Here's our summary of key economic events overnight that affect New Zealand with news a sense of caution is noticeable in markets ahead of tomorrow's US Fed meeting.
But first,the overnight dairy auction was another soft one, falling for the sixth time in the past seven events with a -1.3% decline. But this time there is kind of a silver lining because the NZD is at a two month low, so in New Zealand dollars the overall price rose +0.6%. The key WMP price slipped -1.8% and the SMP price fell -1.7% from the prior auction. This continual set of slippages may be starting to have analysts reassessing their bullish farm gate milk prices for the upcoming 2021/2022 season.
In the US, there has been a range of second-tier data released overnight and most of it was disappointing, even if markets are ignoring it ahead of tomorrow's US Fed meeting results.
American retail sales slipped in May from April and the slippage was more than expected. But it is still +20.7% higher than for May 2019. Consumers are pulling back from buying big-ticket durable goods, but now spending much more of consumption like eating out in a notable shift.
Factory input costs rose a rather sharp +1.5% in the month to be +6.6% higher than a year ago. Services costs didn't rise as much.
US industrial production rose a bit more than expected in May from April and is now +16% ahead from the pandemic-affected year-ago level but still -0.6% lower than in May 2019.
The New York Fed's factory survey for the state is still expanding at a healthy clip, but less so than in May and less than expected.
Canada's factories are facing sharply higher input costs too, jumping the most in more than 45 years.
German inflation came in pretty much as expected at 2.5% pa and this was despite fuels rising more than +10%.
In Australia, their central bank released the minutes of its dull June 1 meeting. But there was an interesting tidbit in the record of those discussions. The RBA wants to see quicker wage growth to help spur inflation towards target. But they are seeing firms acting to not raise wages by adopting non-wage measures to attract and retain staff, such as one-off bonuses and more flexible working arrangements. Some firms were also opting to ration output because of labour shortages, rather than pay higher wages to attract new workers, they said.
Wall Street is slipping today with the S&P500 down -0.2% in afternoon trade. Overnight European markets closed up +0.4%. Yesterday the very large Tokyo market ended its session up a strong +1.0%. The Hong Kong market however went the other way, down -0.7% followed by Shanghai which was down -0.9%. The ASX200 ended up +0.9% while the NZX50 Capital Index capped them all ending up +1.1%.
The UST 10yr yield starts today unchanged at 1.50%. The US 2-10 rate curve is little-changed at +133 bps. Their 1-5 curve is now flatter at +72 bps, while their 3m-10 year curve is flatter as well at +148 bps. The Australian Govt ten year benchmark rate starts today at 1.50% and up +1 bp. The China Govt ten year bond is still at 3.15%. And the New Zealand Govt ten year is still at 1.65%.
The price of gold starts today at US$1857/oz which is down another -US$6 from this time yesterday.
Oil prices are up more than +US$1 overnight at just under US$72/bbl in the US, while the international Brent price is still just on US$73.50/bbl. Demand from China is supporting this price.
The Kiwi dollar opens today at 71.2 USc with a minor devaluation since this time yesterday. Against the Australian dollar we are firmish at 92.7 AUc. Against the euro we are softish at 58.7 euro cents. That means our TWI-5 starts today at 73 and a two month low.
The bitcoin price is now at US$40,393 and up a very minor +0.4% from this time yesterday. Volatility in the past 24 hours has been moderate at +/- 2.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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56 Comments
And Stuff are reporting a survey that indicates Kiwis are increasingly seeing China as a threat. In my view stunningly behind Russia and North Korea, which shows a real lack of understanding of military capabilities as well as geo-political and economic movements. China's belligerence continues as they sent 24 military aircraft into Taiwan's ADIZ yesterday (Tuesday), which not only included fighters and strike aircraft, but four nuclear capable heavy bombers too.
While the average Kiwi may be waking up, they are still a long way from understanding the implications. Our Government doesn't appear to be much better.
Check this out, how Samoa is trying to reject Chinesse debt trap
From the White House G7 readout:
Strengthen our partnerships with others around the world. We will develop a new partnership to build back better for the world, through a step change in our approach to investment for infrastructure, including through an initiative for clean and green growth. We are resolved to deepen our current partnership to a new deal with Africa, including by magnifying support from the International Monetary Fund for countries most in need to support our aim to reach a total global ambition of $100 billion.
More failed Washington Consensus economics?
Funny I don't see China as a threat. The USA is trying to make them out to be the bad guys, I'm not buying into it. They are a rising power economically and the USA are now trying to suppress them because of it with a "they are a danger" narrative. I was more worried about the USA when they put the last idiot in power.
Carlos - " Funny I don't see China as a threat. The USA is trying to make them out to be the bad guys, I'm not buying into it. They are a rising power economically and the USA are now trying to suppress them because of it with a "they are a danger" narrative. I was more worried about the USA when they put the last idiot in power "
I 100% agree.
I use to believe that Iranians were bad, the US wants us to believe that, until a good friend of mine went there in 2019 for a Architects conference, surprise surprise they are wonderful hosts for tourists, its' safe and the country is way more developed than we are led to believe !
The US is toxic on a world stage !
Comments like this sometimes is totally misleading. People who had no historical background in the region would easily believe anything. Taiwan claims sovereignty over entire China and it is in their Constitution. Actually they both claim each other's land after civil war in 1949. Fact two. the Taiwan ADIZ (someone please do type this in google), a third of this ADIZ covers three mainland provinces within China and again there are overlapping ADIZ between Janpan China South Korea and Taiwan. Fact three, ADIZ is not entirely territorial water or land, it includes international airspace. Anyone Please let me know if anything I said above is incorrect.
World is aware except Jacinda Arden and our very own Mr Orr is still in Wait and Watch mode
https://www.newshub.co.nz/home/money/2021/06/new-zealand-tops-bloomberg…
What is Mr Orr waiting NOW as monthly data released suggests that house prices are touching new height and the same and will be reflected in quarterly or annual data ( Is not quarterly data made up of weekly / monthly data and was it not manipulated by Mr Orr to cover those data as it did not suit his narrative by deflecting to quaterley or annual data - playing with time. Just like the spin on temporary inflation is to keep everyone silence / cover higher inflation number, which are comming out every week / month as who has seen the future)
Mr Orr last month mentioned that he has data suggesting that housing market is cooling, WHERE IS THAT DATA.....Was he lying.......to support ponzi.
Is he accountable now or ........
For Jacinda Arden, think she is waiting for another open home near her house to realise, how BIG the crisis is in NZ.
Does anyone of them are aware of what is happening or go on hearsay from the people surrounding them as they all have same vested biased interest.
NOW WHAT AS ALL DATA RELASED EVEN AFTER THREE MONTHS OF HOUSING POLICY AND REINTRODUCTION OF LVR SUGGEST THAT STILL ........Will be interesting to hear new analysis and twist from Mr Orr and Robertson ......how they spin to support the ponzi.
Bernard Hickey on Housing
https://thekaka.substack.com/p/dawn-chorus-sustainably-unaffordable?tok…
Will RBNZ and Government maintain silence on this issue and bigger question will media allow them to be silent.
"RBNZ opposed use of the word “affordable” in the mandate on housing, and insisted it should be “sustainable.” The Reserve Bank argued ‘sustainable’ was much closer to its financial stability mandate, “where our concern relates to excessive volatility in house prices.”
This pretty much sums up the RBNZ, a semantic argument over the whether the use of the word "sustainable" or "affordable" is appropriate. Bravo Mr Orr you truly are the hero we need.
Houston we have a problem!
For some perspective - as of Dec20 $1,385,674,000,000 is the total value of NZ residential housing.
Given the increase in the last 6 months a 20% drop in house prices will suck over $300Billion from Kiwis perceived collective wealth. That's 45 "Fletcher Buildings" or 116 "Trust Powers".
Whichever way you look at it, it's not small change.
Created a monster so big that will start dictating and this is exactly what is happening in housing market that has become so big that no one is able to control it with fear of adverse reaction as mentioned by you Tom Joad.
Government has dug themselves in a situation where have allowed themselves to be blackmailed but this fear has to be overcome and go for short term pain for long term gain as still possible to avoid disaster both social as well as economy.
It is this fear that is used to prevent RBNZ and government from taking any meaningful action.
Yeah but they are not going to drop are they in fact they are going to go up another 10% between now and Christmas. The best thing anyone can hope for after that is the annual rise that matches inflation which will be a so called "2-3%" per year so essentially flat.
Carlos67 nature and economy cycle will play by itself and will be bad for everyone.
After 30% to 60% rise another 10% rise will add to FOMO and will continue as it is as prices stands now make no sense. FOMO has to be controlled and for that prices should fall even by few percentage will help and little fall will be a drop in a ocean and will not affect anyone but may help to calm FOMO and deter speculation.
Hi Carlos67, It will not be 10% but could be much more, the way this ponzi is supported by Mr Orr and Robertson with blessing from Jacinda Arden.
Do not believe : Let their be a fear that housing ponzi may stop and see how they all come out firing with all policies and measures to support - act first than think and when it is the other way round like now it is think.....think......think......Who the he'll wants to act .....in worst scenario comes out with sympathy and hope of future action but still.......no action.
Well the big rises have already happened, so.....
Seriously, housing bubbles usually don't pop overnight. But now, it pays not to be surprised by anything. Michael Bury (author of 'The Great Short') says "People always ask me what is going on in the markets. It is simple. Greatest Speculative Bubble of All Time in All Things. By two orders of magnitude."
Agreed, I find it truly bizarre that the current labour govt hasn't tried to tax the property market in some form. The stars are aligned. They have both a majority in govt & the perfect excuse, a pandemic. A land tax on investors of 1 or 2% or a CGT of 10% could probably have been implemented in 2020 with relative ease. If anyone has a problem you just say we need this money to fight the pandemic & that individuals & companies are already over taxed. On the bright side at least high don't have to listen to my labour voting friends harping on about national & the investor class anymore.
To be fair they have increased benefits but yes they seem to have lost the fervour of their communist party beginnings. We have a while to go before the next election so I suspect it will be cruise control until then. Then we can expect crazy-time to continue, specifically not listening in any way to the paid experts and certainly not consulting with affected parties.
More so the equivalent of $60 000 per man woman and child. In Dec last year household debt was $250 Billion - an argument could be said thats now closer to $300B in household debt- all of which must be paid back (with interest).
in a story closer to home a nearby neighbour bought a 3 and 1 house for 1.1M in Nov last year- paid approx 120K over the valuation at the time- but was desperate to get in because of FOMO. The marriage has split up and with the changes in the interest deductibility rules there are now a glut of lower priced 3 and 1's on the market. The local real estate agent told him she wouldnt think he'd get more than $1 Million for it at the moment (only three 3 and 1 houses in the area are going for more than $1.1 Million - one has been on the market 3 months and the other 2 are big potential development blocks.) So he is now having to rent it - (he needs $200 above market rent per week to cover the mortgage) to avoid taking a loss.
There really is no Ponzi. You can buy a near new modern home in Canterbury for less than the cost of buying the land and building it. You want to live in Auckland or be close to your preferred school that is entirely your choice. Plenty of other affordable areas to buy in as well. Plenty of work too. The percentage of first home buyers has been on the rise, that is NOT a sign of affordability decreasing. I accept lower interest rates are at play but I am often surprised buy what a house sells for and why.
New Zealand, leading the world again:
https://www.bloomberg.com/news/articles/2021-06-15/world-s-most-bubbly-…
Interesting article on cnbc suggesting how everyone is having a doubt on reserve banks narrative. Creditabilty of reserve bank is at stake and may be, will be the biggest reset post panademic.
https://www.cnbc.com/2021/06/14/paul-tudor-jones-says-bet-heavily-on-ev…
Many do not buy the theory that high inflation is temperarory as data suggests otherwise and feel that reserve bank is kicking the can as much as by changing the defintatiin of short term as and how it suits them along with what level of inflation is tolerable or high.
All Central Banks, no matter their closeness or distance to Governments, are struggling in uncharted territory. They have no memory of where we are, because it hasn't happened before. Not at global scale, anyway.
Imagine a blindfolded person on a ladder, pushing a bucket of paint up the rungs ahead of them. It becomes routine; take a step, shift the bucket. Then the bucket hits the ceiling, with not quite enough distance-gone for our blindfolded hero to get it onto the next step. What does he do? Well, it's never happened before, so he pushes upwards harder. What he needed to do, was take the blinkers off and ascertain the real parameters he was operating in.
And there we have the failure of economics, in a nutshell. These people can't shift the ceiling, and don't dare take off their blindfolds (having posited for two centuries that the ladder was endless; they'd lose cred)
Unemployment in the UK is on par with ours at 4.7% but off a much higher participation rate (79% in UK vs 70.4% in NZ).
Average wages trending up since January to levels not seen elsewhere in the West.
https://www.reuters.com/world/uk/uk-payrolled-employees-surge-by-197000…
Wellington Airport Bus. - which no longer exists - given Wellingtons layout the bus was as useful to get into town as a taxi.
Yet every morning hundreds of government employees and NGO staff fly into Wellington airport each gets into a taxi and off to the city. Hordes of taxis.
Many of them will be there to discuss climate change and carbon reduction.
Madness.
That is if the transport provider can find enough staff to drive buses at $22-23 an hour.
The council just yesterday announced further cuts to its peak hour service, blaming a lack of migrant drivers coming through the borders.
For reference, the regional council, in-charge of funding the bus service, has 125 staff on six-figure salaries.
She ride shares in an EV with a migrant driver while tweeting
https://twitter.com/JulieAnneGenter/status/1377780931121963010
Pay them more then. $30 ? Plenty of Kiwis would line up to do it.
Companies tendered to provide the service but have not performed their contract. They are huge companies and have the resources to meet their obligations, even if they misquoted. They should be obliged to pay what it costs (wages) to meet their contract.
I bet if they made a zillion bucks from the contract they would be putting their hands up to pay some back to the council. Tui.
Comments like this sometimes is totally misleading. People who had no historical background in the region would easily believe anything. Taiwan claims sovereignty over entire China and it is in their Constitution. Actually they both claim each other's land after civil war in 1949. Fact two. the Taiwan ADIZ (someone please do type this in google), a third of this ADIZ covers three mainland provinces within China and again there are overlapping ADIZ between Janpan China South Korea and Taiwan. Fact three, ADIZ is not entirely territorial water or land, it includes international airspace. Anyone Please let me know if anything I said above is incorrect. I found this type of comment is very common nowadays.
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