Here's our summary of key economic events over the weekend that affect New Zealand with news China's recovery is now being aided by the recovering US economy.
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's steeper increase is based on its strongest upturn in sales for five months. A quicker rise in employment is also 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 also rose an impressively, up a sharp +9.5% in April from March and up +31% year-on-year. That is better than expected; the world is buying. But 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 trade deficit with New Zealand, and a -US$9.6 bln deficit with Australia in April - despite their political tensions.
In the US, there was a big surprise in their labour market data released over the weekend 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 (up +8.4%) rose much faster than labour hours (up +2.9%) or wages (up +5.1%). This 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 the UK it turned out the SNP won big but just short of an absolute majority. With its pro-independence partners (the Greens), it is pushing ahead with a second independence referendum. It is not something London can really stop given it campaigned on an 'exit' from the EU as a sovereignty issue. It seems the Scots also want 'sovereignty'. With the customs border in Ireland now at the coast, and the strong prospect Scotland will cede, there won't be much 'united' in the United Kingdom soon. And the bits being hived off are joining back up with the EU.
In Australia, the RBA issued its Statement on Monetary Policy on Friday. 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 the value of all Australian residential real estate has now topped AU$8.1 tln and up +14% in a year, up +28% in two years. In fact at this level it is more than AU$1 tln higher than the total value of the ASX, plus all their super funds, plus all their commercial real estate, combined. (For comparison, the equivalent New Zealand 'value' is NZ$1.4 tln (+17%/+24%) with similar dominance over those same reference assets.)
And it is worth noting, even though it isn't really 'new', commodity prices for copper, aluminium, nickel, zinc, iron ore and coal all rose sharply at the end of last week.
The latest global compilation of COVID-19 data is here. The global tally is still rising, now 157,819,000 people have been infected at some point, up +766,000 each day this weekend, still largely driven by rises in India and Brazil. Global deaths reported now exceed 3,286,000 and up +25,000 in two days. Vaccinations in the world are also rising fast, now up to 1.286 bln (+24 mln per day), and in the US almost half of their population (46.1%) have had at least one dose as they keep up their fast rollout. Now more than one third have been fully vaccinated (114.1mln people). The number of active cases there has fallen to 6,454,000 after being revised sharply lower with fewer new infections than recoveries recently and improving progress.
The UST 10yr yield starts today at 1.58% and down -2 bps from where it ended in New York last week. The US 2-10 rate curve is unchanged at +143 bps. Their 1-5 curve is also unchanged at +72 bps, as is their 3m-10 year curve at at +157 bps. The Australian Govt ten year benchmark rate is down -1 bp at 1.63%. The China Govt ten year bond is up +1 bp at 3.18%. And the New Zealand Govt ten year is unchanged at 1.74%.
The price of gold starts today at US$1831/oz and that is up just +US$1 since this time Saturday.
Oil prices start the week at just under US$65/bbl in the US, while the international Brent price is still at US$68/bbl.
The Kiwi dollar opens today at 72.8 USc and little-changed over the weekend. Against the Australian dollar we are still at 92.8 AUc. Against the euro we are still at 59.9 euro cents. That means our TWI-5 starts the week at 74.2.
The bitcoin price is now at US$57,537 and -2.4% lower than this time Saturday. Volatility in the past 24 hours has been a high +/- 3.0%. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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54 Comments
Mr Orr will wait for months.....years.....as has no intent to act, will follow his policy of Wait And Watch despite data / news screaming to act and act fast to control the ever growing house prices.
Real Shame.
https://www.nzherald.co.nz/business/house-prices-increase-21-despite-at…
https://www.newshub.co.nz/home/money/2021/05/house-prices-increase-21-p…
Even after after two months of housing policy announcement, house prices are touching new high, still Mr Orr wants to wait in hope that may be sometime in future, house price growth may stop, not realising that his inaction is leading ponzi to new heights on a weekly basis thereby supporting FOMO.
As long as FOMO is not controlled, Ponzi will continue and to control ponzi, it is Mr Orr's turn to take act and act fast or to go for a long sick leave. This news today again will act as a CATALYST to boost FOMO.
No half cooked measures will help so if really wants to control the ponzi, even now will have to go for least regret approach or both Robertson and Orr are mucking around playing with time and Jacinda Arden is losing the biggest opportunity to reset.
Robertson has been voted to ensure and not hide behind excuses or bureaucrats or agencies
FHB who want the security of their own home are being forced to speculate that prices won't crash because there is a reasonable chance they will and if they do, they could be in negative equity for decades.
Investors that buy (likely anything other than a new build with interest deductability) are speculating - but they get to chose to do that...not because they need the security of a place to call home.
Just because you like it that way? by that definition, if i bet on a roll of dice and put hard cash on it, I am investing? (not speculating).
How you finance a venture, has very little to do with the venture itself. Or you meant it from the bank's perspective? i.e. lending to a customer on "equity" as opposed to cash deposits, is a speculation for the Bank? there seems to be some truth to that.
On the face of it, with skyrocketing house prices unjustifiable in relation to festering incomes, how can our situation be any different from say this one https://en.wikipedia.org/wiki/Spanish_property_bubble ?
In relation to interest rates .... its understandable https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt
How is our situation different..?? I think this is a big question...
How will population growth look.. over the next 5 yrs ? https://www.stats.govt.nz/topics/population#release
Much of NZ GDP growth in the past has relied on population growth + credit growth...
I dont see much new productive wealth producing stuff going on..
Check out this interactive graph which shows how different sectors have contributed to GDP, over time.
eg... Once upon a time Goods production was 34% of GDP... now it is 19%..
https://www.stats.govt.nz/tools/which-industries-contributed-to-new-zea…
https://www.stats.govt.nz/tools/which-industries-contributed-to-new-zea…
Watch how 'Owner-occupied Property Operation' change in it's rank over time particularly between 1985 and 1986.
An example of good journalism:
https://thebulletin.org/2021/05/the-origin-of-covid-did-people-or-natur…
Compare that to those who bury things on slow-traffic days or, even worse, bury things full stop. Or go down woke rabbit-holes in a conscience-displacement attempt. Pity we don't have much at that level in NZ.
The DarkHorsePodcast also discusses the lab leak hypothesis in great length over numerous episodes.
I think sometimes the world would rather believe a lie than face the truth - until the evidence is very difficult to deny.
https://www.nationalreview.com/corner/wade-on-the-lab-leak-theory-of-co…
"Nicholas Wade is not an alarmist, and not a conspiracy theorist. He is one of the most eminent science journalists in the country, having done stints at Science and the New York Times"
pdk
Why did I suspect I knew where the article was heading?
"An example of good journalism" ?????
A simple very quick check for just for a bit of balance:
https://en.wikipedia.org/wiki/Nicholas_Wade
A man full of controversy. A couple of comments regarding a book of his:
"a deeply flawed, deceptive, and dangerous book" with "pernicious conceits" - New York Times
"Over a hundred geneticists and biologists categorically dismissed Wade's view of race"
"Other scientists argued that Wade had misrepresented their research".
many others critical of his work:
https://www.americanscientist.org/article/a-troubling-tome
Lets keep an open critical mind.
While it is a good article, the ones that he refers to I have read. From memory they generally state that it is unlikely that the virus had lab origins, not impossible, that it is much more likely that they came from wild animal crossover after reviewing the virus proteins. Much of the media has come out saying that scientists said it is didn't come from a lab, much more definitive, based on the non definitive findings.
The author of the article does a reasonable job of saying that it could come from a lab, but does a poor job of explaining why it doesn't come from animals. Simply that the bat population hasn't been found yet, which itself is not evidence of something not being true. He falls into the trap he accuses other scientists for falling into! To me that reeks of bias...
Thanks for replying, I accept that by not providing a similar level of analysis in regards to animal-origin theories there is a bias. My view was that he was looking into the other side of the argument. His deconstruction of the early and un-founded and biased political statements regarding origin were interesting and new to me.
JustAnOpinion
"What problems did you have with his article or approach?"
I start to question when a "scientific" article takes on a persuasive nature especially as neither the article nor those "facts" are referenced to articles in recognised scientific publications.
To simply quote the selective views of some - no mater what their qualifications or their institution - is not considered to meet the rigorous requirements of the scientific community and being facts. There will always be some who have differing views and that is great for scientific debate, but care needs to be taken as to accepting that as scientific fact.
As said, there is need to keep a critical mind open.
Yes, excellent link. Very good supporting links in the article text as well.
I was surprised it didn't mention the WIV virologist in Shi's team who has disappeared (i.e., presumed died of this virus) in the month/s before public awareness. It has been postulated that she is patient zero.
Further journalism. Worth more because on the premium Govt puts on international comment too.
- & today's wedding venue news couldn't look worse.
https://www.telegraph.co.uk/news/2021/05/08/ardern-isnt-lovely-have-bel…
Ardern isn’t as lovely as she’d have you believe
The Prime Minister of New Zealand is fawned over worldwide for her empathetic manner. But increasingly, her actions stink.
DOUGLAS MURRAY
8 May 2021 • 5:00pm
Douglas Murray
From the moment she entered office in 2017, the international coverage of Jacinda Ardern has been nothing short of slavering. Ardern is a female political leader at a time when sections of the press still talk about this like women politicians are unicorns. A year later she added to that advantage by giving birth while in office, which was reported on as though giving birth while holding down a job is unheard of. Coverage has continued in the same vein ever since, helped by the fact that her more important public statements are delivered with lashings of forced empathy. But those of us who are allergic to such bogus forms of communication and who judge people by their actions rather than their capabilities at emoting are noticing that increasingly, Ardern’s behaviour stinks.
Last month her oh-so-progressive government made an unprecedented step. It refused to join a Five-Eyes statement which was critical of the Chinese Communist Party. The Five Eyes intelligence-sharing network (the UK, US, Canada, Australia and New Zealand) is the world’s most successful and important intelligence-sharing partnership.In being a member of it New Zealand is at an extraordinary advantage – an advantage that far outweighs the miniscule resources it actually puts into intelligence or other defence capabilities.
But the refusal was not an oversight by the Ardern government. Rather it was a part of a disgraceful and pro-totalitarian political turn. Ardern’s foreign affairs minister Nanaia Mahuta said that New Zealand now has a preference for moving on from the Five Eyes alliance and looking for new ‘multilateral opportunities’. Except no such better opportunities exist for such a small and isolated power. What is going on is that sweet, lovely Jacinda Ardern and her government are in the process of seeking as much Chinese investment as possible to boost their economy, and doing everything that the CCP wants to ensure that the investment roars in.
Placeholder image for youtube video: vmep4N0MBr8
It is a cynical and immoral policy because Ardern knows that Chinese investment always comes with strings attached: Australia welcomed it in the 2000s, only to spend the last decade desperately trying to disentangle themselves from the boa-constrictor that is the CCP when it moves into any foreign market.
Earlier this week she gave a speech in which she tried to claw back some of her moral capital by insisting that she had raised questions about the CCP’s human rights record in private. And she said that she really was worried about how to ‘reconcile’ New Zealand and Chinese Communist Party attitudes towards human rights.
Well here’s a tip. It can’t be done. You’re either in favour of forced labour camps, neo-colonialism and forced abortions on women who are nine months pregnant, or you’re not. Ardern perhaps hopes that we’ll glide over these awkward facts. And the international press might well. On Wednesday, the New Zealand Prime Minister announced with wonderful timing that she and her partner have set a ‘summer wedding’ date. So yay. Sweet Ardern is back. Pity she sold her country.
But the refusal was not an oversight by the Ardern government. Rather it was a part of a disgraceful and pro-totalitarian political turn. Ardern’s foreign affairs minister Nanaia Mahuta said that New Zealand now has a preference for moving on from the Five Eyes alliance and looking for new ‘multilateral opportunities’. Except no such better opportunities exist for such a small and isolated power.
But the alternative is withering on the vine of commerce and just about all else:
Ganging up against China, Russia a nightmare trip for US, West: Global Times editorial
No way for Washington to replicate Cold War victory: Global Times editorial
Interesting piece of spin, HT to HT, one of our local spinners
In FACT, all NZ Governments have actively sought trade with China. In FACT, the US hegemony has been - and is - responsible for more repressions and killings, than China (which is no better or worse, it has just come to the party late) since WW2.
Blaming is pointless, the problem is the compounding one of over-population and increasing depletion. Nobody represses if there is plenty for all, indeed nobody would initiate enclosures (like the UK version, or Israel Palestine), nobody would indulge in 'ethnic cleansings' or 'genocides', nobody wold go to war. What happened to oil-resource countries (and their citizens) via US destabilisation is the biggest criminality we've recently seen, but it is part of a long-established pattern.
Keeping this in proportion, we may be looking at the inability of democracy to adapt to life beyond the Limits to Growth; China's leadership are clearly much more able to make decisive moves.
Is Australia really trying to desperately disentagle itself from China? There is precious little evidence of this. The figures on who they are buying from / selling to really do not bear this out at all. Australia is playing a game of talking big to impress hawks in the US and UK, while continuing to ship its mineral and metal wealth to China. Perhaps if Australia was really serious about the 'big talk' they would have found alternate markets for their products & even gone as far as banning the sale of key resources - such as iron ore - to China.
Wait. The article just boiled down to being upset at NZ not joining a Five Eyes joint berating effort, and putting our membership of Five Eyes at risk?
I don't really have strong views on 5 eyes, whether in or out. I don't think it will make much difference. The benefits of it compared to relations with largest reading partner, with which we have a trade surplus. It's a no brainer.
Ardern's job isn't to serve the egos or opinions of rightish journalists for a London rightish newspaper. It's to serve the best interest of NZ.
The Sweden's of the world in their safe protected EU trading club (which they exclude nations like NZ from) can campiagn for the Uigher's of the world with relative impunity.
Japan took the top spot in the 2019 export complexity index. In the same year, Japan shipped 22% of their exports by value to China (largest trade partner); manufacturing machinery, semi-conductors to China, and vehicle & parts making up the largest items.
Despite all the anti-China rhetoric in 2020 such as their bid to join Five Eyes and the Japanese government paying its local companies to move productive operations out China (in the name of supply chain resilience), their exports to China are growing in 2020-21.
What I am trying to say is selling milk, fruits and wood to the world doesn't buy you the privilege of speaking out your mind in the 21st century!
https://institutional.anz.com/insight-and-research/Nov-20/how-nz-will-f…
The only advantages highlighted here from the RCEP for NZ is more trade in beef, cheese, agri-produce and table salt. Interesting to know NZ's aspirations don't extend beyond serving refreshments to countries like Japan, China and SK as they work hard to build the world's next big things.
Chinese exports also rose an impressively, up a sharp +9.5% in April from March and up +31% year-on-year. That is better than expected; the world is buying. But their imports fell -2.8%, and one reason is they are finding it hard to buy semiconductor chips.
Awash in “stimulus”, but none able to dent a semiconductor shortage which is purportedly the reason for production woes. In the US and many other places around the world, governments have gone nuclear, with America’s federal authorities dropping checks with abandon. This has created, according to some, everyone in the media, a red hot economy right on the verge of massively overheating.
Bonds just aren’t buying it, and that was long before today’s payroll report. The US goods economy might be experiencing a sugar rush, that’s not the whole ballgame. In addition to services, there’s a global factor underlying the non-reflationary global yields of late (often synchronizing them before economies). Link
https://www.stuff.co.nz/national/politics/300303556/budget-2021-grant-r…
"He also tried to reframe the Government’s unpopular decision to effectively freeze the pay of public servants earning over $60,000.
While earlier, the Government had discussed this as a move intended to save money, on Monday, Robertson said it was actually about ensuring that the income gap closed between people earning top incomes and people on lower incomes
“All of these steps are designed to ensure that we address inequality and so that those on the lowest incomes do not fall further behind those at the top, as we have seen happen in previous economic downturns,” Robertson said."
To Notte :
1 : As per him people earning $60000 are rich
2 : Trying to bridge inequality by supressing wages of Medium earner.
3 : Talking about inequality, still not targetting speculators.
4 : Income gap to reduce what about capital gain / inequality / divide between house owners and those aspiring to be a home owner.
ensuring that the income gap closed between people earning top incomes and people on lower incomes
The government's plan here to reduce the public sector income gap is not to lift skill levels of the low-income public workers (majority of whom are support and admin workers) but to reduce the price premium of trained professionals.
That's the brilliant plan to achieve the child poverty targets - force higher salaries for low-skilled workers in the short-run until employers invest in automation and lay them off altogether.
YES! People always think automation will "take my job", but they don't see the long term benefit of having all your basic requirements done for you at reduced costs. The liberation of humans from menial labour should be the next step in our development. That means so much more time to concentrate on things of real value and if done right, should lead to an explosion of creativity and scientific developments as people retrain and re organise to higher value work.
Their recent actions seem rather communist in nature, trying to ensure everyone is paid the same, not based on merit. Do this by taxing those in the upper pay brackets more, tell those in the middle pay brackets they aren't getting a raise and telling those in the lower pay brackets they will go up.
The PM this morning interviewed by John Campbell was very good at providing further explanation/justification. Worth watching.
https://www.tvnz.co.nz/one-news/new-zealand/jacinda-ardern-challenged-j…
She described their position on pay for government services staff as a "lift, adjust, restrain" position.
Lift = staff below $60,000
Adjust = staff between $60,000-$100,000 (adjust within existing pay scales for teachers, nurses, police)
Restrain = staff on $100,000+
I suspect this is a very clever position to take, as from the government's perspective, as you "lift" the lower paid staff you pay lesser amounts out on WFF - and similarly when you "adjust" those in the below $100,000 range.
You could call it a WFF "offset", or a winding back of tax transfers. And indeed that needed to be done somehow.
No, initially I thought the implication was an outright freeze on PS pay increases above $60K - which I commented was "bizarre".
It wasn't until the "lift, adjust, restrain" explanation came out that this view occurred to me.
Personally, I've advocated hard for government reducing the cost-of-living through regulation (starting with the private rental market) - and that would still be my preference. I've never been comfortable with either WFF or Accommodation Supplements - so have always felt someone needed to come up with someway to wean us off those.
Whilst we were raising our family, NZ had a high cost-of-living where electronics and appliances were concerned - but having the latest food processor (etc.) was a luxury item. Housing is not.
Kate, while JA may have enamoured you of her explanation, the reality will be how the various Government Department heads apply that direction. And I suggest the original words that the media applied, if above $60K only being “exceptional” will get you a pay increase. “Exceptional” is a highly loaded emotive term that most areas of employment in this country avoid like the plague. Labour have significantly shot themselves in the foot here, and to those punters who think the public will have forgotten this by the time of the next election – the period the direction stipulates, covers that election.
An annoying factor about this is that many of the frontline workers this will apply to, Nurses Police, Firefighters and don’t forget Corrections (!) faced increased risk during COVID, as well as facing it daily in their jobs, and this is the thanks they get for this. This directive will flow out into the community where non Government employers will face less wage competition to retain their workers. In addition we have seen inflation occurring in many areas including groceries and fuel costs, so in effect this will just result in living standards being driven down further. An area that has been identified as a significant issue for NZ before. No this will just result in more Kiwi's being more dependent on their Government, not independent.
Murray, as I understand it, nurses, police, teachers are all in PS sectors that have pay bands - so those on $60-100K fit into the "adjust" (i.e., not restrain/freeze) category from what the PM said. Whereas, core government services (i.e., ministry/departmental staff, such as policy analysts/policy advisors; legal advisors; scientific advisors, etc.) do not have those same banded systems.
Instead, these public servants are paid based on private sector comparisons wrt educational qualification; demand for their specific areas of expertise and skills/experience. As a senior departmental manager for example - I could virtually offer an individual whatever I felt justified based on that kind of criteria. Many of my policy analysts had to be registered engineers, for example, and we had to pay what we had to pay in order to bring them in from the private sector. It is in those departmental services that the "exceptional" performance rule will likely be applied by the CEs (and senior managers) of those departments. And actually when I was reviewing salaries way back then, I applied that rule anyway - even though prior managers had been of the everyone-gets-a-small rise ilk. I used what budget I had for salary rises to see that the most deserving were well rewarded, and hence retained.
So, although I hear the unions moaning, it is the nurses, police and teachers above $100K that they are largely moaning on behalf of.
So they'd have a few less headaches if they'd got all their ducks in a row with this explanation ready before the announcement then.
I keep thinking a few more chess moves ahead of where this is meant to lead to.
I'm still stuck on this being a Robertson v Orr arm wrestle.
All of this the inevitable outcome of the housing bubble.
$60,000 happens to be what I earn. And it would be a comfortable living here, as it would be anywhere else in the world, except for one factor: housing. On $60,000 you are still stuck in unstable, sub-standard housing indefinitely (unless you have parents who can give you a pile of equity). When I think about the toys I could buy, I feel rich; but living with unending anxiety about being evicted by landlords wanting to sell/reno (which would be the third time in four years), I feel like it's worth blowing up the whole economy if it can restore some sanity to the housing market.
Yes, could not agree more, brisket! We have a cost-of-living problem that starts with the cost of accommodation. Either wages get raised to compensate; tax transfers and benefits get raised to compensate; OR you regulate to bring down the cost-of-living.
#Rentcontrolsnow
Why is the government so reluctant to regulate the private rental market?
Skip the rent control and go straight to a rent strike.
First week in very month rolling rent strike.
Thus an immediate rent reduction and a immediate decline in property values.
Let the landlords know property does have risk.
So simple.
Stop waiting for someone else to do something - the leaders have made it clear they will do nothing.
RE:US labour market data - Who's Hiring And Who's Firing In April: A Golden Age For Waiters And Card Dealers
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