Here's our summary of key economic events overnight that affect New Zealand, with news despite ongoing pressures, the global economy is still exhibiting some remarkable resilience although largely underpinned by American strength and activity.
American initial jobless claims stayed low last week, lower than expected and it is now safe to confirm that the expected 2023 labour market stress won't arrive. It is a singularly epic achievement even if it gets almost zero credit or acknowledgement. There are now 1.85 mln people on these benefits, a small rise from last week and up from just under the record low 1.6 mln a year ago.
This comes even though the American factory sector stays in the doldrums - marginally contracting. There were two regional factory surveys out overnight. The Philly Fed one for the traditional American Rust Belt region reports a fall within current recent ranges in current activity, but the outlook for future activity was surprisingly positive even if they are slightly below their long run averages.
The Kansas City Fed's equivalent survey was flat in December, but expectations for future activity also picked up.
The US Conference Board leading index continues to be negative and was again so in the November reading. But it is increasingly looking like this monitoring is overstating the weakness in the US economy. It has been a good predictor in the past identifying boom and bust conditions, but it misses sometimes, usually on the upside. This is looking like a rare downside miss.
Canada released its official retail sales data for October overnight and there were no surprises, coming in with a modest real gain.
China released its foreign direct investment data late yesterday for November and it is weak again. It grew just +NZ$20 bln from the prior month, less than the +NZ$25 bln expansion in the same month a year ago which are both very low for an economy as large as China's. It is a mask however of actual declining Western and Japanese investment whereas new incoming investment is from other regions now. Overall incoming investment is now at a four year low and an icon of how the 'de-risking' trend is taking hold.
Meanwhile, the large Chinese state-owned banks are cutting deposit interest rates. For example, ICBC, the largest, trimmed -10 bps from its one year TD to 1.45% pa. Term deposits for 3 years got a -25 bps reduction to 1.95%. Banks are suffering severe margin compression issues currently with both weak loan demand and Beijing's instructions to lend large amounts to struggling property developers.
Turkey's November inflation rate came in at 62% in November and staying stubbornly high. That has induced their new central bank leadership team to raise their benchmark policy rate again and by +250 bps to 42.5%. Observers called this a 'moderate' response to their extreme inflation situation.
In Argentina, their new President has delivered the 'shock therapy' he promised. By decree he unveiled a 'sweeping' set of 'new measures' to eliminate or change more than 300 rules, including on rent protections and labour practices. He also is ending the block on privatisation of their huge SOE sector. There is no certainty these measures will succeed or even come into law. Protest, an Argentine specialty, and the fact that his party only has 40 seats in the 257-member lower house and seven senators out of 72, look like making reform difficult. So perhaps little will actually change.
Here in New Zealand, there was a lot of gritty financial system data released late yesterday, mostly for November. We will cover the important bits over the next week or two, but one thing on credit cards stands out - total credit limits were $21.1 bln in November which was -1.0% lower than a year ago and the lowest level in nine years. But credit card users only have accessed 30% of that, although that is now the largest proportion since the start of the pandemic.
We also saw household term deposits rise to $125.2 bln, the highest level ever. That is up almost +$24 bln in a year, and keeping up the pace of growth we have seen in every month of 2023. The average household term deposit is now $88,800. There are now 1.56 mln of them.
And home loan growth slipped yet again, now up less than +3% for the first time since October 2012. Business and rural lending growth is even more anemic, painting a picture of very tough loan demand facing banks. They are living off their existing loan base.
Globally, it will be no surprise that container freight rates jumped last week, mainly in response to the Red Sea crisis. Shippers are booking vast amounts of future capacity to ensure they have space for longer journeys, and by doing it all at once container freight rates have leapt. China to Europe rates were up more than +15% in one week, raising overall rates by +9% last week. But trans-Pacific rates hardly moved while all this turmoil was going on. Bulk freight rates however continued their retreat.
The UST 10yr yield has risen a minor +1 bp today, now at 3.90%. The key 2-10 yield curve is marginally less inverted, now by -45 bps. And their 1-5 curve inversion is also less inverted, now by -98 bps. But their 3 mth-10yr curve inversion is marginally more at -145 bps. The Australian 10 year bond yield is now at 4.06% and up +1 bp from yesterday. The China 10 year bond rate is down an unusual -3 bps to 2.63%. And the NZ Government 10 year bond rate is down -3 bps from yesterday at 4.55%.
Wall Street is up +0.5% on the S&P500 in Thursday trade. Overnight, European markets were all down about -0.3%. Yesterday, Tokyo dropped -1.6% in Thursday trade, Hong Kong was unchanged, while Shanghai recovered +0.6%. The ASX200 ended its Thursday session down -0.5% whereas the NZS50 rose +0.4%.
The price of gold will start today up +US$6 at just on US$2040/oz.
Oil prices are -US$1 lower at just on US$73.50/bbl in the US. The international Brent price is now at US$79/bbl. In a surprise defection, Angola has quit the OPEC cartel. Low prices and the cartel's policy of output cuts have hurt this producer more than they can bear.
The Kiwi dollar starts today at 62.8 USc and unchanged than yesterday. Against the Aussie we are softer at 92.6 AUc. Against the euro we are unchanged at 57.1 euro cents. That all means our TWI-5 starts today just on 70.8, down -20 bps from yesterday.
The bitcoin price starts today staying high at US$43,598 although a minor -0.4% lower from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.2%.
Happy Holidays! Shop responsibly.
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