Here's our summary of key economic events overnight that affect New Zealand with news American economic data is softening now, but there is a sense the Chinese economy may have bottomed out.
In the US, the number job openings rose by +749,000 to a record high 10.9 mln in July. That was well above analyst expectations of 10 mln and it reinforces the notion that firms face significant labour market constraints. Those jobless don't seem to have either the skills or qualifications for what the post-pandemic economy needs. The largest shortages are in health care, finance, and hospitality. The regions where it is hardest to hire are the Northeast, the South, and in the West.
Separately, new official estimates of American labour market growth shows that they won't be back to pre-pandemic employment levels until about 2025. The pandemic labour market shock came at a time many baby boomers were in the last few years on working anyway and they seem to have used the even to bring forward 'retirement', leaving the labour market all together and depressing the overall participation rate. This effect is expected to extend for the next ten years, probably making the demand for skilled workers higher and harder to find.
The US Fed released its September Beige Book review this morning, showing a US economy that "downshifted" in July and August, mainly due to sharp cutbacks in the hospitality sector as the delta virus raised the risks of going out. They noted that growth also slowed because of supply disruptions and labour shortages in manufacturing. Car manufacturing and house construction were noted as suffering. "Inflation was reported to be steady at an elevated pace, as half of the Districts characterized the pace of price increases as strong, while half described it as moderate."
US vehicle sales fell to just a 13 mln annual rate in August due to those chip supply shortages, and this is the lowest level since the GFC (ignoring the 2020 pandemic freeze).
US consumer credit growth came in less than expected in July, and much less than for June. But at lease it was 'growth'.
In the latest US Treasury bond auction, this one for their 10 year Note, the Fed only took US$4 bln of the US$42 bln offered. This is sharply less than the US$18 bln it took at the prior equivalent event a month ago. Market demand for the remainder was slightly less, and the median yield achieved was slightly lower too. The Fed seems to be backing off this support quite quickly now.
Meanwhile, the risks of a debt default rise in Washington.
On a brighter note, we can report that a new wave of battery technologies are about to come to market, transforming how we power most devices. There are big developments with existing technologies as well.
In Canada, their central bank kept its policy rate unchanged at 0.25% in their latest review, surprising no-one. They also kept their QE program at a target pace of C$2 bln per week, following a -C$1 bln cut in the previous meeting.
In China, high frequency data suggests that economic activity has risen steadily in the past few weeks. This turn up means that new major stimulus is now less likely now.
And that is being reflected in sudden, sharp increases in cement demand and prices.
Japan reported a better Q2 GDP outcome in its latest update, up +1.9% (real) rather than the initial +1.3% originally reported. That was better than analysts had expected. But the Q1 retreat was revised to a worse level however.
In the UK, a new +1.25% tax increase has been approved to fund their woeful public health system (one the locals seem to love despite its gross failings).
In Australia, new inter-state fault-lines are rising over vaccine passports for travel.
And staying in Australia, there were another 1480 new community cases in NSW yesterday with another 1379 not assigned to known clusters, so they remain completely out of control. They now have 25,690 locally acquired cases. Victoria reported another 221 new cases yesterday, so it is still bad there too. Queensland is still reporting no new cases. The ACT has 20 new cases. Overall in Australia, more than 39% of eligible Aussies are fully vaccinated, plus 25% have now had one shot so far.
The UST 10yr yield opens today at just over 1.33%, so down -4 bps and giving up all of yesterday's rise. The US 2-10 rate curve is at +111 bps and marginally flatter. Their 1-5 curve is also flatter at +73 bps, while their 3m-10 year curve is flatter too at +129 bps. The Australian Govt ten year benchmark rate starts today at 1.27% and down -3 bps from this time yesterday. The China Govt ten year bond is at 2.87% and unchanged. The New Zealand Govt ten year is now at 1.94% and up another +1 bp in a day and its highest since March.
Wall Street is languishing in its Wednesday session, with the S&P500 currently down a further -0.2%. Overnight, European markets fell rather sharply with Frankfurt down -1.5% at one end, and Paris and London only down -0.8% each at the other. Yesterday, Tokyo rose another +0.9%, but Hong Kong fell by -0.1% and Shanghai by a similar amount. The ASX200 closed -0.2% lower. The NZX50 fell by almost a full -1.0%.
The price of gold is softer again and down by another -US$4 and now at US$1793/oz.
Oil prices have risen by +US$1/bbl, so in the US they are now just on US$69/bbl, while the international Brent price has risen to just over US$72/bbl.
The Kiwi dollar opens today at 71.1 USc and little-changed since this time yesterday. Against the Australian dollar we firmer at just over 96.4 AUc. Against the euro we are also firmer at 60.1 euro cents. That means our TWI-5 starts today at just under 74.1 and still right at the top of the 72-74 range of the past ten months.
The bitcoin price has stayed down overnight, dipping by a further -1.5% from this time yesterday to US$46,239. Volatility in the past 24 hours has been moderate at +/- 3.3%. Things didn't go well in El Salvador.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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49 Comments
In the UK, a new +1.25% tax increase has been approved to fund their woeful public health system (one the locals seem to love despite its gross failings).
That seems a bit harsh. It's not perfect but there aren't many other countries health systems that are better. Outcomes per pound/dollar spent are way better than the US system.
I was talking to some staff the other day who are going through wage negotiations with their union at the moment. A part of the offer they got including rolling back some retirement provisions, and she said to me they didn't apply to her. I suggested that even though she wasn't due for retirement now or in the near future, they did apply. When that happened she could not turn around and say she wanted the benefits others got when she joined. I told her the all the accumulated reductions that had been accepted before she joined and while she was working where she was, would be the benefits she got when she left. So no matter where you are in your career or life, retirement benefits apply to you here and now!
In my personal experience, the NZ system is quite average indeed (the French and German systems are better, for example), but it is still better than the UK one. The US system is a sad joke, and an utter systemic failure, so comparisons with that system are pretty meaningless.
In any case, the German, French (and also those of many North-European countries) are WAY better than the UK system.
I'm not getting a sense of resilience. David's comment here that "there is a sense the Chinese economy may have bottomed out" seems to me that there may be an element of denial in play. Commodities like cement may be in demand, but it is easy to forget or just sideline china's clamp down on their tech industries, and individuals like Jack Ma, and also their inclusion of chips into motherboards made in China, and they way they diverted internet traffic to pass through a Chinese node. And none of that includes their actions in places like the South China Sea, or their announced 'partnership' with the Taliban in Afghanistan.
It seems the threat is increasing, but the love of money over resilience is making us more vulnerable.
China has been watching, waiting, preparing for this opening in Afghanistan. They may have some issues reconciling their own treatment of their own muslims with the Taliban. But the temptations of minerals galore, lithium etc is irresistible undoubtedly and the Taliban needs money and industrial muscle too. So China along with Russia have influence now over a enormous landscape with Pakistan more or less in the camp, Afghanistan, Iran, Syria the sub continent to the Mediterranean and now the status of Iraq becomes extremely pivotal. No surprises then if disquiet on the streets there starts to stir up. India too must be feeling a bit lonely. These have been dynamic and rapid shifts of power in this region this century, the USA something of the catalyst have to say.
They may have some issues reconciling their own treatment of their own muslims with the Taliban.
Muslim states support China's Xinjiang vocational camps, so why is the West so furious?
Indeed - but others are not so discerning.
The initiative saw BlackRock become the first foreign-owned company to operate a wholly owned business in China’s mutual fund industry. Blackrock told CNBC that its China mutual fund subsidiary set up its first fund in the country after raising 6.68 billion Chinese yuan ($1.03 billion) from more than 111,000 investors, suggesting the fund was targeting retail investors. Link
"the USA something of the catalyst have to say" Bloody hell Foxy that's a bit light! They lit the bloody fuse on a huge bomb that the rest of the world will pay the consequences for. Not just the western world either, as the Taliban's fundamentalist Islamic state (I'm a little surprised they haven't called it a Caliphate, but that's probably because they'd then have to name their Caliph) effectively poses a threat to every other Islamic nation as well. As has been indicated the "government" they have named includes characters who have not been backward about exporting their jihad to the world. Their value systems doesn't concern itself with innocent victims as they are martyrs sent to the bosom of Allah. Anyone who isn't Islamic is an 'infidel', and for Christians, a belief in Christ doesn't count because they are the 'crusaders', in breach of the teachings anyway.
Talk of 'bottoming out' seems premature as Evergrande starts defaulting. China's in a fascinating situation right now; personally, I wish the CCP all the best in their efforts to rein in the wildly speculative real estate and tech sectors. I hope they continue on this path; the question is how much that will cost, and how much cost they can stomach.
Why not both?
The Chinese, unlike Western governments, have a living memory of revolution. What they fear most is social unrest.
A lot of Chinese have got rich from the property and tech bubbles, but inequality is now bad enough to cause social instability.
Young Chinese people are increasingly disaffected because the life-path they are supposed to follow is: work 9-9-6, spend all the money on real estate and extra tutoring for your child, who will also work like a dog studying 12 hours a day... The same real estate boom that has made a lot of people rich is also ruining the lives of those without. Sound familiar?
This is why they're willing to let real estate developers fail. They urgently need to send a signal that further speculation will be discouraged. That's why they were willing to destroy the after-school education sector overnight, despite it being 'worth' billions; they saw it was a zero-sum game for students, a financial burden on families, a discouragement to family life. They were willing to nuke an industry that is destructive to society as a whole. I'm not a libertarian; I think that's a good and admirable thing.
My point is, it's not easy to disentangle "genuine care for people and society" from "trying to consolidate and strengthen their centralized power". It's easier to hold power when the people are happy; the relative political stability of China in recent decades has been possible because people have seen prosperity increasing. That's part of the CCP's mandate to rule. Their authoritarian political structure allows many horrible things, but it would be childish to insist that nothing good ever comes of it.
... house prices rises have downshifted in NZ ...
No doubt Robbo will puff himself up and claim a victory that its all due to his actions ... but : it's just that , they're still going up ... not quite at the helter skelter rate of last year .... but , still rising ....
Nice one , Robbo !
I know quite a few people who brought forwards their retirement when the pandemic started, most are much happier for it and very unlikely to return. That said the declines in the US working age population pre-date the pandemic, the workforce is getting smaller and older. Hang on to your young employees because the labour market over coming decades will be very tight indeed:
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
You've seen companies from Goldman Sachs to Amazon trying to get out ahead of the curve and hoover up workers while they are still available. They aren't doing it for the love, they're doing it because they realise that if they don't hire now they'll be on the back foot for years.
From the link to the battery tech
In their paper, the group reports that with the cathode NCM88 and the electrolyte ILE, the lithium metal battery achieves an energy density of 560-watt hours per kilogram (Wh / kg) — based on the total weight of the active materials. The device also has an initial storage capacity of 214 milliampere hours per gram (mAh / g) and 88%of the capacity is retained over 1,000 charging cycles.
That's quite the step up if my google search is correct in saying current Li batteries are 100-265 Wh/kg.
Vehicles with a range of 800km+ might not be too far away.
Try this one which was just in the news: 1200 mAh/gram
https://news.stanford.edu/2021/08/25/researchers-make-alkali-metal-chlo…
The Fed seems to be backing off this support quite quickly now.
The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the Federal Reserve notes that the Federal Reserve Bank puts in to circulation. This collateral is chiefly held in the form of U.S. Treasury, federal agency, and government-sponsored enterprise securities.
The Federal Reserve does not purchase new Treasury securities directly from the U.S. Treasury,..The Federal Reserve does not participate in competitive bidding at Treasury auctions... Link
Here is the link to the webinar referenced by Kim Hill when she starting querying the NZ plan...
Interview with Kim Mulholland (Aust) / Neil Ferguson (UK) and Helen Petousis-Harris (NZ) oranised by the Aussie Science media centre
Interestingly it cant be found on Google ... only duckduckgo ... done want to upset the sheep
The briefing will discuss the following issues:
- How can we make sense of the vaccine efficacy data?
- Just how effective are the vaccines against the Delta variant?
- Do the vaccines prevent transmission?
- Can any countries actually reach herd immunity?
- Will we need booster shots in the coming months?
There's a fair bit of kiwi exceptionalism on display on this website, and denial of the many issues we face. Which mirrors what we see in kiwi society.
I mean some of it - but far from all of it - is justified. For example, I think our education system is pretty good overall.
I think both extreme views of this country - from ultra positive to ultra negative - are wrong.
Overall, I would say our quality of life is middling by OECD standards.
Perhaps.
But in terms of bang for your buck this place is scraping along the bottom. The cost and quality of everything is woeful.
There seems to be a lot of noise about the education system here focusing on cultural nonsense instead of actual academics these days.
I know you aren't happy being back here, but there's not really any 'perhaps' about it. NZ ranks highly on some indicators, and lowly on others. I think to say that we have a middling quality of life by OECD standards is fair.
I totally agree on the horrendous cost of living, which for anyone but high income earners is always going to be a big drag on quality of life.
This country is very far from perfect, there's lots of problems and they are growing problems. Right now I would say that overall it's an OK place to live. I am not confident I will be able to say that in 5-10 years.
My only caveat would be (in my experience) that GP care is better here (we do have a particularly good one though). I always get to see my own GP here and can get an appt usually within 2 days. (That may be the one upside of charging for a visit...stops all the timewasters)
The average wait time in the UK is 2 weeks(!) and that might not be the same doctor every time. https://www.theguardian.com/society/2019/aug/12/nhs-patients-waiting-over-two-weeks-to-see-a-gp-shows-survey
Have friends who are GPs over there and the workload is crazy and they're all quitting or planning to.
EDIT: turns out that average waiting time number may be spurious https://fullfact.org/health/gp-appointment-waiting-times/ although longer waits were certainly my experience
To be fair Mike, we might pay for GP visits but we don't pay 12% National insurance...
(Although i just learned that NI only contributes 20% towards the NHS so effectively it's "only" an extra 2.4% NHS tax on top of income tax) https://fullfact.org/health/how-nhs-funded/
Most of that employee NI contribution is only on a small band of your salary.. you pay zero percent on the first 10k (approx) you earn. Then 12% between 10k-40k (approx). Then 2% on what you earn after that.
The killer tax in the UK is the employers NI that employees don't usually have any visibility for. Your employer is paying 13% of your salary in employers NI contributions before you see it.
The landscape of that tax system makes contracting quite a popular alternative.
Bitcoin in El Salvador was hilarious. Everyone was supposed to get $30 in their digital wallet and most people couldn't even access that. I saw a couple go to 4 different fast food outlets and none of them were accepting it. You could have a $1million in Bitcoin and you cannot buy a burger with it. El Salvador local currency is already the USD so that probably explains why. $200 Million spent in trying to implement Bitcoin over there, the majority of the population are furious.
I think you only have part of the story. Many Salvadorans don't trust the govt and don't see how BTC will benefit them. There has been a Reddit thread circulating highlighting many of the issues.
https://www.reddit.com/r/CryptoCurrency/comments/pjcpcb/bitcoin_will_be…
Just walked into a McDonald's in San Salvador to see if I could pay for my breakfast with bitcoin, tbh fully expecting to be told no. But low and behold, they printed a ticket with QR that took me to a webpage with Lightning invoice, and now I'm enjoying my desayuno traditional!
https://www.forbes.com/sites/jemimamcevoy/2021/09/07/mcdonalds-starts-a…
(Keep up the FUD Carlos)
"In the UK, a new +1.25% tax increase has been approved to fund their woeful public health system (one the locals seem to love despite its gross failings)."
Tut tut! The UK public love the National Health Service - free universal healthcare for all and one of the best performing health systems in the world.
The tax increase is to fund improvements to the widely disliked social care system. The threshold for paying for your own care will increase from about $47,000 to $200,000 (a bit below the NZ threshold). There will also be a cap on care costs that adults have to fund themselves - probably around $170,000 per annum.
The Public Health System is separate again - this is not getting any extra funding.
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