Here's our summary of key economic events overnight that affect New Zealand, with news the strains in the Chinese economy are grabbing market attention today.
But first, it is mostly upbeat economic news from the US. American mortgage applications were up +10% last week as this market shows signs of stirring again. Benchmark mortgage rates slipped with the key 30 year fixed rate down to 6.89% plus points.
So it won't be a surprise to know that the NAHB/Wells Fargo Housing Market Index rose, extending the rebound from a year-on-year low touched in November and its best level since August 2023.
December retail sales came in much better than expected. They were up +0.6% from the prior month, following a +0.3% rise in November and beating forecasts of +0.4%. It is the biggest increase in three months, led by sales of cars. Year on year they were up +5.6% and handily beating inflation which rate at 3.4% over the same period.
Adding to today's positive vibe, US industrial production also rose more than expected in December although the bar wasn't high here. On a volume basis, it is +1% higher than a year ago.
The UST 20yr bond auction today was well supported, with a median yield of 4.36%, up from the prior equivalent event a month ago at 4.15%. That is a notable rise.
There was a big set of important Chinese economic releases late yesterday. As foreshadowed in Davos, China recorded a Q4-2023 GDP expansion of 5.2% which was marginally less than the +5.3% expected. The official 2023 target was "around 5.5%" so they undershot slightly. Disappointing analysts was that this was only achieved by outsized public-sector spending. Consumer spending was a drag on this result.
China's industrial production grew by +6.8% year-on-year in December 2023, after a +6.6% gain in the previous month and beating market forecasts of +6.6%. It was the fastest recorded pace of expansion in industrial production since February 2022 and electricity production rose +8.0% which supports the industrial production claim.
However their housing development retreat deepened in December. And new house prices fell at their fastest pace since March. Prices for pre-owned units fell faster and everywhere.
Meanwhile, China's population is declining faster now, as deaths rise above norms. The number of people in the world’s second-largest economy fell for a second year to 1.41 billion in 2023. The Chinese population started shrinking in 2022 for the first time since 1961.
We should also note the Chinese Lunar New Year runs this year from January 26 to March 5. It is the Year of the Wood Dragon. It is also the first post Covid period where family travel is high. In the middle, Spring Festival, China's biggest festival, will fall on February 10. Passenger trips via railway, highway, waterways, and civil aviation are expected to hit 1.8 billion during the period officials predicted. About 80% of the trips will be by car, which are likely to hit a new high. They also expect Covid to spike and spread during this gigantic travel and intermingling.
Both S&P and Moody's issued separate global reports overnight for 2023 that showed sharply higher funding costs are resulting in many more corporate defaults. The 12 month trailing corporate default rate rose to 4.8% in December, the highest rate since May 2021. Although almost half the defaulters they rated were in the US, Europe was where the biggest increase came from. And in 2024 it is the "media and entertainment" industry that is the most vulnerable.
In Australia, they are getting to realise that rate cuts may not be on the agenda as soon as they had priced in. And in Canberra yesterday at a long press conference, the Chinese ambassador took a tough line over Australia's complimentary comments about the free and fair democratic voting in Taiwan. There seems to be a cooling underway in China-Australia relations not long after a thawing had started.
Locally, the REINZ will release its December transaction data at 9am this morning. We will have full coverage.
The UST 10yr yield starts today at 4.12% and up +4 bps from this time yesterday. The key 2-10 yield curve is more inverted, now by -26 bps. Their 1-5 curve inversion is little-changed, still by -82 bps. And their 3 mth-10yr curve inversion is less inverted, now by -129 bps. The Australian 10 year bond yield is now at 4.29% and up another +9 bps. The China 10 year bond rate is now at 2.52%, down -2 bps. The NZ Government 10 year bond rate is little-changed at 4.70%.
Wall Street has opened on Wednesday with the S&P500 down -0.8% so far. Overnight European markets closed down about -1%. Yesterday, Tokyo slipped off its perch, down -0.4%. Hong Kong was down a very sharp -3.7% yesterday (and -5.9% in the three days of this week) and Shanghai fell -2.1%. Singapore fell -1.3%. All these Asian exchanges reacted negatively to the Chinese data The ASX ended its Wednesday session down -0.3% while the NZX50 ended essentially unchanged for a second day.
The price of gold will start today down another -US$22/oz from yesterday at just on US$2005/oz.
Oil prices are softer at just under US$71.50/bbl in the US and down by another -50 USc. The international Brent price is now at just over US$76.50/bbl and down almost -US$1.
The Kiwi dollar starts today at 61 USc and down almost another -½c from this time yesterday. Against the Aussie we are holding at 93.3 AUc. Against the euro we are lower at 56.2 euro cents. That all means our TWI-5 starts today just under 70.1 and -30 bps lower.
The bitcoin price starts today lower, now at US$42,308 and down -1.9% from yesterday. Volatility over the past 24 hours however has remained modest at +/-1.5%.
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110 Comments
It's NOT a challenge; it's an ADVANTAGE.
Less people = more real wealth per head.
We, on the other hand, are stupid enough to add one new person for every 20 incumbent, in a single year. And that was the stupid Left (this lot will totter on worsely, I suspect).
You only do that, when your goal (economic growth forever, in this case) is invalid. And it's invalid whether media people use words like 'encouraging', or not. We are an ecologically overshot species; China is therefore on the right pathway.
As much as I agree in resource terms, I can't say having a social credit system that restricts movement and a government that can plunder any success I achieve or put their thumb down to prevent people having any opportunity (many farms get destroyed by local government there if farmers are not toeing the line) is a great outcome despite the large 'on-average' increase in living standards achieved by China over the last 3 decades. In the meantime we can all have a grumble about water restrictions here XD
Most people don't understand this about Beijing - the central government doesn't particularly care if an individual or thousands of individuals are economically crushed if it means that the population of a region or of the country as a whole can move forward. They recently did this to very profitable companies involved in gaming and also in private kids tutoring. Beijing decided that they were industries harming the society and shut them down.
pdk - China and India population growth has not been sustainable, but you note that China is on the right pathway. But isn't their 'pathway' in a large part an unintended consequence of previous policies rather than a realisation that an 'economic growth forever' model isn't sustainable? With that in mind, won't the bureaucracy pull out all the stops to stop a rapid decline?
That sentence is correct, but self-defeating.
Technology, and innovations thereof, are merely energy efficiencies in the doing of work. In physics terms, that is the all of it. So entropy and the Second Law (and Carnot) apply. You therefore can expect diminishing returns, for more and more effort. We have reacted by complexifying (like fuel-injection and CDI, the internet) with predictable results; a lack of capacitance to withstand outside-parameter events.
'Some growth' is an oxymoron; growth attempts 'doubling-times'; 'some' doesn't even give you one. If the Chinese leadership - or ours, or our so-called journalists - actually accounted for the real world, growth ceased some decades ago; globally we've been in draw-down mode for a long time.
PDK you are right in your call out of the insanity of our current immigration "policy" (it appears to have a single qualification - that being you can afford the airfare here) and it appears President Trump will be sailing back into the Whitehouse on just this issue.
Mean time in the banana republic of Aotearoa, we have ~50% of the capitals fresh water being flushed out of their broken water infrastructure...
People love to rage against cycleways, but the reality is they're a drop in the bucket of pointless council spending. The latest budget allocates an average of $11m per year on cycleways ($110m over the next decade). That's out of a total budget of $1.4 billion per year of which $566m is capital expenditure - so about 2% of capital expenditure will be on cycleways... Compared to $330m on the town hall alone (and climbing), $180m on the new convention centre. Some estimate the cost of fixing the pipes will be around $1b/year for the region. $11m/year on cycleways is miniscule in the grand scheme of things. The Petone to Wellington cycleway will be expensive, but that is doubling as a vital sea wall to protect the railway corridor - there's no way to avoid building that with sea level rise threatening our transport system, tacking a cycleway on top just makes sense.
The conspiracist in me suspects it's no coincidence cycleways have been made public enemy number one, despite their relatively minor impact. Perhaps those industries who would be negatively impacted by reducing our car dependency are threatened? I don't know, but either way it's strange to me.
My comment was not without facetiousness. The sum of the expenditure may well qualify it pro rata within the overall budget but priorities should also be carefully considered and as you describe it, pointless council spending should not displace upkeep of essential services. Underground pipes, pumps and valves are just not sexy enough but doubt any householder would agree the safe, reliable and secure inflow and outflow of water from their property should be sacrificed for vainglorious projects and such like. Three waters may now be withdrawn but likely central government will still need to get involved where local government neglect is now irretrievable. Likely loans to be made and the funds controlled so that they are not siphoned o ff elsewhere. The various councils will need to pay interest for this of course and they can then explain to their ratepayers why it had become necessary.
Yeah its a crazy thought process. Like watching a city catching fire and slowly being destroyed and raging about the price of parking in that city. Complaining about cycleways is just being used as an outlet to vent outrage, its an easy target for those that don't want to face the real problems. I find this with a lot of peoples thinking, the old "Nero fiddles while Rome burns".
4 councils and a regional body in one little city helps explain why FA important gets done
WCC is going to investigate if water meters work to reduce consumption - they could just talk to Kapiti Coast where they have been implemented
time for a shake up and an administrator
Wellington Water is warning that fixing the region's water system would cost around $1 billion each year for the next 10 years.
The National Party's pre-election 100-day plan listed scrapping the three waters reforms as a top priority, and it is unclear what would replace it.
Wellington Water was calling on the government for help and Haskell said water assets needed to come off councils' books because they were restricted in how much they could borrow.
She said continuing with the council-controlled model meant councils would still struggle with the same financial restrictions.
Good luck with your rates bill Wellington..(own goal)
How much would it cost to install a tank / pump / filter into every house? Maybe 10k * 1.9 mil households = 19 billion. Then you have to service it, clean it, fill it on dry seasons, power the pump, etc.
And the added costs for hospitals due to water borne illness.
At least things like the convention centre have a return on the money spent that will pay off over time. Unlike cycle lanes, where there is no revenue derived from them, they are just a pretentious gift to a few hobbyists who like to cycle on nice days when the weather is not too bad, but otherwise use their cars like everyone else when its not.
Factor in cars not imported, oil not imported and associated health and enviro positives and investing in cycling would outstrip a convention centre.
For an entire career i used my legs to get to work. Never thought kiwis would be so soft they would be scarred of a bit of rain and exercise. Soft and lazy as a nation we now are.
This may be heresy but how much of this extra cost is due to new regulations to make things safer. How much has building strengthening required in case there might be a big earthquake cost our society? Buildings that have stood for a 100 years now stand empty because they don't pass a new standard. Why is Wellington spending $330 million on a building instead of fixing the pipes?
How much have new 'safety' features like median barriers and reduction in passing lanes gobbled up the money that would have otherwise been spent on fixing potholes and widening the roads.
How much more do sections cost than they need to because councils feel the need to protect themselves against spurious lawsuits resulting from shoddy construction.
If want to have the funds required to fix the stuff that actually needs fixing perhaps we need to be able to tolerate a bit more risk in areas that we have been able to tolerate risk in the past.
Regulation is slack in the areas where it needs to be tighter and too tight in areas where it needs to be lighter.
I am more and more persuaded by the theory of the surplus of educated elites who drive the creation of extra regulation so that there are more bureaucratic job openings.
SilverSnake, I think the cycle ways are cool, even tough I don't own a bike. In my travels recently I have noticed an increase of users. Maybe it's the warmer weather but I suspect it's people are cottoning on to the benefits of transport with no cost.
I will admit that I am totally against bicycle riders on our roads as they present a real danger to motorists.
Not from what I read.
Republicans just don't have the numbers anymore. Their base is military, religious nuts (abortion) an business. So the women are bailing (due to abortion stance) and the military are getting p##d due to Sen. Tommy Tuberville's nonsense and the Ukraine situation. Not to mention Trumps love affair with Putin and the little korean
Big business are also wary of him. Tariffs and threats to deport cheap immigration labor a concern.
So they stick with Biden. If they weren't confident they would drop him and select another candidate. No need for a vigorous candidate when you have a madman running.
It's never been a better time to be in cash and cash superfunds. (YES I do have some property and shares)
With the Population collapse in China confirmed as occurring and now ingrained {strong share and property market declines increasing -HK IN FREEFALĹ)
Next, the US yields are rising again (as are NZ bonds and swaps) the entire US Property market is on the edge, with commercial about to have many new owners (as loan defaults accelerate) at much lower prices in 2024, likely to trigger defaults in other assets. USA mortgage rates above 5% is not positive for the RE market.
Borrowing costs will be staying high, the supposed cavalry of the reserve banks significantly cutting rates, won't come! Its pure Hopium on Roids!
Hardhats are required.
As has been the case since 2021, leveraged and high borrowings are the heavy, dragging anchor that can sink already precariously positioned ships.
Cash is just a holding position, until the fundamentals of other assets ACTUAL EARNING CAPACITY stacks up.
Better cash and 5% earnings for a time than washing a 10 to 40% of your accumulated earnings down the drain.
Housing that earns less than 5% and shares with PEs above 15 are a lunatics games with Debts Piled High already - Its relies on another fool to pick up the massive Debt.
When this music stops, there WONT BE a soft landing.
- Property has been a totally disastrous inflation hedge since 2021, with loss of actual value and inflation, seeing over 20 to 30% drops in value in many regions, in real terms.
Yes many successful startups have sky high PEs...... and good returns.
I in particular follow and invest oil/gas/metals (U308 is in a massive multiyear Bullrun imho, as it will save the climate)
Some of my oilers/miners are paying massive Divs and PEs of 3 to 4x...... great value!
And right on cue, out comes the firing squad. Complete with an admonition that all extraction has an end point. Good to learn that. While the current rate of extraction is obviously unsustainable the industry will continue in some form, and require capital. The current share value reflects investor beliefs in the industry's long term through-put and returns.
Of course most people think short term PDK because quite simply we are only here for a short term.
In fact extraction of resources can last for decades so why not invest and make some dosh while still alive.
Absolutely things are finite, but when is the end?
Why shouldn't anyone invest for their short term future, and strangely chances are there will be (maybe) something left for the next generation. Or do you think everything will be over in the next 20 or so years?
First line of this article "But first, it is mostly upbeat economic news from the US. American mortgage applications were up +10% last week..."
The problem with an inflationary state is with investors who are not able to do the mental gymnastics to re-baseline their costs and returns expectations to meet the market.
Last years performance for the US Stockmarket (primarily the top 50) was excellent and those advantages in monopoly positions remain. The rest of the DOW is also looking likely for a lift this year.
I wonder at those who deny reality; who self-justify a growth-is-good narrative, whether it fits the physics or not. Some of us will come out of Oncology facilities, with news of our terminality; wanting it to be different is unlikely to make it so. Better deal with the realities. And those are that degrowth - the options being controlled or uncontrolled - is the only future pathway.
And I've long preferred controlled, of those two options.
Anathema to free marketeers, of course, but they were just - in anything but the short term - wrong.
Why did Africa's population not plummet during the whole COVID scam? No country there took proper precautions. Have WHO made any announcements regarding this.? The COVID seriousness seemed to be in direct proportion to the MSM big Pharma influence on each country /continent.
On the related topic, in the olden days, when times were tough, we were poor, when times were good, we were rich. Simple, really.
A lot of people have died and are dying from Covid, but I don't think it was ever suggested that it was a big enough threat to make populations 'plummet'.
I have just done my own research and found this article which goes a way towards explaining the issue you raise: https://www.bu.edu/sph/news/articles/2022/morgue-data-reveals-true-covi…
But I expect your research might come to a different conclusion?
Ex South Africa is much younger and less obese so low death rates. There much worse things to worry about in Africa than a bad case of the flu. The chances of dying of covid under the age of 70 are tiny, whether you had experimental gene therapy or not.
Age-stratified infection fatality rate of COVID-19 in the non-elderly population
"The objective of this study was to accurately estimate the infection fatality rate (IFR) of COVID-19 among non-elderly people in the absence of vaccination or prior infection.
...Infection Fatality Rate increases approximately 4 times every 10 years. Including data from another 9 countries with imputed age distribution of COVID-19 deaths yielded median IFR of 0.025–0.032% for 0–59 years and 0.063–0.082% for 0–69 years.
...The proportion of people with some comorbidities that are very influential for COVID-19 outcomes such as obesity is very different across different countries, even for the same age groups. For example, obesity affects 42% of the USA population (https://www.cdc.gov/obesity/data/adult.html), but the proportion of obese adults is only 2% in Vietnam, 4% in India and <10% in most African countries (). However, also within Africa, obesity affects 0% of Ethiopian women and almost 40% of South African women (Agyemang et al., 2016)."
Sssh. We are not allowed to talk about obesity being the number one risk factor for Covid death. The reason why Maori and Pacific Islanders are being hospitalised and dying from Covid is because of RACISM in the health system. If you havent noticed, losing weight was never ever part of the covid health message over the last 4 years because that would be RACIST.
JJ - that's ideological hogwash. Try not conflating? The things you mix, are 'having' and 'owning'.
They would 'have' a whole planet (minus their entropic contribution).
They wouldn't 'own' anything - the result of no trading, no economy, no ownership. But they could make, given time, anything they wanted. Not that they would want half the shyte we're currently assured will make us better, or higher of status...
Sometimes these things are so ingrained....
:)
No one actually owns anything it's just a system. Everything was always here it's just that we built stuff on this earth and that stuff we built starts to deteriorate strait away. Also we done a bit of damage to other living organisms along the way. But that's how Homo Sapiens evolved, we are designed to do what's needed for the survival of our species regardless of the consequences.
Not to mention an ageing population that has no one to care for them, not enough taxpayers to cover their healthcare and super, and no one to buy their assets.
If we really wanted to depopulate, the best solution would be execution at age 65 rather than decreasing fertility.
De-growth would release a ton of resource to help out with any labour shortages.
The asset purchasing is another positive. People may look at it as shelter rather than investment. There are a few places around the world that have experienced this (Japan for one) and the outcomes have not need all negative.
That is the policy I have been pushing for years now. Compulsory euthanasia at 70. It would basically solve everyone’s problems everywhere, worldwide. My parents and aunties and uncles are not that keen. I suspect it would wipe out 87% of those commenting on this site.
Yeah I imagine it wouldn't be a popular policy.
At the very least you should lose the right to vote when you retire. Let the people paying most of the tax decide what is done with it. Or have a system where the worth of your vote is relative to how long you probably have left to live. So a 20 year olds vote is worth a lot more than a 70 year olds.
We are probably not that far away from it - I foresee AI analysing someone's productive worth to the planet, then subtracting the cost of keeping them alive, and then deciding that its more efficient to discontinue medical treatment. How much money in the hospital and Pharmacy systems are spent keeping old people alive, just so they can then require aged care beds and round the clock caregiving?
I can tell you now its not worth it. The idea of being kept alive so that your pain and suffering can be extended as long as possible, while your mind and body withers into nothingness, is appalling to me. The sooner they relax the euthanasia rules the better. Everyone should be entitled to a dignified exit at a time of their choosing, not left to rot in a understaffed aged care bed.
Oh, you're talking nearer the end than I thought? Having observed what happens at rest homes from close quarters, I can say what generally happens is residents are in a slow decline, not really noticeable over weeks and months, still fully rational, but then there's a crisis, cancer, a fall, some other physical failure, from there, it's quick. I doubt anyone in the rational slow decline phase would be happy to top themselves. Certainly family wouldn't be keen.
There are exceptions of course. If there is a crisis that incapacitates an otherwise healthy younger person, say 50/60yo, stroke, dementia etc, they can be in the system for a long time.
Anyone has the right to refuse treatment. It would be rare for someone to be left suffering in pain. That would be a failure of the system!
It should remain a personal decision!
Exactly. It’s sad how the majority are obsessed with their KiwiSaver/superannuation funds. Is that a way to live? Worrying about how much you’ve got for retirement when the body is pretty much clapped out anyway. Or sitting on a 30 year 800k mortgage in Auckland? If that’s what you want and are happy with the set up then all power to you, I just can’t get into it.
Indeed, but the system imposes itself on you anyway though doesn't it. You can forgoe the $800 000 mortgage and what? Live with your parents? Rent for life? Move away from your prefered home?
There now seems little difference between political systems in as far as you are forced to feed the machine. And the machines' grip is tightening, encompassing more and more.
Growth hasn't delivered what it promised, neither has techno utopia.
Lifted people out of poverty, or increasingly turning us into slaves?
The "freedom" of capitalism is but a veneer of advertising jingoism.
That is the system though isn't it? Finite life, paying off a huge mortgage, a few years of freedom, realising you didn't need all the nonsense marketed at you, nor need politicians promising to spend on this latest "essential" money pit. Then declining health and .......
Bit of luck involved.
How could life be otherwise? Everything given for free at the begining? Free stuff is never valued, in fact too much of it seems to cause dysfunction in many.
That was one of Billy Connolly's jokes wasn't it? Some health substance sold on the premise that it extended your life span by 10 years. The unwritten part was that it was at the end of your life when you're (in his words) "too f***ked to do anything with it!"
But the counter point is I'm 66. I had my blood pressure taken yesterday by my GP and it is 120/80 which I am reliably informed is text book perfect for a 30 year old. I am fit and active and go to a gym regularly. I tend to bristle a little towards those who suggest I'm past my Use-By date and should be killed off for the good of society. For anyone who wants to challenge that, I suggest a minimum level of fitness should be the criteria for survival, not age. See how well that goes down?
I've thought the same but it doesn't go down well in polite conversation. Huge savings on healthcare, most people know when they are going to be finishing up and can say their goodbyes, plan their finances. Basically remove the fear of running out of retirement money as you have a defined timeline. Politics might focus on the future rather than the past.
I'd probably pitch it a little older than 70 myself.
Also, I work in cancer treatment so this policy would certainly reduce our workload and maybe do me out of a job.
While there will be a brief summer of people being able to afford homes, they will soon also be out of work as the real economy shrinks outside of government spending programmes. Infrastructure will rot, just as it is in Russia due to the death of the practical generation that built the infrastructure. There will be some (mostly immigrants from
China is as well positioned as it can possibly be for this so it will be interesting to see the effects play out.
RE:China
However their housing development retreat deepened in December. And new house prices fell at their fastest pace since March. Prices for pre-owned units fell faster and everywhere.
The West with its idiotic financialisation of economies imagines that China will fail if it doesn't produce the same fake metrics via asset bubbles as we have done for decades. It has seemingly not paid any attention to the actual reasons why China's economic growth in the last 20 years has been stellar. Link
More Koch evil.
"Jan 17 (Reuters) - OneD Battery Sciences and Koch Modular said on Wednesday they have teamed up to build a factory in North America to produce enough silicon-graphite anode material to supply batteries for around 1 million EVs annually.
...OneD is one of a number of startups developing silicon anode materials all touting better EV battery performance than graphite.
China refines more than 90% of the world's graphite for almost all EV battery anodes and introduced export curbs for graphite in December.
This has spurred automakers' efforts to source synthetic graphite or use alternative materials such as silicon outside of China."
There's a start up company, Carbonscape, working on converting forestry waste into graphite (among other things) here in NZ.
https://www.ruraldelivery.net.nz/posts/Carbonscape-Green-Fuel-2017-04-0…
Since we've legalised human trafficking in babies it probably won't be long before the CCP is paying impoverished women in India to be surrogates for babies to be repatriated to China and raised by the State. Someone has got to be the first to implement the "Brave New World" method of child rearing. Artificial wombs still to come.
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