Here's our summary of key economic events over the weekend that affect New Zealand, with news benchmark UST yields are rising fast again but the rate inversions are unwinding just as fast.
But first up, we should note that the World Bank has cut its forecast for 2024 growth in the Chinese economy sharply, down from +4.8% it forecasted in April, to now +4.4%. Its expectation for 2023 remains +5.1%, so the 2024 deceleration is substantial for China. Their property sector is getting most of the blame.
In the US, the widely-watched ISM factory survey came in much 'better' than expected in September, building on an improvement that started in July. The sector is still contracting the report shows, but only just and the improvement from August was marked. New order levels remained flat, but production rose into expansion territory.
The parallel Markit PMI survey, the internationally benchmarked version, delivered a very similar result for the US, both showing that employment remained strong (expansionary). But the carmaker strike is going to hurt October. And Tesla said for the first time in more than a year, its global deliveries to customers fell quarter over quarter, by -6.7%. And at these levels they are lower than the lowered expectations they earlier set.
In a community event in York, Pennsylvania (in the manufacturing heartland of the US), Fed boss Powell said his institution is now focused on keeping the American labour market at full strength for as long as possible. “Lots of good things happen” in addition to real wage increases, when a good labour market lasts for a sustained period of time, he said. "To have that, though, the record is also clear that we need price stability,” Powell said.
But the really big key news is the return of the sharp rises in benchmark UST yields, up another +10 bps today for the US 10yr, and up +5 bps for their 2 year. If there is a silver lining, it is that the rate inversions are evaporating quite fast now, and indication that recession pressure risks are less important to the bond markets. (See below for details.)
In Japan, sentiment among large businesses is improving, back to its best since March 2022.
Despite that optimism, the Japanese PMI eased lower into contracting territory in September. And the Australian version did as well.
And in Australia, Sydney house prices have bounced back +11% since bottoming out in January. But they dropped -12.4% in the period to that trough. However they are getting close now to making back all those losses, up +1% in September from August. Melbourne is the laggard there, Perth and Adelaide where the percentage gains are highest.
In something of a surprise for a region that has long struggled with embedded unemployment, the EU reported an August jobless rate of 5.9% - which is is lowest since records for the EU started in 1995.
Globally, the factory PMIs delivered a contraction but at a slower rate, led by new order levels. Mainland China was one of only seven nations to register growth of total new orders, almost all of them in Asia. (It will probably be no surprise, but war is good for Russian factories.)
The UST 10yr yield starts today up another sharp +10 bps from yesterday at 4.68%. It was last at this level in August 2007. Their key 2-10 yield curve is less inverted from yesterday at -43 bps. And their 1-5 curve is now at -81 bps and also less inverted. Their 3 mth-10yr curve inversion is much less inverted at -71 bps. The Australian 10 year bond yield is now at 4.57% and up +10 bps from yesterday. But the China 10 year bond rate is unchanged at 2.71%. The NZ Government 10 year bond rate is up +6 bps at 5.45%. Overall big movements here again.
Wall Street has opened its week lower with the S&P500 down -0.6% in Monday trade. Overnight European markets closed about -1.0% lower. Yesterday, both Hong Kong and Shanghai were closed for their National Day holidays, but Tokyo traded normally, closing down -0.3%. And the ASX200 did trade, but very thinly and ended its Monday session down -0.2%. The NZX50 ended down -0.5%.
The price of gold will start today at just on US$1832/oz and down another -US$16 from yesterday. This is another new low since February 2023, all driven by the sharply rising yields.
Oil prices have moved down -US$1.50 from yesterday to just on US$88.50/bbl in the US. The international Brent price is just on US$90.50/bbl.
The Kiwi dollar starts today at 59.5 USc and down -½c. Against the Aussie we are firm however, now up at 93.5 AUc and a new four month high. Against the euro we unchanged at 56.7 euro cents. That all means our TWI-5 starts today at 69.8 and down only -10 bps.
The bitcoin price has moved even higher today from yesterday, and it is now at US$27,972 and up +3.1% in the sort of move we haven't seen for a while. Volatility over the past 24 hours has been moderate at just under +/-2.8%.
The easiest place to stay up with event risk is by following our Economic Calendar here ».
69 Comments
Orr needs to hike.
Or take a hike.
Thats orrfully punny
Orr must NOT hike. Bond yields are rising higher without him doing anything. This is already creating the effect which he desires.
He will not hike, and might in fact come out dovish.
Orr must NOT hike
Sounds like someone is going on fresh mortgage rates soon lol.
They should hike, they're failing at their core aim as an organization.
Financial Stability. No hike.
If by stability, you're meaning protecting those who took debt leverage beyond their means? How about NO.
If you're going to borrow money beyond what you can pay, and take a huge leveraged RISK, you will accept that RISK when it doesn't go to your plan made up in your head.
The longer we protect mortgage holders, the longer we screw over everyone via inflation.
In what capitalist, fair system to we protect those that take on massive risk by burning everyone?
I thought just like you when this hiking cycle started. That they deserve this.
But we must be honest- a lot of FHBs didn't know what they were going into and are now getting squeezed for doing exactly what kiwis have been doing since more than a decade.
I have no sympathy for rent seekers, but for owners occupiers I do.
I still don't have much mercy, call me cold or blunt. I'm 25 and did the math, it didn't make sense in my head borrowing 700k to get a shoebox.
This is for most, the biggest financial decision they make, and seeing that many didn't actually look at history, economics or background of what might happen is poor decision making.
Let them burn for that. I have lost thousands by poor choices in investments as a young person, but I have never borrowed beyond my means and done that.
I feel sad for them to an extent but I also don't, they went in and went through a lengthy process to do so, they had time to look beyond the "kiwi dream" and fomo.
Burn, baby, burn, the mortgage chains undone, In the land of the Kiwis, a new era has begun, Housing's now affordable, for the young and free, In New Zealand, dreams take flight, like leaves upon a tree.
That last bit of poetry really made me laugh. I understand where you come from and you are not wrong.
For better or for worse, you will probably witness the carnage. But there is still some time for that.
FHBs are going to be screwed for sure. But they were screwed by decisions several years ago, made by people who should have known better.
Allowing the mad house price bubble was a crime.
No I rent unfortunately. Believe it or not.
Any way I stand by my words. It is not wise to do so. The economy is more fragile than people realise.
It'll be a rip of a bandaid that will hurt short term but hopefully could be good longterm. I understand your concerns. ❤️🤝
Bend over. This is going to hurt. A LOT..........US Treasury says climate change could devastate US household finances (methinks climate change might also be pretty inflationary)......
https://www.cnbc.com/2023/10/02/climate-change-could-devastate-househol…
think how bad vs leaky homes, at least with leaky homes you still had the land.... climate change will flood your house and then the land will be rerated as not suitable for building.... This is going to ruin a lot of people.... I am not sure the country can come to the rescue here, i think the issue needs to stay in the private domain... Banks or working on models of risk vs flood... can see them refusing lending before insurance market closes , as they need to look forward 25-30 years plus what they could recover in a default situation
If only there was a model we could follow, a country that might have had to deal with this for 100's of years.
https://www.netherlands-tourism.com/netherlands-sea-level/#:~:text=Well….
"The overall trend is down despite rising aggregate costs. The UN recommends loss as a percentage of GDP as an appropriate measure of trends in the economic impacts of disasters.
A downward trend is good news because it indicates that our collective ability to prepare for weather and climate extremes is improving, regardless of trends in extreme weather events — for trends in extreme weather always look directly at weather and climate data, not economic data. This downward trend is apparent in rich and poor countries, with the most improvement observed in poorer regions. "
https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:s…
If only rising sea level was the ONLY crisis that climate change was causing.......
The sea level crisis is a prediction, there is no evidence found by the IPCC that it is a thing. Sleep a bit easier tonight whiner. You're welcome.
IPCC AR6 WG1 Table 12.12
"Already emerged in the Historical record - where evidence is lacking or the signal is not present
- relative sea level
- coastal flood
- coastal erosion"
https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_Chapte…
Red meat article in the herald TLDR China is using up red meat cool store suupplie so weak demand, aussie flooding mutton for drought fears so prices low, may recover in 12 months time.
its worth reading
https://www.nzherald.co.nz/business/nz-meat-industry-faces-challenges-a…
Chatting to a friend who works at a meat works. He tells me they are going to 6 day weeks. Lots of stock coming in. I asked if he knew why, mentioned the Aussie situation of their farmers getting ahead of the expected drought. He said he wasn't sure, but it could be.
Worst El Nino pattern in 80 years from the setup, so destock now while there is a price? I have 40 sheep on my LSB, buggers breed like rabbits, going down to 12-15, have 3 really big beef cows, will sell 2 and process one for myself, have a paddock setup for small bailege sp? do that before xmas then by in cheap weaners people need to move on... I can remember wainui a few years ago when the golf course grass almost died it was so dry, right now its green and growing 5mm a day
That would be why we ended up with Australian steak in our weekly grocery shop then.
Property prices rising in Australia, how is this possible under a Labour government and with a capital gains tax?
Oz CGT has an exemption for the family home
Mass immigration
Went to Sydney early last month and spent a week there (visiting clients and catching up with some old friends). They seem even more obsessed with property than we are here in NZ ... also far more obsessed with materialism in terms of what brand watch you have, what sort of car you drive, what your airline status card is and so on, but that thing seems to be seeping into NZ society too.
Stayed with friends in a suburb called Longueville and I swear that entire flashy part of Sydney just exists as some kind of artefact of the real estate industry. Went for a few runs around the neighbourhood and surrounding areas and every 2nd billboard or commercial space was a real estate agent or property manager office - pounding the pavement gives you a good sense of what's going on in an area.
Played some golf with my friend and his friends (who are all cashed up Aussie bogans who've done well in either tech sales or property investment/development) and the only topic of discussion was property and excitement about prices rising again. I found that weird, as my friend was complaining to me at the same time that he is worried about the mortgage on his place he bought for $3 million (I checked the sales records online) and how his payments will triple when the term renews in November.
I am not sure if bear steepening is a silver lining.
Exactly what I thought…impending recession here we come.
most real silver demand is industrial so this move is an early recession indicator
Maybe indeed. Or is the global sovereign debt bubble popping.
- Bitcoin +10%
- US Treasuries -7.8%
- Gold -5.7%
- Silver -12%
- SPY -5%
Bryce Edwards: Ten reasons Labour’s support has halved
https://democracyproject.nz/2023/10/03/bryce-edwards-ten-reasons-labour…
He nails it
100%, on the head.
He left out that the leader who presided over most of the Labour disaster quit at the first sign of being held accountable for her performance.
I do not understand how she isn't held to account more for her cowardice. Rather than fight for her party she abandoned them when they needed her the most. I see that as character and values totally unsuited to leadership.
No but it led to a Damehood and perhaps cahooting with the Clooneys is obviously more important than the trivial question of what she left in her wake back home
Do Prime Ministers need to stay till they get voted out? What accountability are you wanting exactly?
Were you upset when John Key left at the same time? One year before a general election?
Yeah, but, but, that's different. The previous dodgy PM already had a job lined up, after providing the banking industry with a windfall beyond their wildest dreams.
No fan of Key myself but his successor was still able to return National to parliament with the most seats in 2017. Remains to be seen but Ardern’s successor, this election, might well take Labour from the most seats ever to the least seats ever. Don’t think he could have done that much damage in 10 months which is an indication in itself, of how in order the respective governments were at the time of the handovers.
Although she denied it, the major reason must have been threats to herself and her family by nutjobs about to vote in other nutjobs.
There is a glaring internal logic conflict in your comment - unless you consider Jacinda a liar...
The major reason she left is because she was the weakest political leader in nearly 20 years (since Shipley) & had lost control of her caucus; then gaslighted NZdrs for 2 years implementing a mass of racist policies her govt had not publicly stated before their election & therefore had no mandate for.
Reading the crayon scribblings on the wall & not being able to handle failure or fight (having been handed the PMship by Winston); with an eye on her next career move she chose to walk before she was pushed, handling Hipkins the hospital pass - which he richly deserved being a senior caucus member signing off on her secret agenda.
She then briefed the media well before departure date to ensure wide coverage of the self serving misogyny spin narrative.
PS: I voted for her, twice - so, I've moderated this comment accordingly.
A tale & trail of self destruction not unlike National leading up to the 2020 election. Virtual role reversal territory isn’t it. In so far, Labour is about to be similarly punished by the electorate and likely will claim the distinction of the most heavily defeated government in New Zealand in modern times. Still least they are not going down without a lot of shouting.
"You have sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go".
O. Cromwell (1653)
Usually governments are chucked for something better.
Kiwikids quote is great, but I would suggest that the recent trend is parties are losing elections mostly because they've overstayed their welcome. Labours midterm win was an anomaly here as i believe they won because Jacinda did extremely well handling successive crisis's in the public eye. It didn't hurt that the rest of the world clearly loved her too and it seems still do. But I have argued for years now that no party should be allowed to remain in power for any more than two terms. At the end of their second terms they all become guilty of believing their own PR too much, and thinking they are untouchable. Beyond two terms and the harm they do to the country takes significantly longer to repair, if it ever can be.
Last election season I made the prediction that a Labour/Greens formal coalition would crack apart before mid term. The electorate sorted that in as much as it sidelined the Greens. Regrettably I have come to regard the prospect of a National/ACT/NZF coalition as being similarly fraught.
Even National/ACT may not be 100% solid if the mood keeps shifting right.
Last thing NZ needs is disharmony in government catalysing an early election and resultant instability. Obviously the alternative from the left looks considerably more fractious, but that is hardly of any comfort.
Good luck in building any piece of significant infrastructure in 6 years.
It's this sort of short term thinking why NZ keeps slipping behind. Our revolving door politics means that whenever someone tries to do something, the other party can just scream that they will reverse it all when they get into power. They do, then the roles are reversed with the newly elected party promising all sorts of things, unable to deliver in such a short time, they get turfed out, rinse and repeat. And NZ keeps slipping further and further down the OECD ratings...
If politicians were half as good as they claimed to be, building infrastructure over multiyear terms would be a breeze. The cost benefit analysis should stand up to scrutiny, so that the other party will not want to stop it. But in part you are correct but it is politicians short term, extremist, thinking that has created the hole.
By extremist I mean that they say they won't do anything unless they can get it all done in their term in Government. Now let's see all the different ways they can use that to justify being voted in for 4, 5, 6, ... what the hell 10 years at a time! It's just BS and if you swallow that you deserve what you get!
Politicians don't build infrastructure, engineers do. We should fix political footballs by having an independent infrastructure commission that decides what to fund on a cost/benefit scenario, irrespective of what political party is in play. The settings of what is considered under the cost/benefit analysis can be decided by the government of the day. That way if a political party wants to defund the infrastructure commission because they are building something they don't want, they can wear the egg on their face in doing so.
Way to use the slippery slope fallacy to claim increasing term lengths and we will suddenly have 10 year terms, I couldn't have written a better logical fallacy if I tried. NZ/Aus have the shortest political cycle of any country for their government, nobody does it shorter than us. And both of our governments are the poster children of short term thinking. If you are happy with continual back sliding and nothing ever getting done, feel free to keep the status quo.
Engineers may build the infrastructure Blobbles, but it is the politicians that fund them, and in the end claim the credit. I'm intrigued by the 'infrastructure commission' you suggest, but wonder how we would stop politicians fiddling with it, because it would be the politicians who fund it? Our roads, and rail are all crap because of politicians short sightedness.
Polit5icians argue now that three years is too short, but at the same time they're saying "vote for us/me because we'll get things done"! So which is it? I stand by my comment; If they are as good as they say they are, then the length of the term doesn't matter.
As to being un/happy with the continual backsliding, then vote for someone else, write to your local politician or MP, but demand answers not BS fobbing off. Democracy is aboutr the Government being accountable to the people - make them accountable!
Make an infrastructure commission work like the RBNZ, they have a mandate and are very public about it, all infrastructure building (like ANYTHING except for local council spending) goes through their assessment process. Have the government of the day only able to tinker with their strategy/targets, much like the RBNZs mandates. For instance, their mandate for cost/benefit analysis may sway to 30% climate change weightings if Greens are strong in government, 40% personal transport weighting if National are in government etc. It allows them the government to give some guidance as to what they want them to deliver, but doesn't make decisions for them. They should also not be allowed to cancel projects that have progressed past a certain point (i.e. stop projects previous governments have prioritised under slightly different weightings).
I don't know how long its been since you worked, but if I am to deliver a major project, I need multiple years and enough space and resources to deliver it (in IT). If I get given no resources and no time, I simply don't take the role as its basically impossible to do. Then someone less qualified/experienced promises they can do it, tells management what they want to hear, then fails miserably. But that person still gets paid and moves onto another project they can't deliver. In this case, voters are the managers who "just want someone to tell them what they want to hear", but aren't realistic because they haven't examined the details to do what they suggest, because "that's the job of the people I employ to do it".
When unrealistic expectations as to time etc are given in a political context, the only people you will get at the top are people who will promise to change things, but can't in the time allowed. Those that know they could change things, given the time/space, simply don't become politicians. Because they know they can't do what their boss (the public) wants in the time allowed. So we get more and more politicians with unrealistic expectations on themselves and on their ministries. They then leave when they realise they can't do the things they actually want to. And that leaves a mess behind. And the project is, half the time, unsalvageable and has to be restarted or thrown out. It wastes everyones time, energy, funds. Sound familiar? (Auckland light rail/Harbour bridge crossing/100k homes etc etc). We have a political system that creates the very thing you are raging against, because of its short term. To change it, we need to give the people in charge the space and time to actually make change.
Don't disagree about the infrastructure commission.
Pretty much agree about projects needing to be properly funded, but in some cases the project leaders are hired to scope the project. But that is the early phase where the organisation know, or thinks, it needs to upgrade or do something but doesn't know exactly what or how (I've seen this phase screwed up royally by a highly qualified individual who got rail-roaded by the politics, resulting in the follow-on being a dismal failure). The major need for funding generally comes after when the definition is firmed up.
Promoting people because they tell bosses what they want to hear is pretty much how most Government Departments work. The most productive people usually get fed up with it all and leave after a couple or so years, because they get flogged to death with others taking the credit.
And voters have long been gullible and too accepting of what the politicians tell them. Too ideologically aligned. On this site and in the community as well as polling news casts we too often hear people say they are "Blue" or "Red", and I get frustrated with the idiocy of it all. My own family are traditionally Labour orientated and occasionally accost me for 'betraying' their history. they are not appreciative when I push back.
But having said all that I still do not accept that short term time frames should not be a problem for the politicians who want the jobs.
I'm guessing you're not a fan of four year terms then? ;-)
"harm they do" "longer to repair, if it ever can be." Thing is, we know exactly Nats are promising to crank up the disaster that was the Key gov and more. Things they promise like flooding the NZ environment with synthetic organisms can never be wound back. I agree government starts to develop god syndrome after two terms, but tossing the existing crowd for a worse prospect is like open season for foot hunting.
The problem is though, as well, the governments themselves and an inability to hold themselves together. Since 1949 only the National governments of Holland & Holyoake have held office over three terms. All other National governments have had three terms but Labour only one, that of Clark. That indicates that National has a bit more glue to it, but on that history relatively speaking, it’s hard to imagine a government keeping it together for 12 years ie, three terms of four years.
Longer terms undermine democracy and reduce politicians accountability to the people of NZ, so you are damn right in that I don't support four year terms. As i said above, if politicians were as good as they would have us believe the they wouldn't need longer terms. They'd just get on with the job. But history teaches us that politicians, apart from being able to sway the gullible are pretty much useless at doing most real jobs, and screwing them up when they try. So why would you give them longer terms to do it in?
The issue I see is that although there have been large international influences on our economy since 2020, the government has failed in so many ways and lost the trust of the majority of NZ'ers. In order to have a functional economy that prospers, it needs to have the support and trust of the public to function as it should. For example if nobody believes they will get caught by police then they will frequently break the law. People need to trust the authority to do the job entrusted to it. Currently the public don't believe in Labour, they don't trust them from their last 6 years of performance to draw from, and a lot of people's lives and purchasing power have been worsened across their two terms.
The first thing the new govt needs to do is deliver, and restore this faith. Once people see results, and have less reason to consistently blame the govt (which they've had good reason too lately), then we can all focus on the way forwards. In the meantime, we're all waiting for the royal commission into how COVID was handled. Tick tock
Typically for all Govt inquiries, the Covid Commissions Terms of Reference exclude the main areas of Govt criticism.
https://www.newshub.co.nz/home/politics/2023/09/act-calls-for-royal-com…
Haha, I agree, but "mediocre" is better than what we currently have. I never thought I would be forced to vote for "mediocre".
will claim the distinction of the most heavily defeated government
It is MMP now, Labour is not 'the government'. Sure Labour's polling has fallen a lot. I mean it is now even as low as National was two years ago.
But currently National and Act look like they will need Winston Peters to get into power. That isn't a sign that the current government will be 'heavily defeated'.
Last election night PM Ardern, with good reason, happily accepted that the electorate had given Labour, unprecedented in MMP, a mandate to form a government and govern solely, on its own. But just keep it simple. This election deduct the number of seats Labour retains from those held. and calculate the difference as a percentage, and then what previous government has surpassed that figure.. As predicted in the column by Bryce Edwards, attached to an earlier post, start counting from Coates 1931 but you might even have to go back beyond that.
Fair enough, your probably technically correct.
However FPP elections and MMP elections are quite different, so you shouldn't directly compare results like that. MMP is really the left vs the right vote, where as FPP was the National vs the Labour vote.
A refreshing piece of journalism - spot on.
In a community event in York, Pennsylvania (in the manufacturing heartland of the US), Fed boss Powell said his institution is now focused on keeping the American labour market at full strength for as long as possible.
How Great Is Our Economy If the Bottom 50%'s Share of the Nation's Wealth Has Plummeted Since 2009?
Almost Half Of All Young Adults In The US Are Living With Their Parents
Still living at home can be attributed in part to increased expectations these days. Can be pretty hard beating what you have at home, got stuck in that trap myself. Eventually moved out into a 2 bed flat with no garage and a shower curtain.
Interesting: despite all the talk about China's economy, the latest World Bank report on East Asia and the Pacific clearly shows that since the beginning of the Covid crisis, China has remained the fastest growing economy in the region, with a GDP 20% higher than before Covid. Link
What a load of nonsense from Sanitarium.
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