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.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
67 Comments
ELE placed into receivership right before Christmas: https://www.rnz.co.nz/news/business/505204/hundreds-of-migrant-workers-…
We'll always have Paris.
"Taken together, government plans and projections would lead to an increase in global coal production until 2030, and in global oil and gas production until at least 2050. This conflicts with government commitments under the Paris Agreement, and clashes with expectations that global demand for coal, oil, and gas will peak within this decade even without new policies.
Global levels of coal, oil , and gas estimated under the government plans and projections pathways would be 460%, 29%, and 82% higher than those under the respective 1.5°C-consistent pathways. The global levels of fossil fuel production implied by governments’ plans and projections, taken together, also exceed those implied by their stated climate mitigation policies and implied by their announced climate pledges as of September 2022, as modelled by the International Energy Agency."
Thanks for the link. So goverments plans and projections, policies and announced pledges do not line up. Not surprising. Looking at it as a matter of developed countries keeping their pledges and splitting them into good and bad countries will ignore the big issue which is under developed countries. Developed countries have innumerable potential small reductions in fossil fuel consumption such as Auckland council can nudging us out of cars and into public transport. But how can a third world country decide not to buy refridgerators for medicine or build roads and ports so excess agricultural goods can be exported or use concrete and iron to build schools and hospitals?
$125b in term deposits.
If only we had a good, easily accessible capitals market and governments encouraging startup businesses, instead of flipping back to one now who is governing "Of the spruiker, by the spruiker, for the spruiker" and conveniently doing away with tax avoidance reporting under urgency to show how serious they are about it.
It really depends on your risk tolerance and timeline. A pure TD strategy of saving for retirement over a few decades is hugely risky - you are virtually guaranteed to underperform and have worse funding for your retirement than would be possible with a balanced portfolio. You either give up more today, receive less tomorrow, or both.
If you're saving for some need in the next few years, or in your late retirement and want to keep things simple and predictable, they're a great tool.
There seem to be quite a few on this site with just TDs, and property. I wonder what percent of contributors here own shares other than through a KiwiSaver fund? I wouldn't be surprised if it's a minority, even of those interested enough in finance to frequent this site.
Yep pretty poor performance - this is why it is not advised to buy shares if your timeline is just a few years. I've been here about 10 years and Sharesight tells me I have had a little more than 10% CAGR despite a couple of slow years.
We're also not restricted to the NZX - there's a pretty limited selection of public companies here presumably because most Kiwis only want houses and TDs. ASX shares are cheap and easy to buy and usually exempt from the FIF regime. Going further abroad has a few more issues if you want to invest more than $50k but is still very cheap and easy to do.
5-6% is the long run return on a balanced share fund, a TD has near zero risk in ANZ banks. Kiwibond 1yr is 5.5%. A no brainer compared with shares (no one can time the market), especially for those who can remember 1987 - & the NZ Govt's that told us to ensure we had our own retirement savings.
Oh dear. By way of comparison, my wife's KiwiSaver has a TWR of 9.23% since inception in 2007 (tax paid!). Presently your TD nets about 4%, and substantially less when interest rates were lower.
That's a huge premium to forgo for the sake of 'security'.
Remember that the regulatory environment has changed substantially and the NZX is not the 'wild west' it was in 1987.
My KS also did very well as global govts underwrote equities by their money printing post 2008 GFC, however now the chickens have returned to roost over the last couple of years with the worst sharemarket performance in 50 years. Thankfully I withdrew all my KS near the market peak.
Yes, to be fair, TDs today are a reasonable prospect. Half-decent return and low risk. I've been buying some bonds for similar reasons, with the added bonus that if interest rates fall they will appreciate in price as well as spitting out a decent yield.
Until a year or two ago, TDs were a mugs game.
Different ages have different aims. As you've suggested, someone 65 is riding out their time with the recourses they've accumulated. Having a TD return less than inflation, isn't really a problem, because they're already liquidating their savings throughout the end of their lives.
TD's work well you get a return on your money, too many new business fail.
If the sheeple feel that they're getting a good deal on TDs because they feel secure in that banks are looking after their funds, that's a sign that the ruling elite is in full control. Unfortunately that appears to be the case.
In reality, most do not understand that they're creditors to banks nor do they understand that the value of their hard-earned money is being crushed, even though their peers at the water cooler and Granny Herald have convinced them inflation is somewhere around 4% and heading lower.
Yeah but imagine a collective $100b fund to kick start kiwi startups. Sure there would be a high percentage of failures, but you only need a few big winners for it to more than make up for the small failures. With the side benefit of making our economy more productive and all of us more prosperous.
But instead we just give foreign banks funding margins so they can continue funding the speculative property ponzi. Yay.
Agreed. I still find it interesting that there is $125billion in TDs, and from memory another ~$120billion in low yielding transactional accounts.... yet the total market cap of the NZX is ~$160billion.
The behaviour associated with asset allocation is fascinating but would be curious to know how NZ's compares to to other countries.
https://www.rbnz.govt.nz/-/media/3504a0f1a26d41589a98a53d67204e89.ashx?…
Page 11. We have dubious company with Greece (fairly inept) and China (fairly corrupt) as investments in capital markets. Note the countries near the top are ones who have far higher productivity increases than us and/or have far higher GDP per person. The ones with lower GDP per person may overtake us in the future if they keep re-investing in their capital markets.
Most of NZ capital is caught up in housing and speculation on housing, which is the consequence of various hopeless policies by various hopeless governments. The current lot won't be any better, particularly with a declared specu-vestor as the leader.
Yeah but imagine a collective $100b fund to kick start kiwi startups. Sure there would be a high percentage of failures, but you only need a few big winners for it to more than make up for the small failures. With the side benefit of making our economy more productive and all of us more prosperous.
Most of the oldest companies in the world are in Japan. In a survey of 5,500 companies over 200 years old, 3,100 are based in Japan. The rest are in some of the older countries in Europe. And most of those companies have <300 employees.
The following is an interesting read. https://longnow.org/ideas/the-data-of-long-lived-institutions/
I think you're wrong that "you only need a few big winners". NZ needs better service companies. Not committees gambling on business ideas.
Indeed, what we need is more companies doing labour hire for locals to clean the toilets of the top few % of mega wealthy. That will definitely make us richer.
Theres a very long list of NZ companies who are now overseas or on their way, so they can access capital easier, that would disagree with you. Xero will probably be the next to exit. Rocket Lab is on the way out it seems (if Peter Beck was ever rolled, it would probably be gone tomorrow). Then there are a hell of a lot of smaller to mid size ones that will almost certainly leave in the near future. Most of them site "access to capital" as the issue, they then go to overseas markets, get access to capital to level up, then become moderately to very successful.
When these big companies exit and take all their very highly paid staff with them, what do you think happens to NZ productivity? Productivity is the only thing that matters in the long run and NZs is in the toilet.
But many countries, including many wealthy oil states, are adopting the same position - pour money into new businesses, and see what happens.
So we can't compete with this on a global stage, and the tangible results from it are "mixed".
You need to invest in decent odds, not just throw a bunch of fiscal darts blindfolded.
There are plenty of examples. I'd add A2 milk, who are essentially an Australian company now but still retain the NZX listing (for now). VML/PLX now TSK have left the NZX, now growing fast over on the ASX running McDonald's mobile apps. I expect SKO and IKE will be looking overseas before long, probably PEB if they ever catch a break.
We'll be left with an index of property companies, utilities and banks. Nice steady, boring companies for steady, boring Kiwis.
Synlait can't really move overseas - their plants are here in NZ. Things look pretty dire though, they may end up being owned by overseas interests.
A2 are an interesting story - based on NZ innovations (some from Fonterra), a huge company with a huge potential market on their doorsteps with dairy intolerant customers in Asia. As Keith Woodford has shown, regular milk has very problematic correlations with a whole range of diseases which A2 milk neatly sidesteps. We had a real chance to set NZ dairy up with a unique point of difference. Now shifted to Australia because NZ can't support their own companies.
TSK are pretty well entwined with McDonalds who own a decent chunk of the company - would be an enormous project to undo.
The product benefits of A2M are undeniable. As a business, they're less than impressive IMO. The fact that the company relied on Daigou is a great illustration that their business model needs work.
Yili on the other hand. The Chinese more or less showing us an approach to running a successful dairy business.
There's different interpretations, I guess. My reading is they had this golden nectar of Daigou trade fall in their lap and had to decide whether to turn it away and build a sustainable business, or take the sugar hit. Without that hit, they would never have made so much money and wouldn't have the war chest that still exists despite buying that factory down South. Their revenue and profit would have a more gentle upwards slope and they would have avoided some criticism and drama, but I think they would be poorer all the same.
Tough luck for those who bought at 15-20 dollars assuming it would go on forever.
The product benefits of A2M are completely deniable. While the substitution of histidine for proline at position 67 on the casein peptide may contribute to functional differences, no cause-effect relationship with etiology of disease has been reliably established.
But then again, if people believe it makes a difference then it absolutely will.
The actual proof is elusive and would be expensive. Can you imagine a study controlling a group's entire dairy intake over 20 years to see if they develop dementia or heart disease? Maybe childhood autism would be testable with only a few years intervention.
At present we have strong epidemiological links but no proof. We can all act accordingly. Personally, I wouldn't give my children regular milk.
Keith's book 'the devil in the milk' is a good overview but probably a little out of date now. A2 are performing studies but I think they tend to be on digestive issues and discomfort rather than major diseases.
Clearly you have an anti innovation attitude. Innovation, over time, creates productivity and prosperity, these are pretty fundamentally obvious features of the world we live in today. Its the attitude that NZ can't compete is whats killing the NZ economy, alongside an incompetent series of governments that believe the path to prosperity is:
- Having money locked away and leveraged by foreign companies to generate them more profits
- Selling each other houses at higher and higher prices
- Everyone buy multiple rental properties, as if that is possible
- Allow companies to extract more natural resources and socialise the costs
- Become a bolt hole for wealthy foreigners and a tax haven
But go on believing that all of those things will bring NZ prosperity and keep voting for it. And keep watching NZ slide downhill further against all the countries we compete against.
<edit> Oh, going off your posts below then, the best way to prosperity is via bitcoin then? Cos currency trading is somehow going to improve the NZ economy yah?
How about come us with an idea yourself Pa1nter for the NZ economy, instead of yelling down everyone else, which is all you seem capable of?
I aren't saying its as simple as you are claiming it is, I am saying a lack of investment into our capital markets is a real problem as evidenced by the continued off shoring of NZ companies. Hell, imagine if that 100b fund only invested in moderately successful companies that wanted to leverage up? What if they had invested in Xero, who was desperate for capital about 8 years ago, so announced it was leaving the NZ market for Aus? Could be an entirely NZ based company, instead we decide to sell houses to each other over that time and are all poorer for it.
Yeah but imagine a collective $100b fund to kick start kiwi startups. Sure there would be a high percentage of failures, but you only need a few big winners for it to more than make up for the small failures.
Doesn't really work that way. You'd be down 80-odd billion in 3-5 years. Then most of the survivors would be marginal propositions, because you've just subsidised their existence.
So you'd need quite a few massive successes, over quite a long period, just to break even on the initial 100 billion.
Probably, a better strategy would be to do what some other places do, and back specific industries, providing the infrastructure and critical mass to be a globally competitive sector.
But first you need to identify what these industries and companies should be.
Instead of chasing moonbeams, "capital", the next big tech unicorn etc, we ideally need to go back to locally owned, produced and sourced products, quality and genuine human interactions and service.
But it means somehow "competing" with the giant corporations and brands. There are some great local FMCG producers of healthier products but because of economies of scale can't compete on price. When the bulk of FMCG goods, basic appliances etc are owned by a handful of multinationals we're always going to be on the back foot.
We've literally hamstrung ourselves overpricing land and houses, underpricing front line essential workers, and loading up on credit creation.
If you think you're going to live more than a decade and don't have some other inflation-adjusted income that will provide for your needs, you really should think about inflation. I guess if Super is enough for your lifestyle and you're confident it will remain enough for the rest of your life, you can be more relaxed.
In it's basic sense, it's a medium of exchange for purchase of goods and services. Could be beads, stamps, or Fiat currency. Given the latter is how most of our economic interactions take place, that'd be a reasonable shared definition. If your employer or client wanted to pay you in potatoes, I'm not sure you would accept their definition.
For me, I only view it as a temporary state of energy, which I can either add to via enterprise, or expend for my personal enjoyment/consumption. I don't really care about it's actual constitution, it's only a tool.
It'd seem that some believe you can just hold onto it, and expect it to yield exponential returns, in and of itself. Not sure there's too many people who've stashed massive stacks of cash, only to complain central banks have deflated the value away.
What you're into is aspirational wealth, wrapped up in a movement narrative.
My normie mates aren't really aware that we're on the verge of the launch of a BTC ETF. My degen mentors are mixed on the ETF. The rehypothecation issue has been raised. However if the ETF holders are able to demand delivery of the underlying asset, then Blackrock,etc need to be careful.
Anyway, disappointed not to catch 600%+ on Solana in 2023. Buy of the year IMO.
What is the underlying asset?
I would've thought it was the technology but it would appear we've well and truly perverted it into an ethereal coin that relies solely on scarcity and greed.
It'll be interesting to see how it plays out. Will it just be another burden on an already shaky financial system? Will it be another bubble/Ponzi relying on the next greater fool? Could someone with big enough balls short the whole thing with the right timing? Could be eating a lot of popcorn watching this one.
What is the underlying asset?
Rat poison. Blackrock cannot sell the ETF without owning the asset. That was supposed to be how it was with the gold ETFs. However, while it cannot be proven, it appears there are more claims on the gold than what actually exists within custody of the ETF.
Here is one application ..alternative to Visa without the surcharges
Solana Pay is now available to millions of businesses as an approved app integration on Shopify. Solana Pay is built for immediate USDC transactions, fees that are fractions of a penny, and a net-zero environmental impact.
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.