Here's our summary of key economic events overnight that affect New Zealand with news the global economy may be expanding fast, but labour markets seem to be lagging.
There was a big surprise in the US labour market data released overnight for April. They added just +266,000 new jobs in the month, a surprisingly low number that is far below the +978,000 that analysts had expected, and a sharp drop from March’s pace. Their jobless rate shifted up to 6.1% when a 5.8% rate was expected. Their participation rate however rose to 61.7% as more people moved into their labour market. It is a result being looked at sceptically, especially given all the other indicators that show a strong recovery. Neither the equity nor bond markets reacted to the miss (and it is a big miss), and the US dollar dipped only marginally.
Another labour market metric helped ease the shock - US labour productivity rose sharply in Q1-2021. Essentially output (+8.4%) rose much faster than labour hours (+2.9%) or wages (+5.1%). The level of output per hour is the highest ever recorded, and the year-on-year gain is the fastest since 2004.
The growth of consumer debt in the US was modest in March. It rose +US$26 bln and about what was expected. That is +7.1% higher than a year ago, but that is distorted somewhat by the pandemic. Compared to March 2019, it is up just +0.9%. However, this March data does end a string of declines, indicating consumers feel more comfortable taking on slightly more consumer debt now. Consumer debt (credit cards and personal loans is almost US$4.2 tln or about 17% of nominal US GDP. (For perspective, the New Zealand level is about 5%. We may be underweight on this item compared to them, but we make it up and more with housing debt.)
And we should note that the US Fed balance sheet is no longer being expanded. It's not tapering either, but Fed QE is now just at the level either additions are expiring. They are not priming the pump anymore.
But the US Treasury is. Over the past week they have raised +US$44.1 bln in bond issues.
Interestingly, the April jobs data in Canada wasn't flash either, with a shrinkage in employment and one that was more than expected. Perhaps the unusually strong, unexpectedly strong March data weighs here, averaging out a reasonable gain over the two months. Lockdown uncertainties may be another reason. Whatever the reasons, they have a jobless rate of 8.1% now and that is still distressingly high.
In China, a private survey of their services sector brought some better news for them, and better than the official survey. Their services sector is expanding more vigorously than the tame levels we have seen recently. This is more like other international results, and China's service sector is reporting steeper increase in activity amid strongest upturn in sales for five months. A quicker rise in employment is helping to ease capacity pressures. And like other surveys, these improvements come at the same time costs are rising much faster than we have seen for months, even years.
Chinese exports rose an impressively sharp +9.5% in April from March and are up +31% year-on-year. That is better than expected; the world is buying. Their imports fell -2.8%, and one reason is they are finding it hard to buy semiconductor chips. They are also not buying coal. In fact coal imports dropped -20% in April from March and -30% less than a year ago. They ran a +US$28.1 bln surplus with the US in April, and not down noticeably from previous months as American demand recovers strongly. This same data records a strong trade deficit with New Zealand, and a -US$9.6 bln deficit with Australia in April - despite their political tensions.
In Australia, the RBA issued its Statement on Monetary Policy yesterday. They are watching the large bulge in household bank accounts, wondering how those households will use them when the fear of the pandemic eases. Those collective decisions will determine how the central bank reacts with monetary policy changes as they try to find the new 'normal', and more importantly, when. They are expecting a jump in inflation to 3.25% in Q2-2021 but then moderating quickly. They see economic growth up +9.25% in Q2-2021, but with a positive echo later to +4.75% in by December and +4% this time next year. But despite all this positivity they are not expecting pay packets to grow as quickly, and probably not until 2024.
And it is worth noting, even though it isn't 'new', commodity prices for copper, aluminium, nickel, zinc, iron ore and coal all rose overnight.
Despite the US payroll miss, on Wall Street the S&P500 is up +0.7% in midday trade - yet another all-time high and for the week it is up +1.1%. Overnight, European markets were up across the board, averaging a +0.8% gain. Shanghai ended yesterday down another -0.7% in a late selloff to end the week with a -0.8% net loss after their holiday break. Hong Kong traded -0.1% lower yesterday for a weekly dip of -0.4%. Tokyo was up a minor +0.1% yesterday for a weekly gain of +1.9%. The ASX200 was up +0.3% yesterday, finishing the week with a +0.8% rise. The NZX50 Capital Index gave back another -0.2% yesterday for an unchanged week.
The latest global compilation of COVID-19 data is here. The global tally is still rising, now 156,306,000 people have been infected at some point, up 881,000 in one day, still largely driven by rises in India and Brazil. Global deaths reported now exceed 3,261,000 and up +14,000 in one day. Vaccinations in the world are also rising fast, now up to 1.238 bln (+23 mln), and in the US almost half of their population (45.5%) have had at least one dose as they keep up their fast rollout. Now one third have been fully vaccinated (110.4 mln people). The number of active cases there has fallen to 6,675,000 with -24,000 fewer new infections than recoveries in the past day and very slow progress.
The UST 10yr yield starts today at 1.58% and up +2 bps overnight. The bond markets are not screaming 'inflation'. The US 2-10 rate curve is just marginally steeper at +143 bps. Their 1-5 curve is flatter at +72 bps, but their 3m-10 year curve at marginally steeper at +157 bps. The Australian Govt ten year benchmark rate is up +2 bps at 1.64%. The China Govt ten year bond is unchanged at 3.17%. And the New Zealand Govt ten year is up +1 bp at 1.74%.
The price of gold starts today at US$1830/oz and that is up another +US$15 since this time yesterday to its highest since mid-February. Over the past week gold has risen +US$63/oz or +3.4%.
Oil prices are marginally softer today at just under US$65/bbl in the US, while the international Brent price is still at US$68/bbl. US drillers are not rushing to add new wells, as the latest rig count data shows (+2 in a week).
The Kiwi dollar opens today at 72.8 USc and another +½c firmer again since this time yesterday. Against the Australian dollar we are softer at 92.8 AUc as the Aussie makes bigger gains. Against the euro we are still at 59.9 euro cents. That means our TWI-5 is marginally firmer overall at 74.2.
The bitcoin price is now at US$58,954 and +3.5% higher than this time yesterday. Volatility in the past 24 hours has been a high +/- 3.1%. The bitcoin rate is charted in the exchange rate set below. And for those following the joke-crypto Dogecoin, it has risen +12% in the past 24 hours and now has an overall 'valuation' of US$82 bln! (Update: Now US$90.1 bln !!)
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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13 Comments
https://www.nzherald.co.nz/nz/silverfern-property-biggest-supplier-of-g…
100% agree :
Emergency housing should be about getting people back on their feet and into stable housing as soon as possible. Instead, these figures show that it's become a get-rich-quick scheme for motel owners."
Nearly a million paid each day..
Labour has to go as it is trying to please the rich - (into housing ponzi) on one side and homeless on the other side - ignoring aspiring middle class whose dreams are been crushed by Labour party policies.
They are socialists, their raison d'etre is to roll out more welfare and collapse the hated system under the weight of astronomical debt. The housing Ponzi just allows a great opportunity for them to expand the welfare state much faster than otherwise been possible. They will be in ecstacy right now, I've never seen Robbo looking so happy. The turkeys voted for Christmas when they gave this mob a free hand to do whatever they like.
With Iron Ore and A2 both reliant on China remarkable to see the difference in fortunes with many experts getting it wrong.
77 out of 79 forecasters picked 800,000 jobs plus in last nights release, remarkable or unremarkable and just the behavior of herds and experts.
Yesterdays M14 data ,along with the general inflation expectations expert forecasters see the corelogic house price index rising a further 5.49 percent in the coming year and increasing an average of 4.41 percent over the two year period ,much higher than the general inflation forecasts
NZ Government bond market hardly pricing upside inflation
The bond markets are not screaming 'inflation'.
...even more so given TIPS real yields – a quasi-measure of growth expectations which, as you can see above and below, are and continue to be unbelievably depressed Link
A frequent question about Fed policy is why all of this quantitative easing hasn’t produced inflation. The answer is that quantitative easing alone isn’t inherently inflationary. QE just changes the mix of government liabilities held by the public. The Fed buys interest-bearing Treasury securities and replaces them with zero-interest base money. The change just causes a readjustment in short-term interest rates, to a level where investors are willing to hold the existing quantities of both of them.
In equilibrium, every security that has been issued has to be held by someone, at every moment in time, until that security is retired. It’s fiscal policy that determines the overall quantity of government liabilities issued to the public, and that must be held by the public. Monetary policy just determines whether those liabilities are interest-bearing or not.
What triggers revulsion and inflation is a public loss of confidence that the total quantity of government liabilities will be restrained, relative to the real economy. That could become a problem if the private economy doesn’t recover quickly enough to substitute for the federal deficit of nearly 20% that has propped up economic activity over the past year.
Moreover, the increasing tendency to resort to deficit spending was apparent even in 2019, at the peak of the last economic recovery. That year, the federal government ran a deficit amounting to 4.7% of GDP. Since World War II, a deficit of that size was seen only at recession lows, particularly during the global financial crisis – certainly not at the peak of a recovery. From that standpoint, the deficits of recent years have increasingly been what I describe as “cyclically excessive.” Link
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The Grant Robertson disease is spreading.
More Govt agencies using GRs Zero accounting & data recording system.
Neither the police nor the Social Development Ministry (MSD) is actively monitoring incidents of crime, violence or family harm in this type of housing, but do encourage people to come forward if they feel at risk.
https://www.rnz.co.nz/news/political/442016/police-msd-not-collecting-d…
And when people do say they feel at risk, they get absolutely lambasted as being racist. https://www.tvnz.co.nz/one-news/new-zealand/argument-erupts-in-parliame…
Marama absolutely lost the plot here, feeling unsafe has little to do with race. I have heard the same feeling about Wellington from many people I know living there, despite their age/race/gender, it's all the same story.
And yet race and cultural identity is how current Govt does business, separating everyone up. - from yesterday.
Government Progressive Procurement.
On 3 December 2020, following Cabinet agreement, the Government announced a new progressive procurement policy with a focus on Māori businesses. This policy requires all government agencies that are subject to the Government Procurement Rules (the Rules) to set and report against a target that at least 5% of the total number of their annual procurement contracts are awarded to Māori businesses.
For the purposes of this procurement policy, a Māori business is defined as either a Māori authority as classified by the Inland Revenue Department (IRD) or one that has at least 50% Māori ownership.
This policy is intended to increase the diversity of suppliers engaged by government agencies and to provide more opportunities for Māori businesses to tender for government contracts.
The Ministry is seeking information from Māori and Pasifika Businesses who supply to MFAT currently and those that wish to in the future, to self-identify with necessary detail to inform our baseline. We are collecting this information via GETS and also via commercial@mfat.govt.nz. The Ministry intends on storing this information for our records to inform our baseline and report against the cabinet target.
You can find out if you are eligible to be classified as a Maori Business by IRD by looking at Section YA 1 of the Income Tax Act 2007 (Financial institution special purpose vehicles (ird.govt.nz)) defines a Māori Authority as ‘a person who has made an election under section HF11 (Choosing to become Maori authority)’. Section HF 2 states who is eligible to be a Māori authority.
Please contact us if you have any questions.
Company Name:
NZBN Number:
Contact person:
Māori Business classification through IRD: Yes/No
Māori Business by 50% ownership: Yes/No
For more information please visit Progressive Procurement (tpk.govt.nz)
One interpretation I've seen of US payroll data is that the numbers are actually labor shortage, people have retired and won't return to the workforce. Supporting this hypothesis is the spike in wages. In effect this pandemic coincided with a large proportion of the population getting very close to retirement, many have descided to call it a day since they downed tools anyway. Fair play to them I suppose, if a global pandemic doesn't change your priorities I don't know what will. Happy retirement! :-)
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