Here's our summary of key economic events overnight that affect New Zealand, with news the US economy added many more jobs in January than expected. Equity markets rose on the news, the US dollar strengthened, and bond yields rose on the view that the Fed may not cot rates as soon as they expected if the US economy is in a stimulatory phase.
At the headline level, American payroll employment rose +355,000 in January and that is almost double the expected +180,000 rise the market was expecting. It is the second consecutive very strong result.
Behind this result we see that on an actual basis employer payrolls are +2.9 mln higher than a year ago at 155.6 mln at the end of January, maintaining the "about +2%" annual growth pace they have had since July, which is an eased pace from the "about 2.5+%" pace earlier.
Looking more broadly, the household survey the increase isn't as fast. There are now just under 160 mln people employed, the difference from the payrolls report being the unincorporated self-employed. It is quite clear more people are transitioning into company payrolls now so the overall growth isn't quite as strong as the payrolls data suggests.
Average weekly earnings, which had been rising at about a +4% page in 2023, slipped to +3% from a year ago in January. However markets focussed on average hourly earnings which rose more than they expected, up +4.5% in a year. But they are looking at the wrong data - the broader average weekly data is what they should be looking at because that encompases working hours.
After a strong rise in November, American factory orders rose only modestly in December from a month ago to be +1.4% higher than year ago levels. There is northing encouraging about that although the January PMIs suggested the pace picked up in the next month.
Consumers in this market are clearly feeling better. The University of Michigan sentiment survey reported a big improvement and its highest level in 2½ years. They called the change a "surge".
Investors are not keen on holding investments in American regional banks with big loan portfolios in commercial property. The selloff over the past few days has been brutal. We noted this yesterday. Today, markets stabilised at the lower levels and so far no institution has gone insolvent.
The IMF has been reviewing China's economic prospects are it sees growth slowing relentlessly. GDP will slip to +4.6% in 2024 they say and keep retreating to 3.4% by 2028. The IMF sees them stuck paying the price for low quality development in the past and now demographics limits their ability to up their game in a meaningful way. The seeds for this growth retreat were planted years ago.
And China’s real estate market is having a rough start to the year, with January new property sales plunging to a monthly low not seen in five years, despite government measures to boost the ailing sector as it grapples with a liquidity crisis. New property sales were down -34% year-on-year and -48% from December.
In Wellington, the Chinese embassy has rebuked the newly elected government for flirting with the AUKUS security group. It issued a none-too-subtle warning that further steps toward our joining could undermine trade with our largest export market. The rebuke has been distributed widely in the Chinese media, globally.
In Australia, mortgage approvals rose almost +12% over all of 2023 but ended the year on an unexpectedly soft note with a -4% monthly fall. And that December month data ties into housing market figures on prices and turnover that shows their residential real estate market momentum has slowed and that affordability pressures are starting to bite.
And staying in Australia, the port dispute between Dubai-owned port operator DP World and the MUA union has resulted in a big win for port workers. They won a +23% rise over four years (with background help from the Canberra government), ending a dispute that has tied up some of their largest ports for months. Port charges are expected to rise significantly as a result.
The FAO World Food Price Index fell for a sixth consecutive month in January, a fresh low since February 2021. Prices of cereals were down notably as global wheat export prices declined amid strong competition among exporters and arrival of recently harvested supplies in Australia and South America both a which have had excellent growing conditions. Also, meat prices fell and dairy prices were stable. Overall global food prices are back to levels that held between 2007 and 2014. Food is 'cheap' in inflation-adjusted terms, worldwide.
The UST 10yr yield starts today at 4.04% and a sudden +17 bps jump from this time yesterday as bond markets are taken by surprise by the implications of a strong US labour market. But that is still -11 bps lower than a week ago. The key 2-10 yield curve inversion is little-changed at -35 bps. Their 1-5 curve inversion is less deep, now by -83 bps. And their 3 mth-10yr curve inversion is much less at -134 bps. The Australian 10 year bond yield is now at 4.09% and back up a sharp +16 bps from yesterday. The China 10 year bond rate is down -1 bp at 2.44% and still near a new twenty year low. The NZ Government 10 year bond rate is down -2 bps at 4.62%. A week ago it was at 4.75% so a -13 bps retreat from then.
Wall Street has opened its Friday trade up +1.2% on the S&P500 to a new record high, heading for a +1.4% gain for the week. Overnight, European markets were bookended by London's -0.1% fall and Frankfurt's +0.4% rise. Yesterday Tokyo ended its Friday session up +0.4% for a net rise of +1.0% for the week. But Hong Kong fell -0.2% for a weekly loss of -3.2%. Shanghai fell -1.5% yesterday for a very sharp -6.2% loss for the week. The ASX200 ended its Friday session recovering +1.5% on the day to be +1.9% ahead for the week. But the NZX50 ended up just +0.1% yesterday for a modest +0.6% weekly rise.
The Fear & Greed index has eased back from its extreme level a week ago into the "greed" range.
The price of gold will start today down -US$27/oz from yesterday at just on US$2036/oz. But that is +US$20 higher than week ago levels.
However oil prices are sharply lower, down -US$4 to just over US$72.50/bbl in the US while the international Brent price is now just on US$77.50/bbl. A week ago these prices were US$77/bbl and US$82/bbl so an even bigger fall from then.
The Kiwi dollar starts today at just on 60.7 and more than -½c lower than this time yesterday. It -¼c lower than a week ago. Against the Aussie we are down -20 bps at 93.2 AUc. Against the euro we are -30 bps softer at 56.2 euro cents. That all means our TWI-5 starts today at just on 70 and down -30 bps from yesterday to essentially matching week ago levels.
The bitcoin price starts today firmer. It is now at US$43,217 and up +1.4% from this time yesterday and up +3.1% from this time last week. Volatility over the past 24 hours has been low-to-modest at just on +/- 1.0%.
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77 Comments
I addition, if the markets expect HFL from the Fed our currency will drop even if the RBNZ hold rates. That would cause inflation and could be another reason for the RBNZ to hold.
A few months ago I was expecting the RBNZ to cut in the first half of this year, now I think it may be next year or maybe not at all.
He may well be right. But there have been plenty of wrong predictions of rate cuts over the past 2 years, from myself included. It could go either way. Mortgage rates are still higher than when the finance minister and TA told us it was peak rates a long time ago.
Putting the BS in BLS? Quarterly census has 332k private sector job gains in Q2 '23 vs. 603k increase in nonfarm payrolls from monthly jobs reports - which were already revised heavily downward; explains why people hate this economy: job gains roughly half the advertised figure Link
Note: "The Quarterly Census of Employment and Wages (QCEW) program publishes a quarterly count of employment and wages reported by employers covering more than 95 percent of U.S. jobs [emphasis added], available at the county, MSA, state and national levels by industry." https://bls.gov/cew/ Link
Patience. Recessions occur after rate inversions.
Businesses made decisions 12-24 months ago and we'll see the effects shortly. At this stage of the cycle everything looks fine and people's optimism that the landing will be soft is typical of where we are in the cycle. In another 3-6 months y'all will not be feeling quite so chipper.
Case in point: How long do you think it takes a mid/large corporation to make the decision to lay off 5% of it's workforce? A week? No chance. A month? Almost no chance. 3 months would be exceptional. 6 months is typical. And then putting the plan into practice typically takes a minimum of 3 months and can be as long as 6 months or more.
I'm with Audaxes the data out of the US simply gets manipulated. Its election year didn't ya all know, like Biden is going to be running about telling everyone the economy is actually crap, Just wait until Trump takes the stand and tells you how crap it actually is and we get the MAGA speech all over again.
It’s always useful to have an independent review of what a government (or any organisation) is telling you. People can make their own minds up.
I would be interested in knowing whether David was just disagreeing with the ZH conclusions or whether he has issues with any of the quantitative statements made in the ZH article.
Sure is looking like the 'gig economy' is dying with many seeking the illusionary security with a normal job.
And it looks like the days of changing your job to get a big pay rise, or saying you'll leave if you don't get one, are well and truly over.
Yup. The US job market is largely back to pre-covid days. Except ...
In the background, the bean counters are making the case to lay off more workers as (largely fictitious?) gains from A.I. suggest they'll not need them. Remember the .com boom? The internet would replace humans. Same old, same old.
AI can't replace humans, just move them around. Up or down, in regards to AI, hard to say. But the people will still exist, and the system is designed to keep people in jobs, no matter what.
Remember when globalisation was promoted to move all the dumb manufacturing jobs overseas, freeing up the population for dynamic, higher value jobs in tertiary sectors?
It happened for some, arguably not for most.
The system we live under?
The RBNZ has recently abandoned it's employment mandate, but our governance places high employment as a priority. Doesn't matter if that employment is of high commercial or personal value, it's the subscription rate they're interested in.
re ... "The RBNZ has recently abandoned it's employment mandate, but our governance places high employment as a priority."
Incorrect. The RBNZ were instructed, by the Government, to abandon the employment mandate. Doesn't quite fit with your narrative though. Never mind. Most readers will never notice.
So the system won't step in if employment heads south in a big way?
Interesting perspective.
As far as I can tell, the system places very high importance on GDP growth, and labour participation. These are two very broad indexes, based on (or just pushing) an assumption that more money and more jobs = good. Which is highly simplistic, but as gets highlighted fairly regularly on these fair pages, has some contextual ramifications at a qualitative level.
As we go through various technological or economic revolutions, it does seem like the change carries with it a divergence of fortunes. Do we have more or less winners now?
Why are the markets constantly surpised by strong US data? The Govt is pumping in fiscal stimulus at around 8% of GDP - a combination of interest payments on debts and Govt spending. The Fed is effectively underwriting the value of US Treasuries that banks are holding (to avoid mark to market losses), households are protected from high rates by their 30 year fixed-rate mortgages, and businesses re-financed their debt to long-term fixed cheap rates a couple of years ago. On top of that, they are selling record amounts of LNG and oil. The US economy can happily run like this for years (noting that commercial real estate could well go pop).
Meanwhile in the rest of the world, developing countries with debt in US dollars are bleeding out, and a few unfortunate 'developed' economies (looking at you UK, NZ, Sweden) have found that the following economic settings are perfect for getting destroyed by high rates in the US:
- high private debt on short-term fixed rates
- current account deficits - meaning that they would struggle to defend their currency (so they have to shadow Fed rate changes)
- Govts with an austerity fetish - cutting spending at the exact time it is needed to prevent recession
- central banks who are tackling inflation by increasing business costs - thinking that this will somehow lead to price moderation
by Audaxes | 3rd Jan 23, 12:15pm
In that case, the core banks that provided much of the funding for private equity real-estate purchases could be on the hook. That has not happened yet, partly because lightly regulated firms are under less pressure to mark their books to market. Indeed:
Of course, the Fed doesn’t mark to market, nor have banks done so since the early-2009 market low, when the Financial Accounting Standards Board relaxed FAS Rule 157 (which is actually what ended the global financial crisis – by making bank insolvency opaque). Link -Hussman
re ... "The Govt is pumping in fiscal stimulus at around 8% of GDP"
True. I find it amazing that pundits claiming the US economy is going gang-busters and the landing will be soft always fail to mention this. Pumping up markets so the big money can reallocate their capital in plenty of time? Probably.
OOPS! Money-Market Fund assets reach $6tn for 1st time: Assets jumped by $41.7bn in run-up to Fed decision. (BBG) Link
Not exactly a bullish sign for stocks as investors are choosing super safe money markets, where six-month bills yield about 5.17%, as the Fed sticks to its higher-for-longer policy. Safety and liquidity are paramount for some.
Bit out of date there chap. There are some top drawer projects out there featuring "crap" radiata pine. Amazing the level of ignorance regarding our third/fourth biggest export.
https://www.ucfp.com/inspiration/exteriors/accoya-wood-decking-used-at-…
https://www.archpaper.com/2024/01/cunningham-architects-shady-brook-off…
"The yard uses Kebony, a modified Radiata pine, which has been used to good effect by Spirit Yachts."
https://www.pbo.co.uk/all-latest-posts/teak-alternatives-decks-70327
https://www.dezeen.com/2020/09/03/st-joseph-beach-residence-wheeler-kea…
Pine is not that bad, the real problem is the treatment, its should all be H3 going into the house minimum, even H4 would be better for the whole lot. There is not a hope in hell that houses will ever be built out of Rimu and Kauri again so the pine just needs to be treated and it would be great if we stopped building leakers.
In Wellington, the Chinese embassy has rebuked the newly elected government for flirting with the AUKUS security group. It issued a none-too-subtle warning that further steps toward our joining could undermine trade with our largest export market. The rebuke has been distributed widely in the Chinese media, globally.
This is quite something! This is John Lander - Australia's former ambassador to Iran and Deputy Ambassador to China - explaining what the "rules-based order" actually is. In his words it's "a set of ever varying, constantly vacillating rules devised by the United States for the benefit of the United States and its Western allies." He points out that "one of the most difficult thing about the rules-based order is finding out what the rules are!" Link to the whole interview at the end of the thread. Link
1/2 One revelation out of Ukraine is that US, after all, doesn’t have any game changing weaponry — conventional or nuclear — in a war with Russia. On the other hand, narrative that Russia is on the verge of depleting its stocks has proved delusional.
2/2 Thus, US is getting exposed as Emperor without clothes. Non-state actors are taunting it in Red Sea & Iraq - like Goths & Vikings did to Roman Empire that culminated in its fall. It’s never pleasant sight to see wolves closing in on wounded lion. Nemesis, goddess of revenge?? Link
The emperor without clothing in this case is Putin - who needs weapons from Iran and North Korea to survive.
When you are for ever increasing repression against your people internally and now globally it is a sure sign you are running scared of them finding out the truth and revolting.
President Xi has the same problem and is doing the same thing. Ditto the Iranian mullahs
It has the potential to be brutal and not for the West - the repression is likely to get worse before it cracks open and the change could be sudden just like the fall of the Soviet empire
Putin is not having any troubles, the oil and gas is supporting their entire economy. He actually got pretty lucky that the war in Gaza came along, nice distraction until Trump gets in come November and all the aide then gets pulled from Ukraine. The worlds gone mad really, its gets worse by the week I can no longer handle what gets reported by the media.
https://www.stuff.co.nz/nz-news/350164796/heres-what-our-63000-public-s…
"Here’s what our 63,000 public servants actually do - and why we have so many of them now"
A fairly decent analysis, no matter where your opinion is on the topic.
Let’s have a Hmm.
During the peak, over $10b per month was created for housing loans. During that time we were building 3,400 homes per month (annualised 41k). Assuming those houses were $1m each, that leaves $6.6b for existing houses, with interest. What was produced for that money? Some renos and otherwise largely capital gains.
That would be the equivalent of hiring 660,000 unproductive managers at $120,000 each. Except that would have less impact on the economy because tax.
Theres the wasteful spending. Surprise.
While I generally agree, like it or not currently govt spending is about the only thing keeping this economy afloat.
We’ve gone from one cyclical extreme to the other. Over spending into a peak to austerity into recession.
Come 2025/26/27 people will be begging the government for money. Private debt won’t get us out of this hole unless the ocr goes negative and we Japan our economy.
Buy local.
https://www.stuff.co.nz/politics/350166539/pm-christopher-luxons-sister…
Absolutely no links to the tobacco industry here, nothing to see, please move on. This coalition of chaos is an absolute disgrace.
As soon as someone stops all this madness and reinstates rhetoric heavy underperforming ideologues the better!
Remember when you mentioned the fact that smokers are subsidized by non smokers, and it turned out not to be true and instead you fell back on a blanket position about corporate influence of government.
Nope I don't recall that.
I'm not sure why you insist on defending this tobacco policy just because the National, NZ First and Act coalition suggested it.
If Labour or the Greens or Te Pati Maori had put it forward I would be just as vehemently opposed to it. Of course they wouldn't have as people from those parties don't tend to be in the pockets of big tobacco.
It was right about the time you kept making accusations about others passing opinions off as facts.
I'm not defending it, merely critiquing your stance which started off trying to make a facts based argument against it, which morphed into a "I don't like it because it's clearly big business shaping policy". Your initial argument was factually wrong, and you pivoted into low hanging fruit.
I'm mostly swiss on it, because smokers don't cost non smokers anything (from a crude utilitarian perspective they're revenue positive to state coffers), and the way we shape our drug and alcohol policy is pretty arbitrary. Alcohol carries way more harm, but smoking is just easier to judge socially.
Interesting memory. I recall someone pulling some research from Nordic countries that said smokers overall didn't cost the system anything because on average they died earlier than non-smokers so you didn't have to pay pensions and ongoing health costs which I seem to remember I suggested by that logic we should kill everyone as soon as they come to Super age.
But sure you jog on defending this tobacco policy from the coalition of chaos because you can't bring yourself to critique 'your team'. Pathetic.
Yes, we have actual conflicts of interest the MSM sits on it for months until the election period has passed.
Still waiting for the MSM to do a investigation into Pfizer funding of politicians, public servants, mandate lobbyists, washed up athletes, "influencers" and the MSM...
https://www.reuters.com/world/europe/eus-von-der-leyen-cant-find-texts-…
https://www.statnews.com/feature/prescription-politics/federal-full-dat…
I literally gave this story to media with OIAs nearly 2 years ago.
"The Health Ministry has admitted failings in its handling of contracts awarded to Tātou, a consultancy with close ties to former Cabinet minister Peeni Henare."
What got me were the comments by Costello about "prohibition doesn't work" and "it's an addiction", "the money would go to the gangs/black market".
Ok, so what about cannabis, meth, etc etc then? Can't have it both ways...
"...High IgG4 antibody levels generated in response to repeated inoculation with mRNA COVID-19 vaccines could be associated with a higher mortality rate from unrelated diseases and infections by suppressing the immune system. Since most COVID-19 vaccinated countries are reporting high percentages of excess mortality not directly attributable to deaths from such disease, the NSEs of mRNA vaccines on overall mortality should be studied in depth."
https://www.sciencedirect.com/science/article/abs/pii/S0264410X23015062…
Some of the latest from the property crash porn.
The mayhem in regional banks reflects the malaise that has gripped America's commercial property sector, which has a $2.2 trillion mountain of debt due in 2027. Real estate experts have called the market a "slow moving train wreck" with a possible $700 billion default looming on the horizon.
Regional banks are a lot more vulnerable to a crumbling commercial property sector. Unlike behemoths such as JPMorgan, smaller banks can't lean on large credit card portfolios or investment banking branches to buffer any losses. At the same time, they're also four times more exposed to commercial real estate loans than big banks.
One report found CRE loans make up 28.7% of a small bank's portfolio, as opposed to a larger bank's 6.5%.
And the pressure on real estate loans is pushing lenders away from the market. Recent loan sales show banks are trying to limit their exposure to the property sector. From Florida to California, banks like Amerant Bank and Fidelity Bancorp Funding are shedding their property loan portfolios and staving off commercial real estate loans offered by other banking executives.
https://www.businessinsider.in/thelife/news/a-commercial-real-estate-cr…
Prominent Herne Bay residents opposing Watercare’s sewer plans
Gary Lane, who owns the upmarket Wairākei golf course near Taupō, marina owners Simon and Paula Herbert, property and agribusiness investor Nicsha Farac, writer Steve Braunias and former All Black Ali Williams objected to the scheme, which includes taking most of Salisbury Reserve for nearly two years.
As did businessman Stephen Fisher whose wife is interior designer Virginia Fisher, David Chaston of interest.co.nz and barrister Gary Gotlieb.
Source: https://www.nzherald.co.nz/business/prominent-herne-bay-residents-oppos…
Probably not the mention interest.co.nz needed?
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