Here's our summary of key economic events overnight that affect New Zealand, with news financial markets are now turning their eyes to the US Fed meeting results tomorrow after it became clear today that while still easing, wringing the last bit of inflation's impulse from their economy could be tougher than first thought.
The US Fed targets 2%.
The American November inflation rate came in exactly as expected, at 3.1% and down marginally from 3.2% in October. Their core rate (without food or energy) was unchanged at 4%. This unchanged result has markets reassessing those 2024 rate-cut bets. Inflation in the world's largest economy is sticky at the end of its cycle and getting it back to 2% isn't going to be as straight forward as anticipated by financial markets. The Fed's caution is being justified.
Food prices rose +2.9% and fuel prices fell -5.4% so they are not weighing on the overall level. But rent is, up +6.5%. And airfares are up more than +10% in the year.
The Redbook index of bricks & mortar retail store sales on a same-store basis rose +3.4% last week, so the engine of American retail sales is still expanding on a volume basis.
American small business owners are still feeling the pressure however, but more from a tight labour market than from demand. 40% of all owners reported job openings they could not fill in the current period, keeping them glum even if business is expanding faster.
In Canada, they have a housing crisis - and perhaps a back-to-the-future solution. Home prices and rents have soared in part because housing starts have not kept pace with record immigration, and the official estimate is that 3.5 million more dwellings will be needed by 2030 to restore affordability. A 'new' policy has been announced, one with echoes of the housing-building boom after WWII. Standardised units will get blanket building consent approval with the idea that this will speed construction. This time however, the focus will be on density.
In India, the monsoon has been weak this year and that is affecting food prices. Overall, consumer prices rose 5.6% in November, the first increase in four months, up from 4.9% in October. Food inflation however went up to 8.7%, the highest in three months, up from 6.6% in October so the pressure is on, on that front.
India also reported October industrial production which was up +11.7% from a year ago, a much stronger rise than in the prior month and more than expected.
In China, a couple of random points to note: it seems banks are reluctant to ease loan conditions for home buyers in distress. Only a handful of Beijing controlled banks have shown any sympathy.
Also, the child walking pneumonia crisis apparently became a national issue due to very widespread antibiotic resistance, making a mild condition very much worse.
In Germany, sentiment as measured by the widely-watched ZEW survey rose in December. It is now at a new high since March. Despite their current budget crisis, the assessment of the situation and economic expectations have improved again, as more respondents expect interest rate cuts by the ECB in the medium term, and inflation to stay down.
In Australia there were two sentiment surveys out yesterday. The Westpac MI consumer survey found low but improving sentiment in December as the holiday season approaches. The icon NAB business survey recorded a sharp dip in sentiment in November to its lowest level since the pandemic in early 2020.
The UST 10yr yield is softer on secondary markets at 4.21% and down -6 bps from yesterday at this time. The key 2-10 yield curve is unchanged, still inverted by -48 bps. Their 1-5 curve inversion is slightly more inverted, now by -90 bps. And their 3 mth-10yr curve inversion is now -114 bps, also a bit more. The Australian 10 year bond yield is now at 4.30% and down -6 bps from yesterday. The China 10 year bond rate is unchanged at 2.68%. And the NZ Government 10 year bond rate is down -3 bps, now at 4.98%.
Wall Street has opened its Tuesday trade with the S&P500 up +0.2%, so little-changed. Overnight, European markets were all down about -0.1%. Yesterday Tokyo ended its Tuesday session up just +0.2% after earlier gains faded. Hong Kong went the other way with modest early gains shifting to a strong +1.1% rise at the end of trade. Shanghai got a very late end-of-session recovery for a +0.4% gain for the day. The ASX200 ended up a good +0.5% rise. But the NZX50 was under the pump all day ended down -0.6%.
The price of gold will start today just on US$1980/oz and down -US$2/oz from this time yesterday.
Oil prices are down -US$2.50/bbl from yesterday at just over US$68.50/bbl in the US. The international Brent price is now down at just over US$73/bbl.
The Kiwi dollar starts today at 61.3 USc and little-changed from yesterday. Against the Aussie we are up +10 bps at 93.4 AUc. Against the euro we are down -10 bps at 56.8 euro cents. That all means our TWI-5 starts today just under 70.4, +10 bps higher than yesterday at this time.
The bitcoin price starts today at US$41,298 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.3%.
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44 Comments
SuperCore CPI Jumps Back Above 4.00%; Used-Cars & Shelter Dominate Price-Rises
Michael Hudson: The Federal Reserve winner recently for America’s Federal Reserve Bank and the former President of Harvard have all said, “Interest rates have to be held high enough so that nobody will – so few people will invest and so few people can buy homes, that there will be a depression. The depression will lower employment and wages will fall. The solution to any problem is lower wages.” That’s the IMF’s principle. That’s the basic principle of a bank-run economy, no matter what the question you ask, I have the solution: lower wages, lower living standards.
The theory is that that will increase our profit. So, the interest rates will be kept high enough until they’ve wiped out the pension funds, made it impossible for people to – new home buyers to take out a mortgage to buy a home and outbid the absentee owners that are turning America from an owner-occupied society into an absentee-owned society.
That’s part of the aim of higher interest rates, is to create an absentee-owned society where you have private capital coming in and saying, and buying out masses of housing at pennies, just as they did under Obama.
This is the Obama strategy of essentially, ending home ownership, especially for the ethnic and racial minorities. It’s basically the anti-black policy that it was under Obama, to prevent the low income ethnic and racial minorities from becoming homeowners and forcing them into rent dependency on private capitalist absentee landlords. Link
How can we possibly solve inflation and house prices in NZ with this runaway immigration, its as NUTS as Wellington water pipe maintenance...... 212,700 people live in WGTN 30bil so about 140k each over next 30 years?
Its a hard call but If I was WGTN I would cancel the town hall and put that into water pipes. If a decent quake comes through you wouild not even have to demolish the town hall, it should have self collapsed... Later you can have these luxuries but right now they need to fix their rail and water pipes 2bil next 12 months then another 1b a year for 30 years i believe is the required budget.
Probably because it's a spike, rather than runaway. Did you miss what immigration was doing in the couple years prior?
Short of a global catastrophe that turns NZ into an ark, if 2024 has higher internal migration than 2023, I'll eat my hat.
Eating your hat is no strategy to fix over immigration or water supply.... its not a recognised risk mitigation or management strategy
No, but it's a wager based on whether the immigration is "runaway" or not.
Yeah, we can send them back when we discover immigration was in fact runaway.
Just a false economy.
A myth by those who don't have a clue on how to fix the economy and grow national resilience.
If anything it's likely to lead to more blocked pipes eventually.
"if 2024 has higher internal migration than 2023, I'll eat my hat"
No sh-t Shirlock. It's encouraging to see we share common ground!
The tendency is for knee-jerk reactions to short term rises and falls, rather than observing things longitudinally.
2-3 years ago it was people jubilant that the foreigners weren't coming in, pumping up wages, now it's the reverse.
The tendency is for knee-jerk reactions to short term rises and falls, rather than observing things longitudinally.
Trolling for the sake of trolling is as boring as it is predictable.
Trolling can be good. But it must be either witty or insightful. Ideally both. As a caricatural behavior, it has limited value.
Trolling is usually to get a rise out of people, it's not usually for entertainment value outside of the person doing it.
I don't think an observation about how many of us react to information through a fairly short term lens should be construed as a troll, unless the reader has a problem.
Trolling is usually to get a rise out of people, it's not usually for entertainment value outside of the person doing it.
In your case, yes. Witty and insightful trolling is something to strive for. It's much more constructive engagement.
Immigration outcomes are not some kind of natural phenomenon or an outlier in a normally distributed or random data set. It's something that can be directly controlled. Like attenuation.
Trolling isn't constructive engagement in any form. You'd just have a back and forward interchange as neutrally as possible. Not use terms like "normies" repeatedly, that sort of thing.
If we're talking about immigration, that's something you can form a picture of over longer periods of time. If we're bringing in 30-50k people every year over a long period of time, then none for a couple of years, citing a subsequent number of 100k and claiming it's out of control, potentially isn't very valid. You've just caught up on a deficit.
So what did happen over the last two years?
"The Minister of Immigration, Kris Faafoi, has announced the 2021 Resident Visa, a one-off, simplified pathway to residence for around 165,000 migrants currently in New Zealand."
https://www.beehive.govt.nz/release/one-residence-pathway-provides-cert…
After extreme pressure from Federated Farmers and business groups screaming we cant find staff to pay under $20 bucks an hour !! (These groups Visa's were expiring)
Or just at all, but always overlook that.
Ag workers are getting up to $45 an hr where I am, and still not enough.
up to?....love that term probably used in overseas advertisement's and once here realise this is before rent, tolls, travel, food, heater, cleaning, phone....charges deductions.
Yeah, depends on your experience and capabilities. If you can drive a tractor you'll get paid more than someone with absolutely no skills at all. It was a common rate listed outside the front of various firms for anyone who walked in the door, local or not.
The actual spread is 35-45/hr.
I think Faafoi mentally left a long long time ago
I lived in Wellington for 6 years and walked past the Town Hall most days...still nothing to show for the money they have poured into it, and also just across the square a closed Central Library that used to be a major meeting place for the city.
Pretty much everyone in Wellington wants to stop the town hall, except the upper classes who will use it for opera shows etc. All the young/middle aged people I know are absolutely livid its still going ahead. Don't worry, the next blow out will be for the library they are also rebuilding.
There's gonna be a depression?
Don't know how many times I've heard that over the years, mostly from goldbugs, who for some strange reason think that in a global collapse they'll be able to eat a piece of metal.
If people can't feed themselves, nothing is safe.
Agreed, lead becomes worth more than gold.
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Interest rates are shaped by economic fundamentals: growth, inflation expectations, investor sentiment. (lower growth, lower interest rates) 2011's market movements were a response to broader economic and monetary anxieties, not policy decisions. Link
Tension/war in middle east....oil prices dropping? 🤔 suggests either supply increasing or demand dropping...
I think the suppliers need cash and the consumer demand is well down, really noticed Diesel prices fallen a long way in auckland on Gaspy
Why do the suppliers suddenly need the cash?
they are financing crazy shite like liv golf? no more seriously they are spending on building non oil based assets , its end game for them if they do not develope alternate sources of income.
Stockpiles on hand going into winter
Anyone else notice the outcome of COP28 is that oil rich countries are demanding support
Most likely demand, the Saudis started dropping production 2-3 months ago, the forecasts would've highlighted reduced consumption coming in the short-medium term.
IEA and BP both think demand is peaking... (but maybe they would say that?)
https://www.bbc.com/future/article/20230726-an-experts-guide-to-peak-oil-and-what-it-really-means
The reality is that supply seems to have peaked in 2018. There had been an inflection in the late 70s; from a rate of increase which we never re-achieved. The subsequent flattened rate - with a 2008 dip - continued until 2018. That predates Covid...
https://www.iea.org/data-and-statistics/charts/world-oil-supply-and-dem…
Add in the reducing EROEI, and net energy is dropping rapidly. Yes, they will turn to making diesel from coal, and suchlike, but the bang for buck we enjoyed until 1999, ain't coming back. For that reason, debt is in trouble.
And for that reason, Shane Jones' blither re growth in all things, won't get off the launch-pad. Watch that space... Mind you, why you'd want to turn real, one0off resources into a pile of bank-held electronic digits - worth nothing in a resource-depleted scenario - beats me. Maybe he should have just stayed in that hotel room...
Sanctions on Russian oil having an impact?
Perhaps someone here knows the real margin in a barrel of oil. Always said that petrol will drop in price when the demand for it goes down so it remains attractive instead of electric vehicles. Fossil fuel is not going away anytime soon, it will be priced at whatever it takes to keep the demand.
The margin is going to vary hugely on how the oil is extracted. Sucking it out of a reservior with a straw is a lot cheaper than fracking.
It turns complex however and in fact EV owners are helping ICE owners. EV's are helping to extend the usage of Fossil fuels and also keeping the petrol price in check. Reality is oil producers cannot afford to have everyone running out to buy an EV.
Hmm, also probably partially true. Although I think global demand for fossil fuels is still going in one way for a while. Might effect a share price but not the stock commodity price.
I agree, and I also note news articles on how well Yamaha is doing developing hydrogen fuelled ICEs. They have a 5 litre V8 they're doing for Toyota. In the US there is increased interest in H2 fuels for long haul trucks. So the alternatives are ramping up. The hydrocarbon industry are in for a long slow slide to not quite nothing. I don't believe fossil fuels will ever completely go, but there is a lot of work happening to make sure vehicles keep moving without them.
How long until a small car sized nuclear reactor is proposed? As technology improves that must be possible?
Hydrogen is to the fossil energy industry, what vaping is to the tobacco one.
They hope it will continue gas demand, with minimum angst.
There is no other valid method of creating stand-alone hydrogen.
Well, electric is going to be a while off from being viable to heavier industry. So it's likely either Hydrogen for them, or some sort of carbon exclusion for ICE machinery.
Nuclear reactor ? I think we have enough Teslas going up in smoke as it is, please don't give Elon any ideas.
Somebody somewhere will be playing with the idea. Range is the problem. what is the solution?
We are a very long way from nuke power packages, but in lieu of some other alternative someone will develop the technology to make it possible.
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