting a nice return
So, step back and look what is happening here. The net impact of high interest rates is basically fiscal stimulus -- Govt shovelling money to rich people in proportion to how much money they have, whilst households with debts just get on with life; their spending uninhibited by changes in debt costs.
The reckonomists will tell you that those higher rates will be working through the expectations (voodoo) channel, but, really, come on! These are surely the end days for monetary policy.
This chart shows that it is not inflation fears that are driving yields. Investors are demanding higher REAL yields in the face of political chaos in Washington and high debt. 10y real yields (10y nominal yields - 10y inflation expectations) jumped to 2.11%, highest since 2009. Link
The last few years have been tough economically. On this national accounts measure of real purchasing power, there has been total growth of only 1.5% since 2019q4, and the latest reads are lower than two years ago. Link
Had tractor mechanic on farm for 6 hours and the labour only bill is 1230$ plus GST. That was a bit ruff I think.
You need a new tractor and a new mechanic at the same time would do
Do you reckon a robot could do what they did in 15 years?
In 15 years the tractor will probably be a robot
So 2 hours work and a pack of ciggies lazily huffed then they bill you hard for it 😂
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