Here's our summary of key economic events overnight that affect New Zealand, with news of much stronger jobs gains in the US in September, and signs the US carmaker strikes will end with sharply better pay and conditions.
There has been a positive 'surprise' from the US labour market in September. We had suggested the expected +170,000 gain might have an upside, but no-one expected gains as strong as the +336,000 (sa) delivered. Nor the big upwards revision for August (up from +187,000 to +227,000).
These are the seasonally adjusted headline numbers, but as regular readers know we look at the actual unadjusted survey results. And they show actual payrolls rose +585,000 in September (+394,000 in August) to now be at 157.0 mln people on employer payrolls and a new record high. Looking deeper to include the unincorporated self-employed, there are now 161.7 mln in their employed labour force. Only +29,900 of this monthly increase was for part-time work.
If there are any downsides, they include that their jobless rate was unchanged from 3.8%, their participation rate made no progress at 62.8%, and their weekly earnings were up +3.75% from a year ago, little gain from inflation's 3.65%.
US vehicle sales rose to an annualised rate of 15.7 mln in September according to updated NADA data. And there seems to be "significant progress" in union negotiations with the carmakers. The carmakers seem to be caving quickly now.
US consumer credit data will be release at 8am (NZT). Update: This metric actually fell in August when a small rise was anticipated. Overall it fell by -US$15.6 bln, driven by a sharper -US$30.3 bln fall in car and student loans, to US$3.7 tln. That was offset to some extent by a +14.6 bln rise in credit card debt (to US$1.25 tln).
It now appears more likely that another US Fed rate hike will be coming soon. A hot labour market and fat pay and conditions increases will be seen as fueling inflation by the regulators. They will feel they need to get ahead of these pressures. Bond yields are rising again.
Rising yields are causing big changes in where investors hold their liquid funds. According to LSEG/Refinitiv data, investors offloaded American bond funds worth a net -$6.3 bln this past week, the biggest amount since December 2022. Money market funds meanwhile, received about +$43.2 bln in inflows, the highest since April 2023.
And it wasn't only the US's labour market that turned in a much-better-than-expected result. The Canadians did too. They expected a +20,000 gain in employment in September but delivered a +64,000 gain and they also upgraded their August data sharply. But in Canada, it was part-time work that drove most of their gains.
In India, their central bank kept its key policy rate unchanged at 6.5% as expected but said it would keep liquidity tight using bond sales to bring inflation closer to its 4% target and this focus on bond selling was not expected. Indian CPI inflation is currently running at 6.8%. It didn't release details of what it expected to sell, but is was suddenly active and that drove benchmark bond yields sharply higher, up 13 bps yesterday, the most since August last year, to close at 7.34%.
Japanese household spending unexpected rose more than expected in August from July (+3.9%). It might still be lower than a year ago, but the month-on-month rise impressed financial markets.
In Australia, the RBA has been looking at household financial stress in their latest Financial Stability Review. They say early indicators show that financial pressures have increased and the incidence of severe financial stress has increased but remains low. The group of borrowers at higher risk of falling into arrears on their mortgage remains small. You can find this review on page 53. Household financial stress, where it occurs, does not vary much across the country. (Interestingly, Australian media played up the big percentage rise in stress, without mentioning it went from tiny to very small.)
Yesterday we noted low and declining 2023 copper prices as a sign of weakness in China. Today we can note low and falling lithium prices as a huge oversupply of lithium car batteries from China clogs markets (and drives down the cost of a key component in electric cars).
Also falling are world food prices. They may not have fallen in September from August, but they are -11% lower than year ago levels. The drop would have been more if it wasn't for sharply higher sugar prices. Dairy prices are down -25% in a year (as the GDT auctions confirmed), and global meat prices are lower too. Grain prices are -15% lower than a year ago. These are the changes for producers, not consumers. Food prices should not be driving inflation
The UST 10yr yield starts today up +6 bps from yesterday at 4.78% on the implications of the strong US labour data. Their key 2-10 yield curve is still inverted by -31 bps. Their 1-5 curve is now at -67 bps and less inverted. Their 3 mth-10yr curve inversion is also less inverted today today at -65 bps. The Australian 10 year bond yield is now at 4.56% and down -4 bps from yesterday. But the China 10 year bond rate is unchanged at 2.71%. The NZ Government 10 year bond rate is up +1 bp to 5.61%. A week ago it was 5.39% so up another +22 bps in a week on top of last week's +13 bps.
Wall Street is up +1.5% in Friday trade preferring to focus on the avoidance of recession rather than the implications for Fed policy. Overnight European markets closed mixed. Frankfurt was up +1.1% but London was up only +0.6% to bookend these markets. Yesterday, both Hong Kong closed up +1.6% to finish the week unchanged. Shanghai was still closed for their National Day holidays. But Tokyo ended down -0.3% yesterday and was down an ugly -3.5% for the week. And the ASX200 ended up +0.4% in its Friday trade but down -1.3% for the week. And the NZX50 was down -0.2% yesterday for an unchanged week.
The Fear & Greed Index we follow eased off the 'extreme fear' position yesterday (and this time last week) to 'just' record a 'fear' setting today.
The price of gold will start today at just on US$1829/oz and +US$12 from yesterday. But that is down -US$21 from a week ago.
Oil prices have slipped slightly to be just under US$82/bbl in the US. The international Brent price is just on US$84/bbl. These are five-week lows and are -US$8 lower in a week.
The Kiwi dollar starts today at 60 USc and up more than +¼c from yesterday but is little-changed from a week ago. Against the Aussie we are marginally firmer, now at 93.8 AUc although up +½c in a week. Against the euro we have also firmed marginally to 56.6 euro cents. That all means our TWI-5 starts today at just over 70 but little-changed in a week.
The bitcoin price has moved up from yesterday, and it is now at US$27,897 and That is up +1.5% from then. From a week ago it is up +4.0%. Volatility over the past 24 hours has been modest at just on +/-1.6%.
The easiest place to stay up with event risk is by following our Economic Calendar here ».
72 Comments
Now voting is underway, let's see how Interest readers compare to the actual election result.
Thumbs up for the party you will vote for.
National
Labour
Green
ACT
NZ First
Te Pati Maori
TOP
Some other minor party.
Did you take your meds today?
It could be quite interesting to see the results, there's a handful of very vocal partisan party commentators
Edit: obviously it will only work if additional comments are not added to the poll & break the flow
Very true. A clash of titans. An epic, The Praetorian Guard vs The Blue Suit Brigade. Bigger than Ben Hur, buckle yourself in!
I for one wouldn't have picked the results above. David Chaston will be scratching his head over what sort of audience he has here. Thank you to everyone who took part.
How many read this article? Either not many or a very low proportion vote.
Thanks Beanie. It's been interesting to see the votes come in, and it would look like Raf would be PM and Winnie Deputy PM if these results translated into the real world.
“Did you take your meds today? ” - is that the new name for NZF? Seriously though after watching the minor party debate I really don’t get how anyone can vote for him, he was in lala land, didn’t even know his own policy on GST off fruit and veg.
Can you blame people? Effectively it is a disillusioned protest vote. Politics is dire right now. All parties are awful in different ways, apart from perhaps TOP.
I actually think the two main parties are perfectly fine, both very centre with a slight bias to left or right, so they are both a good representation of middle NZ. Both leaders are reasonable too. A lot of countries would love to have either party to vote for
I have once again decided to vote Labour as I see them as the safer choice, but I could also vote National. None of the minor parties interest me; James Shaw is excellent and Chloe too, but too many extremists in there.
NZers are so negative, I just don’t get it!
Each to their own 😂
You had us fooled for a little while there that you weren’t a Labour fanboy
I wonder if the whole system is a bit too simplistic. Maybe the government could be split into the main roles (eg health, education, infrastructure, welfare, crime, immigration, environment, other) and we have different parties / votes for each. Neither the left nor right align with my views for every category.
The real power would remain with the part of the executive that allocated between the portfolios.
I get the sense a lot of people want the FBB to be retained, but don’t want a Labour government.
Enter the handbrake: https://m.youtube.com/watch?v=kAoIgz9iBVo
I also watched the debate, and I more align with James Shaw and the green party’s position on things. Because Seymour openly doesn’t trust Peters, and the potential for toxic working relationships between the National/NZFirst/Act…maybe National and the Greens could form a coalition together? Probably not, but we’ll see what happens.
Edit: I’ve done more research and really like TOP’s policies. May party vote them instead.
National greens might be the only two party coalition possible (other than the two majors). Personally I’d like to see it but I doubt the greens would.
The problem with the handbrake is you don’t know when it will be applied. I suspect that is because Winnie doesn’t know what day of week it is.
What if labour offer Winston prime Minister?
Probably riots in the street and our first ever coup de'tat.
There are too many variables, and I don't think you can vote according to what you think the coalitions might be. You just have to vote your preferred party and what happens after happens.
But I think they will work in out. eg. National will have to respect the number of people who voted ACT and ACT will have to respect the number of people who voted the Nats. Currently about four to one. It won't be the most takes all.
Shaw set out to let Winston and Seymour to scrap at the beginning of the debate. He was waiting to get his"this is what voting national line " in.
He then attacked Seymour, but kind of complemented Winston.
I think he was trying to show National they are an alternative, and maybe swing voters they are a option whichever way the polls go.
Winnie doesn't get in on policy. Remember when he said immigration was going to get limited to 20,000 a year ? never happened we had 100,000. Peters election slogan should be "In it for me"
New Zealand First = Winston First, New Zealand Last...
Because if you didn't take your experimental meds today we will take your job and set the riot squad on your peaceful protest. We won't force you to take them though.
Very uneven spread here Beanie, that will not be reflective of NZ in general. So many disillusioned people come here.
More educated people for sure hence the wide discrepancy with national here and in the tv polls.
Most successful people don't come here to be honest, why would you ? So you can beaten up by the DGM's ? Also you don't have the time if you are working hard.
Work smarter then
The only reason for your perceived victim status, is due to your phony economics and used car salesman attitude toward the property sector.
I’m also quite amused at your “ability” to quantify the successful vs unsuccessful on Interest.
Is title squatting taking up a lot of your time?
Yes, but the disillusionment is spread over a multitude of grouches.
Hard to believe a huge international market like oil can be so fickle.
Record immigration, missing election debate:
https://www.rnz.co.nz/news/on-the-inside/499601/record-immigration-will…
Pffffftttttt, why bother with such a trivial issue. Who cares about the impact high population growth has on social services, healthcare, housing!!!!
No debate probably because there's no debate. All parties agree stuffing NZ with as many humans, as rapidly as possible, is great for re engineering us as the new Haiti.
Ah, don't rub it in. I'm annoyed TOP reversed their policy on this, they could have owned the lower immigration space - especially given Winston left office in 2020 at record levels having promised to reduce it.
How about the Establishment survey? Well, here too, things stink. Yes, the headline surge was great, but the question here is how much of that was purely seasonals.
Consider what Vanda Research FX trader Viraj Patel noted earlier: the official adjusted data showed this Leisure and Hospitality added a whopping +96k jobs. But unadjusted data showed that the sector lost 466k jobs in Sep. This means that the unadjusted private sector payrolls was -399!
There has been a positive 'surprise' from the US labour market in September. We had suggested the expected +170,000 gain might have an upside, but no-one expected gains as strong as the +336,000 (sa) delivered. Nor the big upwards revision for August (up from +187,000 to +227,000).
I just wanted to check in with the people who where predicting a US recession eighteen months ago, most of who just held that view in the face of mounting evidence to the contrary. Are you OK? I've seen a dramatic reduction in the "If the FED rates rise again something is going to break" posts suggesting people where finally nearing an acceptance of reality.
Stay strong guys, wronger for longer.
Any positivity being evidenced anywhere in the American economy doesn’t appear to be reflecting on the Biden presidency. Quite the opposite in fact, by the look of his public ratings. The other problem is even if his record is sublime it is difficult to accept Biden has the ability to defend and or promote it. Last time in 2020 I think the presidential debates were live but from respective studios because of covid. Next time it will be back to live on stage. Don’t think Biden can stand up to that and if he should happen to be on the other side, Trump will overpower him like a wrecking ball and for that matter any other GOP candidate would easily expose his frailty and faltering.
Trump will overpower him like a wrecking ball? What with wavering hands...Trump is getting more senile by the day. Last week he was yabbering on about windmills affecting the whales..."nobody has ever seen this"?
That’s exactly why I used wrecking ball as a simile.
What other GOP candidates do you think can be better than Trump then?
My comment was foremost questioning Biden’s ability to successfully handle the next presidential campaign and in particular the live debates. In a similar vein to your view of Trump, I suggested how he would perform if involved but my opinion on Trump’s worthiness compared to other contenders is immaterial, because at present over 60% of the Republican party want and expect him to be the next president.
Biden would wipe the floor with a debate with Trump. Also can you hold a debate in prison?
Its worse than that mate, I don't think there is a law against being in prison and still being president of the USA. Gotta love the Americans, I'm just waiting for them to start another war as a distraction from the crisis on home soil.
Personally I would hope that you are right as I regard Tump as being a menace to just about anything you might care to name. Nevertheless Biden himself has his own issues, for a start severe arthritis of the spine is no small challenge every day and night and there have been too many lapses in public, memory, names, stumbles which if repeated on nationwide tv in the debates would be utterly self destructive.
Demise of Kevin McCarthy more than downfall of one US politician
Drama reveals there is perhaps no democracy today more desperate for political reforms or no country more blind to that need than America
There are plenty of people who have been predicting continued growth in the US economy due to the huge injection of fiscal stimulus - not least through the billions of dollars of interest paid on US Govt debt (which increases with every fed rate hike) and the healthy (above inflation) return people are now getting on their savings. What is pushing against this stimulus? Average mortgage interest rate is 3%, businesses re-financed their debts at super low interest rates, inflation and wages are tracking together at around 3.5%. Where's the slowing down going to come from? Construction market? Nah.
The only way the Fed can slow the US economy down is by breaking something. I still think they will - unless inflation subsides regardless (which it just might). Meanwhile countries that are matching Fed hikes to protect their currency value (hello NZ) are getting shredded because the negative impact of higher rates (reduced disposable income, higher business costs etc) are outweighing the stimulus that higher rates create through the interest income channel.
It's crazy to be honest.
The only way the Fed can slow the US economy down is by breaking something.
It's the thesis that I generally prescribe to, including some of the tinfoil hat conspiracies. For ex, there are some ideas out there now that given the dominance of USD hegemony, the U.S. Govt through its agencies (yes, the Fed is an agency even if people say differently) is teaching the BRICs and potential allies a lesson and showing them who wears the pants.
Depends on whether or not you actually believe the numbers coming out of the USA Squishy, personally I don't they are fabricated. Basically they are now projecting what they want to happen, thinking that by doing so will make it happen. Reminds me of Trump, if you lie about it enough everyone thinks its the truth, well a few court cases are going to settle that.
US doing well is bad news for us. Not often that happens.
Debt bubbles change everything.
This chart tells the story: US 10y yields spike following US jobs report despite lower than expected wage growth and higher than expected unemployment rate. 10y yields jump 12bps to 4.84%, driven by a jump in real yields. US 10y real yields now at 2.53%. Link
US labour data doesn't make sense until you consider the fact that the fiscal and the monetary are fighting each other.
High interest payments on Govt debt is stimulatory. So is the exorbitant spending in general.
To give some context, 4% interest on 33 Trillion debt is 1.32 Trillion. US Govt revenue is around 5 Trillion.
Fed is being forced to pour more cold water all the while Govt is pouring more fuel on the inflation fire.
In fact, fed raising rates is making things worse now. It is raising yields which is causing even more interest spending from the Govt.
I would have laughed had I not been a little scared.
Here in NZ we have the two main parties trying to give people more money to fight inflation! When really the best approach is to give people less money and pay down some very expensive debt while you are at it.
Yep, it is obvious when you sit back and look at the numbers. Fuel on the fire.
High interest payments on Govt debt is stimulatory.
For how many citizens, the 90% or the 1%? I suspect the latter.
Last time I checked, admittedly 10 years ago, only three individuals or their trusts had an account at Computershare Investor Services Limited, the nominated NZDM repository agent for NZ government bond purchases.
I was referring to the interest on settlement reserves - and the second order impact this has on interest payments to savers. I agree that propensity to spend will be much lower amongst savers, but the impact cannot be negligible when the numbers are this big.
Banks are not in the habit of sharing with the unsecured creditor deposit base underwriting the whole show.
According to the Reserve Bank, the new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest.
Furthermore, US reserve balances are not what they used to be.
Most of the US Govt debt is previously issued and at fixed rates. So you may want to recheck your maths.
5% interest payable on 3 trillion plus of reserves is not insignificant!
I recommend everyone watch this if they haven't seen it, its the Jack Tame interview with Nicola Willis: https://www.facebook.com/gerard.otto/videos/1478288032906928
Jack doesn't understand some basic economic principles, hey that's OK, he misrepresents whats going to be inflationary. But... the next finance minister should pick him up on this and have an easy win, if she knew what she was talking about. But she doesn't pick him up on it. So she doesn't understand the basics either. And she is our next finance minister? I mean we are replacing Micky Mouse with Minnie Mouse here, what are you all thinking NZ?
How did she get to be the National Party's spokesperson for Finance? Surely there are others in the National Party's better qualified?
Simeon Brown was a commercial banker at BNZ, but rather than put him as spokesperson for Finance they have him talking about Transport. You see, they don't nominate party members based on real world experience. Politics is a tax payer funded apprenticeship scheme, a place for people to cut their teeth into something new so they can catapult themselves back into the private sector. Simeon will eventually find his way onto the board of Fletchers and Willis will find a gig in the C-suite at some bank.
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