Here's our summary of key economic events overnight that affect New Zealand, with news bond markets are increasingly worried about what will transpire from the US CPI data for August later this week, and the US Fed's reaction next week.
First today, American inflation expectations seem to be rising. In August they came in at 3.2%, their highest in three months. While that is higher than year ago levels too, some of the detail is a bit of a worry. Those surveyed say rents are expected to rise 6.0%, food by 5.5% and petrol by 3.9%. Also of some note is that job finding expectations have now fallen to a record low in a data series that started in June 2013. More than 14% of those surveyed say they are likely to lose their job in the year ahead. There is a palpable sense of fear and squeeze in these survey results. The fast-tightening labour market has many on edge.
Meanwhile, August data for American consumer debt shows it rising, up +3.8% from a year ago with revolving debt up a sharp +9.7% on the same basis. Debt levels at credit unions seem to be leading the rises. These are all three year highs and the sudden shift likely indicates rising debt stress.
The USD is falling, heading towards a three year low. Benchmark bond yields are falling and the UST 10 year is near a one year low.
Across the Pacific, Chinese exports grew by +4.4% in August from a year ago, a level many others would like to have but it is lower than the expected +5% and July's +7.2% growth. And it is the softest pace of outbound shipment growth since February. Meanwhile their imports were up +1.3% in August on the same basis, less than the expected +3% and July's +4.1% rise. But that meant that their trade balance swelled to +US$102 bln in August, better than the +US$99 expected and higher than July's +US$91 bln.
While China's exports and imports to the US eased back in August, they still ran a +US$24.3 bln monthly surplus with this strategic rival and that isn't declining materially. It's the largest surplus they run with anyone, although the combined nations of the EU ran a larger deficit with China at US$28.9 bln in August.
In Japan, Prime Minister Shigeru Ishiba resigned over the weekend and new candidates are lining up to replace him. Financial markets are buoyant there on the prospect that a new leaders may chase fiscal expansion.
And in France, their prime minister has lost a confidence vote.
In Germany, their exports came in slightly weaker than expected in August when a rise was anticipated. But it was still a good gain on a year ago, and helped them maintain a healthy trade surplus. Meanwhile German industrial production came in much better in July than expected, bouncing back from a weak June.
In Australia, a major court decision will impact hundreds of thousands of businesses. Their Federal Court has "concluded that the annual salary and set-off clause did not have the effect of relieving Woolworths and Coles of their record-keeping obligations and that clocking and rostering data were not sufficient to constitute records for the purposes of reg 3.33 and reg 3.34." It gets 'worse'. Apparently the law is written in a way so that these businesses have to prove that the accuser is wrong, rather than the accuser having to prove its case. It seems to render time-keeping records as 'not sufficient' but doesn't actually say what is 'sufficient'. Life is going to get "very interesting" for the large number of employers who have hired salaried employees - i.e. most. Some think it could cost those two large supermarkets up to AU$1 bln.
The UST 10yr yield is now under 4.05%, down -4 bps from yesterday at this time. The key 2-10 yield curve is flatter at +56 bps. Their 1-5 curve is now inverted by -6 bps. And their 3 mth-10yr curve is still inverted -12 bps. The China 10 year bond rate is holding at 1.78%. The Australian 10 year bond yield starts today at 4.28% and down -7 bps from yesterday. The NZ Government 10 year bond rate starts today at just under 4.38%, down -5 bps from yesterday.
Wall Street has started its week little-changed with the S&P500 up +0.1%. Overnight, European markets closded firmer, with Frankfurt and Paris up about +0.8% but London only managed +0.1%. Yesterday Tokyo rose +1.5%, Hong Kong was up +0.8, and Shanghai was up +0.4%. Singapore closed unchanged. The ASX200 ended its Monday session down -0.2%. But the NZX50 rose +0.4% on the day.
The price of gold will start today surging to a new high at US$3,633/oz, up +US$47 from yesterday.
American oil prices are a bit firmer, up less than +50 USc at just under US$62.50/bbl with the international Brent price also firmer just on US$66/bbl.
The Kiwi dollar is now at just over 59.3 USc and up +40 bps from yesterday. Against the Aussie we are up +20 bps at 91.1 AUc. Against the euro we are also up +20 bps at 50.5 euro cents. That all means our TWI-5 starts today at just under 66.7, up +30 bps from yesterday.
The bitcoin price starts today at US$112,282 and up 1.1% from this time yesterday. Volatility over the past 24 hours has been low at just under +/- 1.0%.
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29 Comments
Trump will get his cuts but momentum is now firmly to the negative. That takes a long time to turn. We've seen here what too little too late gets you.
We saw how the Greeks reacted
We saw how the Greeks reacted
Greece did not have its own sovereign currency. Neither does France. Both countries gave up major aspects of their economic sovereignty, including setting interest rates and managing national money supply, to participate in a broader monetary union.
Greece could not devalue its currency to regain competitiveness or boost exports, as it was locked into the euro. It had no control over interest rates or money supply, which were set by the ECB for the broader eurozone, not tailored to its own needs.
I thought this was strange give existing airpower of Nato
https://www.dailymail.co.uk/news/article-15054555/Europe-prepares-WW3-M…
Nope. Right across Europe the word is being got out to the population to prepare for the worst. the Dutch distributed pamphlets telling people how to prepare.
For those in denial, and there were more than a few contributing to these streams, it must surely be clear now what Putin's plans are. There is only one way to stop this war and ultimately Putin will force it. the threat of nukes is real, but the only way to face it is to stand ready for full escalation. It is far too late to avoid the worst now.
I think it is more likely he'll move before Trump is gone now, because Trump will dither rather than commit. He wants to be a strong man but has neither the courage nor the intellect to be so.
Good luck getting the youth of Europe to front up. By the time they realise its for real it will be too late.
The deployment by Russia of regular foreign troops, formally ordered by the Nth Korean government to engage in combat, is a precedent in this conflict. NATO should have had boots on the ground too, and well before now.
NATO should have had boots on the ground too, and well before now.
Many believe NATO / Ukraine have lost the war already. You won't read about it in Granny Herald.
Alice Weidel (AfD) is one who says that Ukraine has already lost the war and says: “I am not a supporter of Putin, but what he is doing is protecting Russia’s interests, drawing lessons from historical conflicts with Sweden, Napoleon, and Hitler.”
Weidel also thinks Germany and Europe will prosper only together with Russia, not without it.
The Brics will do it by bypassing the US - and its adherents - economically.
Far easier than war.
And from now on, we have to temper Murray86's comments with the fact that he has a military background (correct, Murray?).
Putin isn't looking for all-Nato war; he's looking for a buffer-zone. As did Khruschev (getting missiles removed from Turkey via the Bay of Pigs standoff). The US - read: corporations - want what's under Russian soil; nearly got it too, post collapse.
Putin doesn't want a buffer zone! His actions alone have brought NATO closer than they ever were. You're buying too much of his vodka PDK! You have to remember he's KGB trained to manipulate and control people. He'll find your weak point and play you like a violin, but you'll more likely squeal like a stretched cat! He clearly knows Trump's weak point
He wants a new Imperial Russia under Tsar Putin, and he'll sacrifice anyone and everyone to get it. Clearly he also thinks he'll survive and somehow be immortal (and that's his weak point).
For Europe to face him down they need to play on that. Find out where he hides, track him live and send him a message or just assassinate him. This crisis will not end until he's too afraid or gone. He's far from either at the moment.
Sheesh. If Putin wanted to grab more of Europe he wouldn’t have taken 3+ years to crawl across eastern Ukraine.
I agree with the ‘buffer zone’ comments – I expect it is what Putin has wanted ever since the coup (indirectly supported by the west) in Ukraine in 2014.
This doesn't seem logical. I'm sure he wants to grab the other ex-Soviet states and areas with Russian speakers and he has said as much. The fact that they've spent 3 years in Ukraine is more an issue of competence on both sides.
If the 'take Kyiv in 3 days' plan had played out the Baltic states in particular would have been very nervous and rightfully so.
Putin doesn't want a buffer zone, he wants land access through to the Crimea / Black Sea & a springboard for his next annexation of historical Imperial territory.
I don’t think so. The Russian fear mongering by other countries in Europe is probably to justify increased defense spending or to distract the public from their own deteriorating economies. If Putin’s using North Korean soldiers now then I doubt he would have enough personnel for a larger European war. I also expect he’d lose a lot of personal popularity within Russia if he did.
https://www.nzherald.co.nz/nz/politics/kiwis-must-accept-lower-quality-…
The Government’s current strategy to reduce overall spending levels to 30% of GDP is to hold off on funding all of these cost pressures meaning that over time, while spending levels increase in nominal terms, they fall as a share of the overall economy.
The Treasury paper warns that this would mean public service quality diminishing - it also warns that this strategy might not be enough, and more wholesale reform of what types of services the Government offers and to whom may be required.
NZ super and Health are going to keep increasing in cost. So we are left with the following options:
- Retire later
- Pay more tax
- Decrease other government services
- Borrow and make the next gen pay for it
- Reduce healthcare
- Means test super
My personal preference is a bit of each:
- Move the retirement age to 68 over the next 10 years and then link it to the average expected lifetime
- Allow bracket creep to increase overall tax
- Cut back on unnecessary government spending and handouts where possible
- Luckily in NZ our government debt is low, it wouldn't be the end of the world if it increase a little.
- We may have to reduce healthcare for older people. Probably can't afford to spend money on people who are very close to death anyway.
- I wouldn't means test super as it is difficult to do fairly. But I would means test free PT / winter energy payments / etc.
It would be great if the 2 major parties could get together and come up with a long term plan, with each making a few concessions (e.g. National won't make any more tax cuts if Labour agree to not make any more handouts). Without that the can just keeps getting kicked, each party hands out lollies to get elected.
That's starting an entire discussion on the role of government. The concerning aspect that is silent is that it is apparent that there is a class of highly paid middle managers in the government services who actually for the most part do very little other than whip their staff to work harder for less. More and more of the budgets for government departments are being swallowed in their national headquarters rather than the front lines, despite what Nichola Willis has said.
I was recently told of a middle manager in a government department in Wellington who was somewhat disgruntled and looked at what she could get elsewhere only to find that nowhere else in this country paid as well. But the staff at the bottom are not even being offered increases that match inflation, and haven't for the last four or so years (or more).
Empire building requires birds of the feather and then the insulation and fortifications to parry and avoid outside influence. For instance, twice in the last twenty years or so, external reports have identified in the senior management, exactly that sort of hard core cabal of power coupled with unaccountability in the Christchurch City Council.
Its a nice theory that there are lots of really well paid people doing nothing. But if it is true, why have National not been able to fix it? The reality is that if you remove the people who manage it, the whole thing falls over. You can't just hire front line and expect everything to work, you need things like management / IT / HR / training / research / strategy / etc
Because the people they have put into power create teams to tell the MPs what they want to hear, but never the real numbers. and when reality hits they deny, deny, deny. Smoke and mirrors.
A recent team did a review of a significant event and the final report was provided to the minister as a part of a briefing. That report was critical of the systems of the department and what needed to change, but the minister repeatedly told the staff giving the briefing that they and their department were world class! Denial or just too stupid? You pick one.
"You can't just hire front line and expect everything to work, you need things like management / IT / HR / training / research / strategy / etc"
I know everyone is sick of me repeating myself: in 6 years Labour increased the public service staff by ~18000 / 40% with no significant improvement in public services. At a recent count: despite an election mandate to cull, union academia & MSM scaremongering; National have maintained those overall staff numbers.
An article from the end of last year that you may wish to peruse.
https://www.scoop.co.nz/stories/BU2410/S00333/despite-job-cuts-cost-of-…
"Since the 1990s - after a series of reforms in the 1980s dramatically reshaped the state sector workforce - the public service workforce has oscillated around 1 percent of the population."
so, despite the massive impact of the 3rd Industrial Revolution (mass connected computing, broadband internet etc) since the 1990s enabling overwhelming efficiency & effectiveness improvements to businesses competing in a global market whose population increased by a third since 2000, no such process improvement accrued to the NZ public service.
Actually if you look at our productivity overall there's been bugger all gain in public or private
Yes, however I referred to multinational global businesses where I spent several decades.
"with no significant improvement in public services" - much of that is required just to maintain the service level due to immigration and an ageing population. National would cut it if they could...
How can you measure the lack of improvement? For example there is some really impressive Kianga Ora projects near us, it would have taken a lot of planning, but well worth the money compared to the normal rubbish NZ builds. We had a huge housing deficit when Labour were elected, the private sector weren't going to fix it on their own, MBIE and KO were always going to ramp up the numbers. Not saying they didn't go over the top...
NZ population increased ~8% from 2017 to 2023, not 40%. See my comment above on why marginal customer/population increases should be largely irrelevant to improving customer service.
What is this metric for significant improvement and is it really relevant?
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