Here's our summary of key economic events overnight that affect New Zealand, with news that in the shadow of the sudden geopolitical risks in Gaza, economic markers are generally positive. But the chances of more rate rises seem to be receding.
US mortgage applications were steady last week, little-changed from the prior week so still -19% lower than year-ago levels, which was when the down-trend started biting hard. Meanwhile their benchmark 30 year mortgage interest rate rose to 7.67% and a new high since 2000.
American producer prices came in just +2.2% higher than year ago levels in September. This was up marginally from August and analysts had expected a small slip. They rose +0.5% from the prior month however, the least in three months, following a +0.7% rise in August. Goods prices were up +0.9%, mainly because petrol jumped +5.4%.
The US Fed released the minutes of its September 21 meeting today. That showed a new but small disagreement on the rate hold decision, although all voting members were agreed. Several want to shift the focus of decisions to how long to keep rates high, rather than how high to raise them. But all indications are that there will be no change again in November. There was little initial market reaction to this release.
Across the Pacific, Japanese machine tool orders rose sharply in September from August even though they remain lower on a year-on-year basis. But that annual deficit was cut significantly in this latest update. The rise was especially sharp for orders from local manufacturers, although export orders jumped as well.
Taiwanese exports rose +3.4% in September from August when a slip of -3.0% was expected, a much better outcome than anticipated.
In China, car sales rose in September to well over 2.5 mln vehicles in the month, a good sign their manufacturing sector is stabilising. But capacity is high and there are many carmakers, especially of EVs who are struggling for profitability at the recent low prices that have driven the sales rise. Innovation is high, prices are low, and there are mountains of cars that get scrapped quickly.
And staying in China, their sovereign wealth fund snapped up shares in the nation’s Big Four banks and said it plans to buy more. Although all those banks are state-owned, with only a portion of their shares listed on equity markets, a show of support to keep their share values from falling in difficult times is deemed important for confidence.
European inflation expectations are staying low - at 3.5% - even if inflation itself is finding it hard to fall to that level.
The UST 10yr yield starts today down -5 bps from yesterday at 4.61%. Their key 2-10 yield curve is more inverted, now by -41 bps. Their 1-5 curve is now at -78 bps and fractionally more inverted. Their 3 mth-10yr curve inversion is deeper by -5 bps today at -84 bps. The Australian 10 year bond yield is now at 4.36% and down -9 bps from yesterday. But the China 10 year bond rate is up +2 bps at 2.74%. The NZ Government 10 year bond rate is down -4 bps at 5.48%.
The S&P500 is unchanged in its Wednesday trade. Overnight, European markets mixed, bookended by London up +0.2% and Paris down -0.4%. Yesterday, Tokyo ended its Wednesday session up +0.6%. Hong Kong ended up +1.3%. But Shanghai only closed up +0.1% however. The ASX200 rose +0.7%. The NZX50 ended its Wednesday session up a mere +0.1%.
The price of gold will start today at just on US$1873/oz and up another +US$11 from this time yesterday.
Oil prices have slipped -US$1.50 to just over US$83/bbl in the US. The international Brent price is now just on US$86/bbl.
The Kiwi dollar starts today at 60.2 USc and down -20 bps from yesterday. Against the Aussie we are still at 94 AUc. Against the euro we are down -10 bps to 56.8 euro cents. That all means our TWI-5 starts today at just on 70.2 which is back -10 bps from yesterday.
The bitcoin price starts today at US$26,679 which is down a sharpish -2.8% from this time yesterday. Volatility over the past 24 hours has been modest however at +/-1.6%. Crypto giant Binance is facing official pressure in Brazil for running a ponzi scheme. It is not the only company accused.
The easiest place to stay up with event risk is by following our Economic Calendar here ».
64 Comments
Just two sleeps to go while the economy continues to contract. After the counting most of us will receive our tickets clearly marked Austerity. For those fortunate to receive a VIP pass, the party will continue with much cocaine and champagne. Watch David Brent debauche his rubber dinosaur while an old dude from the north drops his trousers to recite Peter Rabbit.
I have no idea what you just said.
It was remarkable
My friends own Furniture Zone, they've just pulled the pin and are closing everything down across the whole chain.
Retail fell down a black hole in August they said. The recession is now and a lot of stores won't survive.
Yet we keep hearing people spouting rubbish about how our economy is ‘resilient’, how it will be a soft landing etc.
It looks like Orr wants a hard landing. He is still fighting inflation even though consumers have shut their wallets. Some stimulus is needed soon to prevent a hard landing.
The cost of basics in NZ will keep rising as the population grows well-beyond infrastructure capacity. Working Kiwis will be left with choices: either pay heaps more for the same or adjust your living to lower standards.
Good for landlords, supermarkets, power generators, banks, etc. though.
Demand for rental homes is outstripping supply - 12-Oct-2023 - NZ Business news (nzcity.co.nz)
or exit the country. Sell all of your assets that are struck to NZ - housing, cars, stocks and get out before they close the exits or make it more difficult.
Govt has said "I don't care" with its stance of net migration of 100k, so be it.
Been slowly dumping all of my un-necessary possessions in preparation for leaving.
This. It is so plainly the likely outcome. It's not just the out-sized inflation widening the gap to Aus on a daily basis, it really is the collapse (and that is not an exaggeration) of our social services that is starting to make living here a risky business. Police and Health are absolutely operating in crisis mode, I have a strong network in both those area and have seen behind the curtain. If the real numbers of front line staff was known it would probably cause unrest.
Yup. Actively trying to convince my wife we should bring our leaving plans forward.
Like minds
Its not going to be any better anywhere else in the world pretty soon. Australia is going to have real problems with Climate change going forward. New Zealand is going to be the place to be in 10 years time, I expect people to be trying to pour back in. Don't lose your passport.
Yep.
In our household we are definitely pulling back a bit in our discretionary spend, given the surge in the cost of ‘the basics’
Yeah and all that previous stimulus achieved what?
We're all just people trying to make a living and to do so we need to receive money in exchange for our service. Therefore we also need to spend our money. Instead we're going to close our wallets in fear of our own "suffering" but happily force it on others.
Yet all we've done for the last two decades is bid up the price of financial assets in the belief we're creating wealth and storing value. We've increased debt servitude and inequality for many, and widened the "class" systems. We've created mega corporations, technology beyond our wildest dreams and a financial system too big to fail. We're enamoured by brands and status symbols, fixated on getting ahead and climbing the ladder. What good is that now?
There's an article on the site discussing monetary policy and the financial sector yet no comments. Why do you think that is?
Can you imagine if the message shifted from resilient to falling apart? The economy is built on hopium. It's how the system works. I'm surprised anyone thinks otherwise?
Yeah. It’s just too bad there is no one, or hardly anyone, with an independent voice questioning those mantras
definitely,hope is triumphant when we keep voting for the same self-serving politicians expecting a different result than last time.
That kind of psychological approach works to a large degree though doesn't it ? Things have to get really bad for a sudden landslide switch, the point that its obvious for everyone to see.
True. It absolutely works. Positive outcomes are expected even with dire odds. Lotto exists and fail videos of individuals believing physics doesn't apply abound on media. Hope makes life worth living, but it's expanded it's relevance to a civilisational drug addiction.
Linear thinkers blame others. That's as far as the format goes, and is why Governments are voted out, not in.
But the current malaise is not caused by Labour, nor even by the more-misguided neoliberal mantra.
We are up against the physical limits of what this planet can supply, and demands are increasingly overlapping (for instance; food-production vs housing vs carbon sequestration vs biodiversity vs water/soil quality).
We didn't have the required discussion this round - too many linear-thinkers in the media; too many linear thinkers full stop.
Not even enough ‘thinkers’ let alone ‘linear thinkers’!!!
Japan seems to be able to squeeze 125 million people into a similar land area, so I doubt NZ has hit the limit. And looking around I don't see many people going without; bellies are big, cars are used for even the shortest journeys, unneeded plastic crap is bought in abundance. In many ways I think we have too much supply of food / oil / plastic / etc.
Japan has a very homogeneous, compliant culture, happy to live on the 20th floor in a 60metre flat, eating sixty % imported calories while dumping their radioactive waste into the commons.
Carried through from their history, almost feudal in its makeup. Aftermath of WW2, MacArthur’s restructuring, began its modernisation.
JJ - no, it doesn't. That is a clear example of linear thinking - siloed and therefore incorrect.
Japan - like us - lives on imported resources and imported energy. Period. They don't 'manage', they import.
That is why they went to war - https://www.defensemedianetwork.com/stories/the-embargoes-that-blocked-…
Tell anyone you know in Labour (that's your tribe, I'm guessing) that they won't solve poverty or achieve wellbeing, until they define what those are: degrees of access to the resources (energy particularly) of the planet.
Aye, importing for sure. Wouldn’t know where to find the stats but they would undoubtedly reveal that between 1918 (or earlier) and 1939 Japan dominated the purchasing of the world’s supply of scrap metal. Of course they got to fire a lot of it back, pretty effectively too for quite awhile.
Japan imports significant amounts of food and energy, if supplies were shut off in Japan they'd have major problems. They're well over the population level that their islands can naturally support long-term.
That is why they are reducing the population.. What will happen to Japan's demographic by 2040?
Population Size and Growth
The population is expected to decrease to around 110.92 million by 2040, fall below 100 million to 99.24 million by 2053, and drop to 88.08 million by 2065
Their population is falling because 1. Longevity 2. Racism (against immigrants) 3. Misogyny (younger women see no future in marriage / childcare) 4. Hostage justice (against expats who are looking elsewhere since Ghosn) 5....
Cultural change takes generation/s
More to do with dietary choice than anything. If food self sufficiency was a goal they could triple their calories per has by switching from rice to potatoes and be a food exporter. But as we know in NZ you don't get rich by exporting food - better to get mugs like to grow it and import it. Likewise, if they want to be energy self sufficient they could tap in to their methane hydrates or build some more nuclear power plants. All countries would have problems if supplies of food and energy were cut off. Thankfully we can bludge off the US Navy to keep the sea lands open.
"Four Danish companies – Topsoe, Copenhagen Atomics, Alfa Laval and Aalborg CSP – and two state-owned Indonesian companies – Pupuk Kaltim and Pertamina New & Renewable Energy – have signed an MoU for the development of a 1 million tonnes per year, nuclear-powered ammonia project for fertiliser production in Bontang, Indonesia.
The proposed project will have a 1 GW electrolysis capacity, powered by Copenhagen Atomics’ thorium molten salt reactors (twenty-five small modular units). Topsoe’s solid oxide electrolysis cell (SOEC) technology and its ammonia synthesis technology will both be used in the project."
https://www.ammoniaenergy.org/articles/nuclear-powered-ammonia-producti…
That's 0.5% of global need covered
So just 200 of these will feed the world?
Or, maybe let population decline and take the human foot off the planets life support systems throat?
https://www.science.org/doi/10.1126/science.294.5545.1268
2001 doom porn? Tech is moving on. There is maize soil additives now that can fix their own nitrogen from the air - even though it is C4/not a legume.
Doom porn? As opposed to techno utopia porn?
Ha! You can just go to the shop and buy it, really quite boring. Unlike doom porn industry it doesn't end up with millions of depressed and anxious children.
Yet the RBNZ still thinks those stores will be excessively raising their prices, which will just eliminate whatever customers they still have.
I think demand inflation has completely dried up, supply inflation has been resolved (excluding oil but that always fluctuates), wage inflation is over, money supply inflation is over. But it might take a few months for our completely outdated stats to show this.
So far, I think many stores, eateries etc have been able to get away with their price hikes without much impact on demand.
I think that has been starting to change recently. Food places in town that were heaving 5-6 months ago seem to be significantly quieter over recent times. Lots of places have raised the prices of lunch meals from circa $17-18 to circa $21-22. It’s a mental thing as much as a $ thing, but where I was ok paying $17 for a lunch, I am not ok at $21-22.
As you say, wage hikes seem to be subsiding, and I am sure bonuses are off the table for many. And the process of more people with mortgages rolling over to much higher rates is in train.
Our regular f&c just quietly downsized their deals. ~30% less food for the same price. And less packs on offer too.
I agree, everything all of a sudden seems quiet.
The RBNZ team must not eat out, they don't seem to have noticed. Or maybe the fancy French restaurants they attend are still busy.
Construction seams to be slowing down in all areas. Larger companies with long term projects will still limp along. Smaller companies that do townhouses/bathroom reno's might have to sharpen that pencil asap
.
Furniture Now did the same. Huge overheads, lots of competition. Some big discounting going on in furniture at the moment.
I'd agree with that. Up until early August things were tracking as per usual (allowing for aberrations such as the cyclone), then everything went off a cliff, and it's a wall of negative stats since then.
Funnily enough, I'm doing some work today with a furniture supplier (sells through major and independent NZ retailers, both imported and manufactured products). Will be interesting to see what is happening for them and feedback from retailers.
A decent sized business servicing the small towns in the top of the north island, this is not s split second decision , these people know what they are doing, and they won't have made this decison lightly
Time to invest in anyone who makes 155mm artillery shells. Multiple desperate customers, more to come.
Supply and demand!
Killing, and death and destruction, are growth industries
I dunno - it's a dead-end career path.
As the Monbiot quote from some years ago says,
"If kindness and comfort are, as I suspect, the results of an energy surplus, then, as the supply contracts, we could be expected to start fighting once again like cats in a sack. In the presence of entropy, virtue might be impossible."
Speaking as an aging male, I suggest that in the presence of entropy, virtue is increasingly safe...
LOL.
Yeah was saying the same thing yesterday, people trying to invest in sustainable companies etc etc..yet it will be these ones where all the growth is as humans kill one another. We have'nt really evolved that much in the last 1000 years, just the way we go about it.
There are IMF forecasts for about 190 countries/territories. For 2024 NZ is expected to have no growth in real GDP pc, 177th of 190 countries/territories. Note, however, that Canada, the UK and Australia aren't much different in these forecasts/ https://croakingcassandra.com/2023/10/12/gdp Link
One gets the feeling IMF are not impressed with our major import - people.
I think it is interesting, it certainly widens the net of countries that you could move to that are doing better than this crazy backwater.
"in 2024 the IMF forecasts that New Zealand will have real per capita GDP growth of 0.0 per cent" I note that Haiti is above us in this forecast, this Haiti...
https://www.pbs.org/newshour/show/we-live-in-misery-haitians-struggle-t…
https://www.theguardian.com/world/2023/aug/14/haiti-violence-abuse-kill…
so the world really is our oyster!
That is talking about GDP pc growth. NZ's GDP pc is still around 22x higher than Haiti's. I know where I would rather live
I thought they are major proponents of neoliberalism, the free and easy movement of goods and people etc etc
There's a difference between free movement of people and third world population growth.
Only an idiot/politician would be.
Median weekly rents in six regions have skyrocketed by 10% or more over the last year, Trade Me Property says
https://i.stuff.co.nz/business/property/133102811/here-are-the-regions-…
What housing crisis...?
https://www.thepost.co.nz/a/politics/350088591/more-20-mps-rent-back-th…
The solution to our housing crisis
https://nopunchespulled.com/2023/10/12/the-solution-to-our-housing-cris…
I doubt Jones has a handle on the Limits to Growth, except perhaps to sneer at the concept.
Not so much yesterday's man, as the day before's.....
I don't know if he's aware of limits to growth, but the Chinese construction companies he wants to fly in definitely know about limits to reinforcing steel.
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