Here's our summary of key economic events overnight that affect New Zealand, with news the US Fed says it needs to see more progress on inflation before it considers a rate cut. But they hinted that a cut could be coming later this year. That was enough to see markets worldwide start pricing that in. Benchmark interest rates retreated everywhere.
But first in the US, there was actually quite a jump in mortgage applications last week after the prior week's unusual fall. And this latest week more than made up for that prior retreat. That came despite the benchmark 30 year mortgage interest rate staying up above 7%.
In its precursor reports, ADP said private businesses in the US hired an extra +140,000 workers in February, following an upwardly revised +111,000 in January, but slightly below forecasts of +150,000. Services companies were responsible for +110,000 of those extra jobs, while goods producers added +30,000.
Meanwhile, the number of job openings went down by -26,000 from the previous month to 8.863 mln in January, the lowest in three months and below the market consensus of 8.9 mln. Still, this data lags current conditions in a way the jobs reports don't.
These American labour market updates came ahead of Saturday's (NZT) February non-farm payrolls report which is currently expected to deliver a +200,000 increase on top of the very strong +353,000 January rise.
It would be appropriate to start reducing the Fed funds rate at some point this year, but only when there is greater confidence that inflation is sustainably moving towards the 2% target, Federal Reserve boss Powell said in his semiannual Monetary Policy Report to Congress. “Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2%,” he noted. But markets moved past that caution almost instantly, with benchmark rates falling, equity prices rising, and the US dollar easing.
The Fed releases its February Beige Book survey results at 8am NZT and if there is anything notable in that we will update this item.
North of the border, the Bank of Canada delivered the expected no-change rate decision, holding its policy rate at 5% and saying it is in no hurry to cut.
We should perhaps note that the South Korean inflation rate ticked up above 3% again in February. They are having "last mile" problems too.
China has appointed a known hard-man to head its Securities Regulatory Commission who is determined to stamp out unwanted behaviours. Traders are going to have to be very careful they adopt the Party narrative in their trading actions. Only 'up' is now likely to be tolerated.
India says it is looking at a growth rate this year of about +8%.
Perhaps surprising some, the volume (ie real) of retail sales in the EU rose in January from December. But they are still lower than year-ago levels.
Readers of this column will recall us suggesting the the good Australian current account data was likely enough to ensure a good Q4-2023 growth outcome for economic activity (GDP) in Australia. Well that was a misplaced reading. The GDP data yesterday disappointed many, with real economic activity up just +0.2% in the quarter, up +1.5% over the year. Clearly, the contribution from households was lower than expected amid budget and rate pain. And without that strong current account data they may have had to book a contraction.
The global airline industry is claiming that the passenger travel market was nearly fully recovered from the 2020 pandemic in January with 'resilient' growth in both domestic and especially international travel volumes.
The UST 10yr yield starts today at 4.09% and down -6 bps from yesterday. The key 2-10 yield curve inversion is marginally deeper at -43 bps. And their 1-5 curve inversion is deeper at -86 bps. Their 3 mth-10yr curve inversion more at -128 bps. The Australian 10 year bond yield is now at 3.99% and down -11 bps. The China 10 year bond rate is now at 2.29%, down an unusually large -6 bps, and another new all-time low. The NZ Government 10 year bond rate is down -8 bps at 4.73%.
Wall Street has opened its Wednesday session with a +0.8% recovery on the S&P500. Overnight European markets were up about +0.4% on average. Yesterday Tokyo ended unchanged. Hong Kong jumped back up +1.7%. But Shanghai ended down -0.3%. Singapore was up +0.9%. The ASX200 ended its Wednesday session up a minor +0.1% and the NZX50 was up +0.4%.
In the US, the SEC has dropped a contested rule requiring that companies report emissions from their supply chains and customers’ use of their products. But the new rules still require some enhanced disclosures.
The price of gold will start today up +US$19/oz at US$2145/oz and another new record high.
Oil prices are up +US$1.50 at just on US$79.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.
The Kiwi dollar starts today at just on 61.4 USc and an overnight gain of +½c. Against the Aussie we are down -¼c at 93.3 AUc as the Aussie rose more. Against the euro we have risen to 56.3 euro cents. That all means our TWI-5 starts today at just on 70.4 and up +20 bps.
The bitcoin price starts today at US$66,709 and up almost +2.0% from this time yesterday. Volatility over the past 24 hours has been extreme at +/- 6.6%.
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102 Comments
Maybe, you would think there must be impact but perhaps to services most of us where not getting any value from...
I see KiwiRail has blown the budget... on the AKL rebuild, there goes another 1bil plus all the raised crossings that are going to be needed, perhaps another 2-3 bil
Try costing works in civil engineering / construction at the moment.
In 2019, we had had years of relatively stable materials, credit, labour costs, plant leasing costs, supply certainty, etc. So, you could price a job based on those input costs and the level of risk to the project - e.g. delays causing costly downtime. Risk was generally pretty low. In the last couple of years the cost of inputs (credit, materials, plant leasing) have gone through the roof and are still volatile, labour costs have increased with general inflation, and clients are trying to transfer more risk to contractors (which increases the risk that has to be priced in!) So, costs have gone up 30 - 40% at least - and much more if clients load contracts with penalty clauses etc.
In a country with more scale, the big buyers (eg the big housing associations in Europe) would just buy out a few key suppliers or enter a partnership deal to de-risk their projects and attempt to get the costs stable.
Agree 100% better to be a company like Beca then a prime contractor like fletchers.
THE CRL needs to be finished, but I know the council not being honest on the issue of raised crossings..... with trains running every 6 mins in both directions traffic on some routes will stop..... its going to cost a lot to resolve this and its not in the budget
Had a call from a builder I use yesterday looking to do a few projects now that I had lined up for him later in the year. His entire pipeline of work has fallen over due to cost escalation. I'm going to ask him to reduce his rate, he said it had gotten tough very quickly.
Job I had they repriced materials up 15% in last 4 months.
On another scale got a haircut today, up $2 in or 6% on last 2 months.
Im glad inflation is cooling but I can't help feel it will be stickier than we think and prices will stay up not retreat to what I would have thought reasonable.
I'm a civil estimator and over the last 12 months have certainly seen a huge number of contracts asking for up to 6 months validity (our standard is 1 month) and no cost fluctuations. As you say, the clients want to bear no risk at all at the moment so we're pricing in that risk.
And that comes off the back of huge volatility in costs of the raw materials we use for manufacture, freight and other components so instead of pricing say 5% or so of buffer, we might go 10 - 15%.
But the clients can kinda get away with it because there's a shortage of work as projects are being deferred.
Not sure public sector works are going to retrain to be truckies, digger drivers, bus drivers etc etc
Seriously WGTN will be smashed by this, the average wages/salary in WGTN is very high.
WGTN works find it hard to move to AKL due tot he MASSIVE difference in house prices
Ominous for the entire globe I would venture. Ukraine & Palestine were not alight in his term and nor did China have so much then of the wobbles. Something of an international powder keg looking for a fuse and likely a president elect who likes to play with matches.
The real concern is the reality of what the government is trying to do. Luxon campaigned on getting rid of a lot of the drones in government departments in Wellington and redirecting those resources to the front line. His comms skills failed to a degree doing that, but over time it was clear what he wanted to happen. Now it seems the government has just directed all departments to save 6.5 - 7.5% of their budgets. The problem with that if that is all he has done, is that it will not result in the front lines being secure, while the drone count will remain high to ensure egos can still have their empires!
True but there are lots of things Govt depts keep doing that are of really low value
The amount of rubbish in my email - and even still by snail mail - from MBIE is mind boggling - paternalistic rubbish telling me how to look after my staff or start a business or plant trees or save power or etc etc
That would be driven by the woke personnel and their job descriptions in that organization. Unfortunately very hard to back track on now.
These days at most workplaces there would be interview questions where if I answered honestly, it would rule me out of the job immediately. But I'm not complaining. This has given me the impetus to retire early. Its wonderful!
But another downside is that my rates, taxs and the prices of other things are higher than they would otherwise be.
Ronald Reagan, in borrowing someone else’s quote, was right when he said something like - it’s amazing what you can achieve if you don’t mind who gets the credit for it. Unfortunately though today that translates to- it’s amazing what you can achieve if you can get the credit for what someone else has done. Would suggest that attitude and culture is well at play in our public service but not exclusively in that sector either and broad based simple percentage to lowering numbers plays right into the hands of the shiny pants arse members who are also adept at being in the front line for the medals and well behind the lines for the action.
Aussie GDP low, why? Because GDP growth tracks this equation:
Current Account Surplus + Govt Deficit Spending + Net Private Lending (new loans minus repaid loans)
So, if Govt deficit spending is low (or the Govt budget is in an Aussie style surplus) and Households / Businesses have slowed down their borrowing, then GDP will be low or negative.
In NZ, we are:
- running a Current Account Deficit (overseas investors are saving up our NZD / bonds)
- Govt deficit spending has been reducing rapidly and the new Govt is aiming for a surplus in 2026/27 (they will fail by many billions)
- Net Private Lending is nearly at zero
So, guess what our GDP is doing?!?
Remember that investment is basically private borrowing and we have a housing ponzi to feed! Japan also has much lower income inequality, has had zero inflation for many years, and has a very high number of older people not working (hence a deflated per capita score). The GDP purchasing power parity per capita of Japan and NZ is about the same.
It's important to note that the larger Australian mining operations are foreign owned and pay an export related tax to the government.
by Audaxes | 6th May 21, 6:52pm
Do Australians own the ore reserves any more? - I remember when PM Rudd proposed increasing the exit duty on ore exports four large foreign owners arrived in a corporate jet together and Gillard was PM in days, if not overnight.
And GDP is inadequate, already...
You might like this: https://surplusenergyeconomics.wordpress.com/ and that Rand Report (it's 219 pages, but worth the effort; search RNZ Sunday Heath). Put them together, and it explains... just about everything we see.
'The segmental progression is pictured in Fig. 1D. What comes next is a succession of peaks, including peak gadget, peak media, peak travel, peak hospitality and peak property price. We’re also likely to reach peak supportable credit and, in some cases, to discover that we’ve gone a long way past peak national cohesion.'
Interesting, I'll take a look.
GDP is a terrible, terrible measure of anything other than how much we are consuming. Hence, by now, we should be viewing GDP growth as a negative outcome in developed countries - a sign of over-consumption of resources. There are alternatives - e.g. the Genuine Progress Indicators, but late-stage capitalism relies on growth - in consumption, credit, war, asset bubbles etc.
That depends if getting richer than rich improves things for people or planet.
We're currently destroying our ecosystem in NZ so that we can send dairy products to (mostly) lactose intolerant people in Asia, and we're importing and eating vast quantities of processed crap food so that we can overburden our underfunded health system.
"We're currently destroying our ecosystem in NZ so that..."
Thats what the economy is.
A consumption machine which requires growth of consumption.
Globalisation was the part where we leveraged everything to the bejesus to get every nook and cranny of possible resource.
And we have massively overshot carrying capacity. Hence ecosystems are in trouble.
Theres simply too many humans and too many promises baked in with debt.
which is where we are heading ... Stagflation ... consumption dropping first on discretionary items then moving onto necessities
As more consumers become "non viable" the cracks will start to disrupt production & supply of goods in general - hard to go back on economies to scale as a producer
The consumers will require ever lower prices which the producers cant meet
LOL ... Had coffee catchup with a semi-retired mate yesterday. He's calculated that their family will be eligible for Working For Families once the NACTF re-introduce interest deductibility and other expenses like rising rates and insurance expenses. I haven't checked his maths but it doesn't seem unreasonable. Talk about unintended consequences!
The student allowance has a long history of being rorted by wealthy folk who have an accountant structure their affairs to appear otherwise...the type of people who feel entitled to all manner of taxpayer handouts while tut-tutting at the poor for getting anything. The worst type of character.
It’s fully intended! National are all about screwing over the PAYE worker so that business/ property people can pay bugger all tax and get the perks.
You shouldn’t be allowed to claim WFF if you are rich enough to have an investment property. I know people with businesses that claimed to get full WFF, I guess they just reinvested any profit straight back into the business. But for the PAYE plebs you need to be on minimum wage to get a cent.
Funny all you eco warriors blaming Bitcoin for high Electricity usage are very quiet on this subject?
Your Microsoft retirement shares more important?
AI Technology Guzzles Water: Enough to Fill 2,500 Olympic-Sized Pools
Some context here. The average Kiwi uses ~230l water per day, meaning that Microsoft's global water consumption is roughly equivalent to Ashburton's annual household use (~20,000 people).
Meanwhile, Bitcoin mining apparently uses roughly the same amount of electricity as the Netherlands (not just the household use) - a country of 17 million.
Your stat is quite surprising - I am amazed Microsoft use such a small amount of water given their enormous scale with over 200,000 employees.
No. Meters are just another attempt to blameshift responsibility with a stealth increase in rates / taxes.
By far the largest WCC leak is the half of water leaking out of pipes before it reaches the homeowners.
Councils have wasted ratepayers money for decades on selfserving kneejerk vanity projects instead of essential infrastructure. Aggravated by Helen Clark changing the local authorities legislation to permit them to do so & successive Govts failure to rescind this.
Agreed. In my last place the council installed a trial meter (not charged). Then I got a friendly notice in the mail that I had very high water consumption. Noticed a green circle on the front lawn during middle of summer, sure enough when I dug down found the pipe and the hole filled with water.
If you didn't have a power meter, do you think you'd use more or less electricity? I think paying for what you actually use is quite a good way to help ration a scarce resource.
This doesn't take away from some Councils' utter failure and doesn't get them off the hook.
No, it's not. I also followed the link to the report - this is Microsoft's global usage.
"In Microsoft’s latest environmental report, the company revealed that its global water consumption spiked by more than a third from 2021 to 2022, the equivalent of which could fill more than 2,500 Olympic-sized swimming pools at nearly 1.7 billion gallons"
I did make a units boo-boo though - the number is in silly US units (gallons) and I assumed litres. The difference is about a factor of 4, meaning Microsoft's entire global water usage is closer to Palmerston North's household usage.
If you look at the report, Microsoft claim to replenish about 2.5x the water they consume as well - I haven't checked the details of this though.
Can someone please explain to me how Traffic Management functions? It seems like companies set up to bleed as much extra out of any project as they can? One government dept charging another? Is it our H&S rules gone nuts? CYA? Corruption?
I noticed in the furore over raised traffic crossings that 20% of the cost quoted to make one was traffic management. Are they the roading version of Wellington consulting firms or something else?
It all comes down to the area. In Grey Lynn they have to keep the road open at all costs and install fancy concrete crossings, otherwise the entitled will complain. In my area they close entire roads (for years if needed thanks watercare) and install bitumen crossings if anything.
It would take more than a comment to fully explain why they are so high but one of the main reasons is that speed limits on most new Zealand roads are set too high, this means that whenever works are required you need to set up a temporary speed limit zone, the bigger the difference between existing speeds limits and required speeds, the bigger the cost.
Getting speeds down from 100km to 30kmh is expensive (lots of cones, lots of taper, lots of signs, lots of people).
In urban areas where speed limits are already 30kmh, like in most of Europe, you don't need to go and have a huge intervention.
One of the other reasons is that New Zealanders are highly intolerant of roads being closed and having to take alternative routes. If you can fully close the road the costs are much cheaper than having to manage traffic through the site. Ironically, it's also offer quicker to close the roads fully, it can often be done for a couple of days rather than several weeks, this is to because they can move plant and people easily if the whole road is closed.
It's basically one of the consequences of a car driver first transport culture.
One of the issues in our hood is that NZTA organise and undertake the traffic management so no real cost to the contractor
You could argue that this is sensible as it is done properly however also no cost implication for overdoing it nor for project delays
Also does not appear to be any requirement to minimise impact so no change to restrictions when work is not being undertaken
and it can be a big deal - recent local road closure for express way build here cost circa $35k in extra time and road user charges alone - reimbursement = NIL
I have heard from one contractor that I deal with in 3 waters, that they made more money in traffic management than they did on actually installing the pipe. Given it was a tricky job in Wellington with narrow streets, but goes to show that even if a contractor is not outsourcing this function, they'll still make a killing on it.
China has appointed a known hard-man to head its Securities Regulatory Commission who is determined to stamp out unwanted behaviours
"US bill would ban TikTok from app stores unless ByteDance divests it" This is a good old-fashioned shakedown, basically extortion: "we take over TikTok or we ban it". https://ft.com/content/fdc63261-d4a6-4179-b239-7b1f68f3e0b8 Link
Same deal with Chinese EVs: they're better than "inferior US rivals" (dixit the FT) so naturally they're a "security threat". Is that a sign of strength and confidence? Again, the exact contrary. Link
It would be appropriate to start reducing the Fed funds rate at some point this year, but only when there is greater confidence that inflation is sustainably moving towards the 2% target, Federal Reserve boss Powell said in his semiannual Monetary Policy Report to Congress. Sooner rather than later?
Powell: "when we have a profit we hand that money to the Treasury" So when the Fed has a $100BN loss and massive equity shortfall, shouldn't the Treasury give some money back to the Fed and bail it out (like in the UK).
On a slight tangent, how then will the US deal with having plundered their social security fund over the last 30 years and never paid back into it for what it removed? Looking like a classic case of those that have a lot will be fine and the rest will struggle in their old age. Private equity firms having a huge increase in investment and stripping businesses over the last decade including rest home businesses. Seems that not all, but many of the wealthy become more parasitic as time presses on, all for that golden ROI.
The price of gold will start today up +US$19/oz at US$2145/oz and another new record high.
1/6 Huge red flag. #gold has jumped nearly $100 in last five days, reaching all-time highs. Big warning that has nothing to do with inflation since gold is a terrible inflation hedge. This has been building for some time. Link
If I bought 1 bitcoin off you for $1, where does that $1 go?
If I buy $1 back for 0.5 bitcoin, what is bitcoin "worth"?
You still have $1 worth of bitcoin, I now have $1 plus $1 worth of bitcoin.
Did any money enter or leave the economy? Where did the extra $1 worth of bitcoin come from?
--- Today.
You now have $0, I cannot sell my $1 worth of bitcoin. But I have $1, and that will cost you all of your bitcoin.
re US Employment figures ... Back when G.W. Bush was touting his success in reducing unemployment, economists pointed out that the US needs to create between110,000 and 120,000 jobs per month just to stand still. Anyone know what the current figure is?
ChatGPT - hedging as always - has this to say:
The number of jobs needed to maintain stable employment in the USA can vary due to several factors, including population growth, labor force participation rates, and economic conditions. There isn't a fixed number, as it depends on the specific circumstances at any given time.
Historically, economists have looked at monthly job creation in the range of 100,000 to 150,000 as a rough estimate to keep up with population growth and maintain a stable unemployment rate. However, this is a general guideline and doesn't account for all the complexities of the labor market.
It's essential to consider other factors, such as technological advancements, changes in productivity, and shifts in the overall economy, which can influence the optimal number of jobs needed for stable employment. Policymakers and economists regularly analyze various indicators and adjust their assessments based on the dynamic nature of the labor market and the economy.
Boy there must be journalists out there wondering just where it all went wrong ...
Our hero, Donald is back
Can he out-debate the senile one?
Its possible
https://www.stuff.co.nz/world-news/350203781/us-election-nikki-haley-su…
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