Here's our summary of key economic events over the weekend that affect New Zealand, with news some eyes are on the cliff-hanger election is Argentina. It is turning out to be very close.
But first, in the week ahead, the main focus will be on the Fed meeting minutes followed by American durable goods orders, manufacturing PMIs, and some housing market data. We will also get flash manufacturing and services PMIs for Australia, the EU, the UK, and Japan. Upcoming are policy interest rate decisions for Turkey, and Sweden. And CPI inflation rates will be released Canada, and Japan.
However, first up over the weekend, China released its October foreign direct investment data that was only +¥106.5 bln (+$24.5 bln), continuing the run of weak inflows. In fact these are now -9.4% below year-ago levels.
In the US, housing starts rose by +1.9% in October from September, above market expectations as limited supply in the resale market has boosted new construction. Also, residential building consents, a forward-looking indicator of future construction, moved +1.1% higher. However, these might be recent trend increases but both are still lower than year-ago levels. And completions are now running higher than new housing starts.
A new Boston Fed research paper released over the weekend examined how much labour market surveys undercount gig-workers. It could be by a lot, and answer the question about why the US participation rate seems so low. US employment is already at a record high. It may well be very much higher than those official levels, and that has monetary policy implications.
Given that it is widely accepted that the US is battling a flood of illegal immigrants, in ordinary times some facts might quell the angst. But in a "post truth" world, no doubt these facts won't change any biases.
In Canada, producer prices are falling, essentially due to the much lower fuel prices. They fell by more than -1% in October from September, the steepest decline in producer prices since August 2022. Year-on-year they are down -2.7% on the same oil-cost retreat.
In Europe, the euro area recorded a current account surplus of €41 bln in September, the fourth consecutive one and the largest since July 2021. That is an improvement from a deficit of €5.40 billion in the same period of the previous year.
In Argentina, final voting is underway in their presidential election, one making headlines because one of the candidates is an out-there libertarian outsider. A key driver of his appeal is that inflation has spiraled to over 140% pa, up more than 8% in October alone. Voters are frustrated.
Separately, we should note that nickel prices have dived and continue to be pressured downwards. The price for this key commodity is down -44% since the start of 2023. Poor demand, especially by EV manufactures is weighing more than some short-term supply challenges by one large producer. This market is facing the largest supply-demand surplus in at least a decade. It does seem specific to nickel; zinc, tin, copper and lead are all holding their own on price at present.
The UST 10yr yield is little-changed from Saturday, now at 4.44% and +1 bps firmer. A week ago it was 4.62% so down -18 bps from then. The key 2-10 yield curve is still inverted by -46 bps. Their 1-5 curve is marginally more inverted, by -81 bps. Their 3 mth-10yr curve inversion is now -96 bps and unchanged. The Australian 10 year bond yield is now at 4.47% and unchanged from Saturday. The China 10 year bond rate is unchanged at 2.67%. And the NZ Government 10 year bond rate is also unchanged at 4.98%. A week ago it was at 5.22% so a notable fall since.
The price of gold will start today at US$1981/oz and up just +US$1/oz from where we left it on Saturday. A week ago the yellow metal was at US$1936/oz so a weekly gain of +2.3%.
Oil prices have held their Saturday rise to be just on US$76/bbl in the US. The international Brent price is also still at US$80.50/bbl. These are week-ago levels.
The Kiwi dollar starts today at 59.9 USc and little-changed from Saturday. But it is up almost +1c from a week ago. Against the Aussie we are up marginally at 92 AUc. Against the euro we are little-changed at 54.9 euro cents. That all means our TWI-5 starts today at just on under 69.1.
The bitcoin price starts today at US$36,375 and virtually unchanged since this time Saturday. A week ago however it was at US$37,215. Volatility over the past 24 hours has also been low at just on +/- 0.5%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
54 Comments
Oil prices have held their Saturday rise to be just on US$76/bbl in the US. The international Brent price is also still at US$80.50/bbl. These are week-ago levels.
Indian Foreign Minister Subrahmanyam Jaishankar has asserted that India, the world's second-largest oil buyer following China, played a pivotal role in stabilizing global oil and gas prices by continuing trade with Russia, thereby mitigating global inflation.
“So we’ve actually softened the oil markets and the gas markets through our purchase policies. We have, as a consequence, actually managed global inflation. I’m waiting for the thank you,” Jaishankar said. He then elaborated that if New Delhi decided not to buy oil from Moscow, global oil prices would increase dramatically “because we would have gone into the same market, to the same suppliers that Europe would have done, and frankly, as we discovered, Europe would have outpriced us.” Link
https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resourc…
Importer margin approaching 55c per liter briefly recently according to MBIE website (thanks to another user for the link).
The UST 10yr yield is little-changed from Saturday, now at 4.44% and +1 bps firmer. A week ago it was 4.62% so down -18 bps from then.
Then, there is the vexed question, which neither side would dare discuss publicly — namely, China has begun to sell its vast holdings of US Treasury bonds. The damage a Chinese selloff could do to financial markets, to Washington’s finances, and to the economy generally needs no explanation. For decades, the US was a major consumer but since Americans were running a trade deficit, they needed to borrow to support the purchase of Chinese imports and Beijing advanced that loan indirectly through its purchases of US Treasury bonds. But the matrix has changed. Link Nonetheless:
The mainstream emphasis on Treasury auctions is, like so many of these things, completely misplaced. It's not just misplaced, even the worst Treasury auctions don't actually matter. Interest rates have nothing to do with how much debt the government issues. It's sad, it's not right, but that's the eurodollar world we live in. Uncle Sam has issued almost $20 trillion in debt over the last dozen years, and the long bond yield has barely moved - even with the Fed spiking ST rates - Link
Not easy to process a log profitably in NZ.
"Eighty workers being laid off from a mill in Gisborne say the sudden job loss is devastating.
Japanese-owned Juken New Zealand told staff on Friday that it had decided to close due to ongoing financial difficulties and falling demand."
https://www.nzherald.co.nz/kahu/gisborne-mill-workers-devastated-over-s…
That's the balance that unions should always be considering, but owners might be expecting excessive profits to get a high return. It has been indicated elsewhere recently that current investment trends tend to be short term rather than longer.
Closure suggests that the company is not profitable which suggests the unions were too greedy, else the company could have been sold as a going concern and therefore with more value to shareholders?
Same tired old line. Unions greedy ,company unprofitable.
Whakatane board mills were an absolute loss maker under previous owners. New owners bought it and put prices up 30% plus. Turns out old owners were selling to their overseas selves cheap ( profit shifting who'd have thought) and had built a new mill elsewhere so didn't care about whakatane . Extremely profitable now though a total shite plus to work by accounts.
There is also the issue of future log supply due to politics around forestry in the area.
Even though growing trees is the best land use for most of the region. Industry needs pine, Redwoods and such like have a long wait till harvest and will never replace Radiata. Expect more closures in that area if forests are locked up due to opposition to harvesting.
Chinese subsidise their timber processing and transport meaning that their importers can outbid (and outscale) our domestic mills. I also heard that kiwirail discount the transport of logs to our ports. At some point, we will work out that our slavish devotion to the 'market' is a major disadvantage.
Jfoe,
Because there are still people that believe in the Phillips Curve? This has puzzled me for a long time. Apparently our RB still does, while Joseph Stiglitz wrote very recently; "Once again, the standard macroeconomic relationship between inflation and unemployment-expressed in the Phillips Curve-was not borne out. That 'theory' has been an unreliable guide over much of the past quarter-century, and so it was again".
For reasons that have been oft repeated here; labour used to be 'work' - human and animal muscular effort, traceable to sunlit acres (food), but fossil energy is what we use now; last I checked a barrel of oil equaled 4.5 years human hard labour. That makes labour nothing but noise. The folk clinging to the curve are like priests clinging to a 4,000-year creation-story (one wonders if our new PM is one such?).
That goes with the other old nonsense; that at a certain price-point a substitute will always be found. Primary-school mathematics rebuts that one; no need to get into second gear.
The West has been trending to using ever-lower wages; either offshore somewhere, or as 'do as we say or you're on your way back home' migrants. That's a via-a-vis others comparison, but the sinking lid is atop the whole game.
In Wellington, 1kW of panels generates 1400kWh/year (Auckland is 1500, Chch 1300). A human puts out about 100W - so 0.8kWh over a working day or about 200kWh per working year. So each installed kW of panels does the work of about 7 humans.
In NZ, we directly use 10 barrels/person/year. We also indirectly use several more to make the goods we import from overseas.
The IPCC puts the carbon footprint of rooftop solar at 41 grams of CO2 equivalents per kWh of electricity produced. So your1kW installation produces the equivalent of 57.4kg of CO2/year or 1.4t over a 25 year lifespan.
I think he wants a treaty referendum. Either that or he is using it for very good leverage. Its the one thing National can't agree to.
Really he should have very little bargaining power considering he said he won't go with Labour so his only option is National. Kind of like the greens when the left win.
NZFs policy is to "simply" remove all references to the nonexistent Treaty "Principles" from all NZ legislation.
As everyone with an agenda wilfully mis-states: ACTs policy is a referendum on the Treaty "Principles", not the Treaty.
ACT proposes referendum on co-governance - ACT New Zealand
"It would define the Principles of the Treaty as.
- All citizens of New Zealand have the same political rights and duties
- All political authority comes from the people by democratic means including universal suffrage, regular and free elections with a secret ballot
- New Zealand is a multi-ethnic liberal democracy where discrimination based on ethnicity is illegal"
For some reason, some people have a problem with that.
It is essentially is a change from Maori having a 50% say because they signed a treaty giving them that right, to having a no say because they "have the same political rights and duties" and only make up 15% of the general vote. Whether you think that is good outcome or not, it will lead to animosity and perhaps a civil war, it certainly won't make NZ a nicer place to live. That would be the end of the National party IMO.
As it is being applied today the third article is in direct conflict with the other two.
Your comment "Maori having a 50% say because they signed a treaty giving them that right" is where the conflict lies. Article three suggests that should not and cannot happen.
Why would Te Reo Maori be outlawed? It was Maori Kaumatua who asked for it to be banned from schools in the first place and the Government of the day acceding to their request. Maori can't be banned if people still choose to use it, and to try to do so would only get a bad reaction today.
I'm not saying it would. But if it was, is that still equal? According to Seymour's theory we shouldn't have any official languages as they are racist. Road signs should be written in whatever language the guy writing the sign feels like. But as with everything about Seymour, the theory only applies when it suits him.
How about another example. MBIE can't make special exemptions from the building code for traditional Maori structures because that is racist. So that makes it impossible to build a new traditional Maori meeting ground and they will become obsolete. But that is totally fair and equal.
I did acknowledge it above. My main point was that it will cause a massive uproar at the least, and understandably so.
I think a lot of NZers including myself see the treaty as an agreement to coexist in a fair way, the actual contents really don't interest me, they are very outdated anyway. I don't see any harm in acknowledging that there is a Maori language and Maori culture and that they should get some kind of say in decisions that affect them, not be treated "equally" where everyone speaks English and lives a European lifestyle as David Seymour and Don Brash desire.
Thank you Jimbo.
Equality does not mean exactly the same.
While we have equal rights to healthcare for example people who need it can have vastly intensive use of health services, and others who don't need it near none all their lives. Quite 'unequal' access. It's a good principle.
The negotiation is fine. No need to hurry.
What the pollies have to deal with is the election result we the voters have delivered them. So there are things each party declared they wanted but they have to give something up. Nobody got a 100% vote.
It's what the voters gave them, it's democracy, and it's good.
We have had winner takes all, three year dictatorships in the past. Don't wish us back there.
This was a funny comment section referencing me almost exactly four years ago. Times have changed a bit since then!
https://www.interest.co.nz/news/102687/us-data-lackluster-china-makes-h…
by Mrs The Point | 22nd Nov 19, 12:07pm
I haven't seen the LoneWolf post here for a long time. Must have retired to a tropical island on his Crypto earnings.
Rumours of your retirement were premature.
Certainly have lonewolfnz !! .....but you are preaching to the "old skool" dudes here, who don't like and are scared of any sort of change.
I would happily set up, thru EC and an Exodus wallet and get people started - especially in the over 50's , could actually be a great business idea ! :)
I would happily set up, thru EC and an Exodus wallet and get people started - especially in the over 50's , could actually be a great business idea ! :)
You could market it as the "Normie Package" (just joking).
Many people are never going to self custody properly. Better for them just to have exposure to the ETFs.
JC - yep, you have a point, but rather them, then me - no doubt the large investments co's ie the Blackrocks, Grayscale et al will have the fees structure worked out "'very nicely, thank you".
I'd rather pay the gas fees etc - at least I know what "real" return I am getting, without adding ANOTHER ticket clipper to the financial gravy train.
The first part of this article explains well the massive conundrum in the tax issue that is undoubtedly at the centre of the coalition negotiations and their delays:
https://www.thepost.co.nz/a/nz-news/350112631/forget-foreign-buyers-tax…
According to ACT it is really easy to afford much larger tax cuts: “ACT will implement a middle income tax cut. We will cut the 30 percent marginal tax rate to 17.5 percent. We will reverse the 39 percent tax rate and we will reverse the Government’s interest deductibility change.
Haven’t they also said such things aren’t possible right now due to the fiscal position?
Gee I would love to be a fly on the wall. I find it very hard to see how the differences on tax can be resolved. For example, the Nats reversing their policy on interest deductibility just doesn’t seem plausible given the wishes of many of their constituents (landlords)
Anyone have any ideas on what the compromises might be?
The article I posted notes the impact on the poor of raising GST, yet ‘the poor’ are hardly the constituents of these 3 parties are they?
So Milei got elected in Argentina! Wow a libertarian president ! He has analmost insurmountable task to pull Argentina out its deep malaise but I wish hm the best of luck
Milei is pledging economic shock therapy. His plans include shutting the central bank, ditching the peso, and slashing spending, potentially painful reforms that resonated with voters angry at the economic malaise
Go for it, but will he be able to achieve this without extreme demonstrations and anger by the people ?
Have you looked into him at all Yvil?
He wants to get rid of public health and education. He wants to make guns easier to obtain. He wants to legalise all drugs, and make abortion illegal. He also believes in a free market for human organs.
Whatever the problems in Argentina are, those don't sound like good answers.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.