Here's our summary of key economic events over the past two days that affect New Zealand, with news some key 'risk' commodity prices are rising while our currency is softer.
In the US, Fed Chair Powell said that PCE inflation data for February was along the lines of what the Fed wants to see and broadly expected. However, the latest readings aren’t as good as what policymakers saw last year and the Fed can wait to become more confident before cutting interest rates. In fact, he said policymakers don't need to be in a hurry to reduce borrowing costs. The Fed's base case is for inflation to come down but if the base case doesn't happen the Fed would hold rates where they are for longer, he said.
He was responding to PCE inflation data for February which rose +2.5% and that was following a January 2.4% rate and a December 2.6% rate. Core PCE inflation rose 2.8% after being 2.9% in the prior two months. Powell and his colleagues won't be unhappy with these levels but they aren't seeing downward progress either.
Meanwhile American personal incomes were +1.7% higher than a year ago and personal consumption is +2.4% higher on the same basis. This is the first time income growth trailed spending growth in a long time. It is too soon to know whether this is a turning point, or just a data blip.
However US Q4-2023 economic activity came in +3.4% higher (real) in their third and final 'estimate'. This was better than the prior estimates an means the US economy is running at an annual rate of US$28 tln, nominal, and of course a new record high. With IMF estimates that the world GDP hit US$105 tln, the US accounts for 27.6% of that. The US grew +US$1.5 tln in the year, the world +US$5 tln, so 30% of the global growth was from them. ($870 bln on expansion was from China, half the US level.)
US initial jobless claims were little changed last week from the prior one, but lower than year-ago levels. The total number of people on this support remains unusually low, but is little-changed too.
So perhaps it will be no surprise to know that the University of Michigan sentiment index rose more than expected to its highest level since July 2021.
In Japan, industrial production fell and their jobless rate rose, both not expected changed
in South Korea, industrial production rose more than expected.
In China, the slow motion real estate sector crash rolls on with more troubles at both Vanke and Country Garden. It is more than them of course. And banks that responded earlier to beijing's call for them to support the sector are trapped in growing bad loans. Asset quality pressure is "immense" said one major.
We should note that India has banned YouTube from allowing users to access an ABC program about its extra-judicial killing of a Sikh independence activist in Canada. It will be no surprise to India-watchers that the Modi government suppresses news it doesn't like.
And we should note a new ILO report that shows the jobless rate for Indian graduates at home was a massive 29%, almost nine times higher than the 3.4% for those who can’t read or write. The unemployment rate for young people with secondary or higher education was six times higher at 18.4%. This data reinforces David Hargreaves point that even if New Zealand's local labour market struggles, it will still look attractive to Indian immigrants. It isn't our attractiveness that draws them, it is the job pressure at home that pushes them out.
In Australia, inflation expectations, which had been suck at 4.5% since December, actually slipped in March to 4.3%. While this may be its lowest since October 2021, it does emphasise just how sticky Aussie CPI inflation has become.
China has dropped its tariffs on Australian wine after years of sanctions that crippled the billion-dollar export industry.
And staying in Australia, we should note that Jan Cameron, the founder of Kathmandu and prolific investor, has been found guilty of hiding money in the Caribbean without disclosure in a 2017 ASX filing, and is now subject to an automatic ban on directing or managing a company for five years.
The UST 10yr yield is now at 4.21% and up +2 bps from this time Thursday. The key 2-10 yield curve inversion is deeper at -42 bps. But their 1-5 curve inversion is little-changed at -82 bps. Their 3 mth-10yr curve inversion is now at -117 bps and also little-changed. The Australian 10 year bond yield is now at 4.00% and up +1 bps from Thursday. The China 10 year bond rate is unchanged at 2.31%. The NZ Government 10 year bond rate is now at 4.64% and down -3 bps from Thursday.
Wall Street didn't trade on Friday, and ended its Thursday session up +0.1% on the day and up +0.4% for the week. They may be minor changes but they are also all-time highs. Overnight European markets were closed too. Yesterday Tokyo closed up +0.5% limiting its weekly fall to -1.1%. Hong Kong was closed in Friday, ending unchanged for the week. Shanghai did trade and closed up +1.0% to also end its week unchanged. Singapore didn't trade and neither did the ASX200 or NZX50.
The Fear & Greed index has changed little in a week and is still in the "greed" range, similar ro a week ago and a month ago.
The price of gold will start today stronger by +US$42 from Thursday at US$2233/oz. and a new all-time high. the push up has been strong in the past few hours. A week ago this price was US$2159/oz so a net +3.4% rise for the week.
Oil prices have risen +US$2 to just under US$83/bbl in the US while the international Brent price is now just under US$87/bbl. A week ago these prices were US$80.50 and US$85/bbl so a +US$2 rise for the week.
The Kiwi dollar starts today at just on 59.8 USc and -20 bps lower than this time Thursday. A week ago it was at 60 USc so little change since. Against the Aussie we are down -20 bps at 91.7 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69.1 and down -20 bps, the same fall for the week.
The bitcoin price starts today firmer at US$69,386 and +0.6% higher that this time Thursday. This time last week this prices was US$63,588, so up +9% since then. Volatility over the past 24 hours has been modest at just on +/- 1.4%.
Over the Easter holiday break, we will have normal weekend service, and will return with these daily briefings on Tuesday, April 2, 2024.
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46 Comments
The yanks seem to be saying they are happy where interest rates are, and they will wait to see what happens with inflation. Kiwi dollar down as a result and due to other factors as well. We will have to raise rates to support the dollar or we will import inflation. Watch for swaps creeping up over the next few weeks.
Consider the NZD - The FED has said they now have the ability to stay HFL WITHOUT cutting due to the strength of the US Economy..... while they kill inflation, maybe.
If we cut before the FED, the NZD falls, if we cut 3 times before the FED, the NZD must be back around 54 thats a 9% drop from current.... RBNZ needs to balance the imported inflation that this would cause. The RBNZ is now between a rock and another rock. This could be made much worse by Mrs Watanabe selling her long NZDJPY positions on margin.
Its clear that the banks are doing whatever it takes to try and keep people in there homes even when their debt is increasing... I think this is actually the thing to watch, if the banks start to get tougher on this then the RBNZ cuts very soon after, and cuts hard.... we may see both at once, inflation falls, rates drop and banks get tough.
RBNZ will no doubt be aware our currency could tank if they're forced to cut earlier than the FED and as a precaution have been bulking up on foreign currency here;
https://www.interest.co.nz/currencies/126554/latest-monthly-figures-res…
Will they be required to use it? How long will it take to burn through this fund if they do is the $20 Billion dollar question....
Our housing centric poor productivity economy is about to reveal itself to the world stage under the full light of day.
RBNZ could of course set a floor price for bonds and commit to buying any amount at that price. That would create a floor for bond prices and a ceiling for interest rates. They will not want to do it, but they will have to if things move against them.
As per previous comments, there is a real risk that NZ has to drop rates before the Fed. I was predicting April 24 for the RBNZ drop, but the Fed staying higher for (a bit) longer might push things back to June.
China’s central bank head dissuades real estate woes as Vanke teeters towards default
- The head of China’s central bank has said the country’s property market has shown ‘positive signals’ despite uncertainty the worst has passed
- Vanke, a major developer, saw its credit rating demoted as other firms tangle with solvency questions
Yes! can we export NZs leading property Gurus on property commentary to the land of the all-powerful CCP??
We can even pay them to accept?
While their slimy market spruiking abilities have well and truly lost its "midas touch" and no longer invokes market moving or levitation of our flailing housing market.......just maybe, they could fool some new housing punters in China?
And my, don't the Chinese just love a good punt!
Yes it seems the Chinese, just like the garden variety Kiwi housing punter, finally have woken up to gambling ring that is their respective ponzi- like housing markets.
In already heinously overpriced housing markets (duch as ours and some others, in a few property centric economies)....where you can, well and truly do all your dough / deposits, (plus you are left with the noose of remaining DDDebt to the bank to pay off) - and then you are sent to the poor house for many years.
Banks would then be shy of lending to you in the future, especially if you loan default, as your credit is arse.
But just maybe, the new, shiny giblets of these economic Property Gurus, could raise the offshore dead body of the Chinese housing Ponzi ??
They may as well give it a crack offshore.....their credibility and terrible predictions here, has their economic prowess donkey deep in the outhouse mud-hole!
As they are now a laughing stock in NZ, with their many, many spruiking cluster calls since 2021 and led many into financial oblivion.......
They may have more "luck" in a new land, with a new set of oblivious property gambling plebs, to likewise mislead down the financial oblivion garden path ??
Just suggesting another option for some badly broken record, property pumper hacks......
They won't. I once had a first floor office on SH1. Landlord was jacking up the rent. "Valuations etc".
I stood in the downstairs door saying within sight I could see six vacant first floor offices. Some that way for years.
He stayed with his increased figure - I moved on. Ten years his 'valuable' office was empty. Some of the other six are still empty.
Which planet are these guys on?
"This data reinforces David Hargreaves point that even if New Zealand's local labour market struggles, it will still look attractive to Indian immigrants. It isn't our attractiveness that draws them, it is the job pressure at home that pushes them out."
This 'll add another compulsory 50,00 immigrants per year in order to get a trade agreement.
Maccy B zeros in on the immigration disaster that is Canada warning Aussie that it's facing similar issues.
The Anglosphere - and that includes Nu Zillun - has its head so far up its own rear.
Playing the easy game of opening the gates to pump GDP and to preserve the Ponzi is all very well, but the consequences are real.
https://www.macrobusiness.com.au/2024/03/canada-issues-recession-warnin…
Truflation has now added a compounded inflation rate to its dashboard. This shows USD has lost approx 25% of its value over the last four years.
https://truflation.com/dashboard?feed=truflation-us-aggregated
Interestingly, Truflation shows lower inflation at the present time and higher inflation in the past because it uses real-time house price trends (Zillow). The CPI/PCE use a lagging indicator.
"This shows USD has lost approx 25% of its value over the last four years."
No surprises there. Its what happens when the money grows faster than real productivity. I'm guessing that if the US government slows down borrowing (they're throwing money into the US economy) then the growth of money will slow. And we all know what happens next ...
Why doesn't this get more attention here?
https://www.nzherald.co.nz/business/reserve-bank-governor-adrian-orr-in…
This needs to be the leading discussion everywhere. And it can't be blamed on the pandemic.
New Zealanders’ purchasing power has declined 19.4 per cent since March 2018
I'd like to see what the decline was leading up to this over the prior 2 decades.
Alongside its record low interest rates, a funding for lending programme for banks and Government fiscal stimulus policies, it pushed New Zealand’s money supply to a record in December 2021.
“Central banks globally, including us, and fiscal authorities, pumped money in to [the economy to] keep jobs and livelihoods going,”
Pure incompetence or negligence? When the government is pumping in billions via fiscal spending there was no need for QE and the OCR reduction. There was no data to back this decision.
When does he admit that the biggest contribution to the decline in purchasing power/"money" expansion, is the debt based ponzi we call the housing market? Nobody wants to know that truth do they?
And the real kicker - the demand for asset price inflation - is simply compounding the problem. It highlights the same issue of declining purchasing power. Apparently this inflation makes us rich and CPI inflation makes us poor. I hear the need for financial literacy yet not acknowledging this just shows how illiterate we really are.
And yet we blame the Central Banks without acknowledging the commercial bank business model, or our own contribution, and we continue with the same failed thinking that created the issue. We debate and argue about policies that tinker around the edges and never address the real issue. Then we continue to demand the failing status quo and unable to come up with any worthwhile solutions.
It doesn't get any real attention as nobody wants to admit it would upset the entire narrative about getting rich. It would upset the entire narrative of economics. Hence it doesn't get real mainstream attention and our financial literacy will continue to fail.
And yet we blame the Central Banks without acknowledging the commercial bank business model, or our own contribution, and we continue with the same failed thinking that created the issue.
The mighty Audaxes highlights the qty theory of money; how private banks expand the money supply; and risk weighting often. Most people are not interested as it's too bland for most people.
No surprises there.
Yes. I was more focused on how Truflation is emerging as a measure of choice for many people. We have govt depts with many pointyheads and fancy pants degrees, but Truflation is showing us more accurate ways to measure inflation in real-time. And it's still very much a work in progess.
Disclaimer: I've owned Chainlink tokens since 2021
However US Q4-2023 economic activity came in +3.4% higher (real) in their third and final 'estimate'.
Nothing to support the NZD from here........ Hope many here are holding some AU and US assets??
We just need to decide which of the many big rocks to get NZ squeezed between.
Oil set to rise further with hungry war machines to fuel, Military Industrials working 24 hour shifts, and a Booooming USA (in some sectors) sucking up them Petroleum reserves.
++++ Biden sucked the US strategic reserve near-dry to help his previous Dem re-election peeps in the last few years......sure to end well??
NZs low Dollar and increasing oil price. Don the Hardhats!
Almost all for me. Been that way for a long time, apart from my house of course. All invested overseas either directly or indirectly (through NZ based funds). Overseas economies and markets will out perform NZ for the next 5-10 years while this re-balancing/fixing of labours mess plays out.
Im doing this by owning companies earning AUD and USD, then it's eventual repatriation to Kiwi........in the future, at the comming, much lower cross rates.
They are both more resilient than our little lovely Nu Zillin.
How do you suggest is best to buy forward exchange?
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