Here's a special holiday update of some key events and data you may want to know about today.
The US economy added just +138,000 net new nonfarm payrolls in April, and there was a large downward revision to jobs growth in the previous two months. These figures, coupled with average hourly earnings which grew just +2.5% in the twelve months to May, may prompt the doves at the US Fed to reconsider voting for a rate increase in the middle of next week. But with their unemployment rate falling to 4.3% (which is down from 4.8% at the start of the year), and other data from the report pointing to diminishing labour market slack, most still still expect the Fed to raise rates when they next meet on June 15, NZ time.
The American trade deficit widened in April as Americans stepped up purchases of foreign goods such as cell phones and equipment. It increased +5.2% from a month earlier to US$47.6 bln. Imports grew +0.8% from March while exports fell -0.3%.
That may have been why global airfreight (as measured by tonne kilometres) grew by +8.5% year-on-year in April, down from growth at the rate of +13.4% in March. The healthiest region was the Asia-Pacific, with North America a laggard.
Meanwhile, global passenger air travel grew by +10.7% year-on-year in April – the fastest pace in 6 years.
In China, their banking distortions are growing every greater. The ratio of private non-financial debt-to-GDP is now more than 200% - a quarter above what it was in the US ahead of the financial crisis in 2008. If all off-balance lending were to be included, the total would be substantially higher. Credit continues to flow towards unprofitable projects and unproductive assets that generate little or no return. One analyst has estimated their non-performing loans are now close to 30% of GDP, over ten times higher than the official estimate. But there are no signs officials there are about to take any meaningful remedial action. A major Chinese banking crisis is just getting closer, although it is impossible to know when or how it will arrive. But when that time arrives, it will probably happen suddenly.
In Japan, data out for 2016 shows that for the first time ever, there were less than 1 mln births in the country. Japan’s population hit a peak of 128 mln in 2010, but it shrank by close to a million in the five years through 2015, according to census data. By 2060, demographers expect the Japanese population to plunge by a third, to as few as 80 million people - a net loss of a million a year, on average.
In New Zealand, data out here shows there were 9,186 new cars sold in May, the highest number in 27 years. And 56% of all new cars being sold are SUVs. However the real story is over on the commercial side. The 4,745 new commercial vehicles sold in May were the highest number in any month, ever.
And in case you missed it, LINZ has published updated details of tax residency for the 41,919 property transfers registered with them from January to March 2017. 3% were not New Zealand tax residents. In Auckland it was 5%. They are now also collecting 'affiliation' stats. That shows that 82% were NZ citizens or residents, 16% were corporates or businesses, and 2% were foreigners. In Auckland, the foreign buyer proportion was 4%. It is unlikely any of this extended data will satisfy those who had already arrived at conclusions without the annoying need for any data at all. Blaming foreigners for our own ills is not unique to some Kiwis. It is pervasive in Australia too.
In New York, the UST 10yr yield is sharply lower following the employment report, now at 2.16%.
The US benchmark oil price is lower today and now under US$48 a barrel, while the Brent benchmark is just under US$50.
The gold price is higher by more than +US$10 at US$1,279/oz.
The New Zealand dollar is definitely firmer following the weak US employment data and now at 71.5 USc. On the cross rates it up to 96 AU¢, and 63.3euro ce nts. The TWI-5 is now at 75.6.
The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »
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47 Comments
"It is unlikely any of this extended data will satisfy those who had already arrived at conclusions without the annoying need for any data at all. Blaming foreigners for our own ills is not unique to some Kiwis."
The housing market has magically ground to a halt this quarter. Coincidence?
Driving my daughter to maths tutoring actually. A 4km round trip.
However when you consider Double-GZ and my own interest in this subject it's not sad at all. We have lots of other interests too. Plenty of time to fit everything in, it's a rich and interesting life.
Also it may be lowish sales numbers but hundreds of them nevertheless.
I'm still walking and spotting those sold signs left right and centre. In the last week the most notable sales are both within easy walking distance. 3A Upland Rd and 82 Upland Rd, both well over $3m. Also the one that Zach pointed out to me 2 weeks ago at 1/32A Tawera Road has also been sold!
http://rwremuera.co.nz/auckland/remuera/82-upland-road-10259183/
http://rwremuera.co.nz/auckland/remuera/3a-upland-road-11131369/
http://rwremuera.co.nz/auckland/greenlane/132a-tawera-road-13353954/
I agree with Zach in this instance. In my endeavour to stay lean and mean... I run the streets of Glenfield, Hillcrest and surrounding suburbs. Lots of For Sale signs with SOLD stickers. Houses usually on the market, albeit by 'negotiation' for between three and four weeks before being sold. Buyers don't seem to have stopped buying and the demographic of purchaser would also indicate not all capital flight from our second favourite trading partner has stopped.
That may be... I can say that I sold my one classic car last month to an investor that had about 25 classic cars. He wanted our car and wanted to make it a better classic car via a bit of restoration, so I sold it to him despite other offers that were higher than his offer... maybe his was not an investment but instead a purchase...
Then again, I remember when Japan was buying anything/everything in Hawaii and California 25+ years ago... sadly for them, they were selling a few years later at a rather large discount as compared to their purchase price.
Recently the property spruikers appear to be a just tad desperate - using cliché's in response to unwelcome news ( e.g. poor auction results). While property sales have not stopped the more important answer needed is the selling price. Additionally it is what is happening in the entire market, not just a drive down the road or what is happening in your particular area.
So foreigners could indeed be net sellers of New Zealand property. Three countries , Canada, Australia and New Zealand all simultaneously headlined that foreign invaders were buying property at the cost of the locals throughout the media and various real estate outlets. Hard data from Canada supports the LINZ numbers. If foreigners had been buying in such large numbers our mortgage credit data would have been very disturbing.
Maybe this quote from today's holiday briefing could one day tell us how much of Auckland's property market is oversea's Chinese owned.
"A major Chinese banking crisis is just getting closer, although it is impossible to know when or how it will arrive. But when that time arrives, it will probably happen suddenly"
Yes there's certainly been lots of hints about China having to tighten up it's lending and clean up their banking systems. It wouldn't take much to call in their loans. A simple increase on their rates from 1 to 2% would be enough to have a huge impact on the so called gateway cities like Auckland etc.. Forcing lots of foreign buy sell up.
Oh wait that may well be starting to happen according to recent headlines: The number of homes available for sale in Auckland up 51% on last year.
https://www.interest.co.nz/property/88080/number-homes-available-sale-a…
A 51% listings increase in Auckland is a heck of a lot!
John Key gets a knighthood (http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11869410). One of his comments is:
"It doesn't change anything for [his family] but I think it is one of those things where for future generations of our family, it will always be a nice thing that was there."
Like an affordable home for many families, to be kept in the family? But now not affordable -- 'Affordable Auckland a thing of the past' (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…).
In the past eight years, Key lead NZ through one of the greatest redistributions of wealth (via property) into those with and those without that has taken place in New Zealand's history, and neither did not attempted anything material to change that outcome.
Thank you for your service, Sir John, from a grateful nation.
But with their unemployment rate falling to 4.3% (which is down from 4.8% at the start of the year), and other data from the report pointing to diminishing labour market slack, most still still expect the Fed to raise rates when they next meet on June 15, NZ time. [my emphasis]
This claim is in need of an explanation in respect of the missing denominator values.
There is just one problem with the above "silver lining": the unemployment rate declined for all the wrong reasons, because contrary to expectations, the Household Survey reported that the number of employed Americans actually declined by 233K to 152.923 million, the lowest going back to February.
So how could the unemployment rate decline as the number of employed Americans tumbled? Simple: the labor force plunged, with the BLS reporting that the total labor force declined by 429,000 Americans in the month of May. This was the result of a whopping 608,000 American exiting, as the number of people not in the labor force soared to 94.983 million, up from 94.375 million in April.
As a result, the labor participation rate tumbled once again, sliding to 62.7%, the lowest print since 2016. Read more
Moreover,
Average weekly earnings for production and non-supervisory employees were just 1% more last month than in May 2016. For all workers, average weekly earnings grew by just 0.9%. Variation is quite common in these data points, so averages are more instructive as to the state of wage inflation. The six-month average for production workers is just 2.4%, the same as it was last month and the month before. Thirteen months ago, the average was 1.8%, so clearly there is some improvement, but in terms that matter not really.
To begin 2015, average growth in earnings was 2.4%. At the end of the Polar Vortex in early 2014, average earnings growth was 2.4%. I could go on but you get the point. Policymakers have been seeing “signs” of acceleration all throughout that nearly three and a half year period. They could not be more encouraged by every drop of the unemployment rate; at least until now, as I wrote earlier. As the unemployment rate falls further especially in months like this where it is due to the labor force contracting sharply, their whole operating theory about economy falls apart. Read more
The UST 10s at 2.16% reflect the situation more than adequately. Read more
Yes, a bit meaningless this residents/foreigners data. If you can fog a mirror you can be a Kiwi resident pretty much with the whole process characterised by fraud and corruption at every level. A deeply embarrassing national disgrace and, what's worse, once here even multi million dollar fraudsters (William Yan) or convicted sex criminals and pedophiles (Sultan Ali Abdul Ali Akbari) are welcome to stay. The man that inflicted this on us gets a Knighthood to add insult to injury. You couldn't make it up!
The raw data is one thing. The reality behind that data is another.
There is plenty of offshore Chinese money being pumped through local platforms, which are tax residency entities. Some of my contacts in real estate and development reckon as much as 15-20% of the Auckland market comprises such platforms.
Whether anything could realistically and effectively be done to address this is another question.
As a result, there is no doubt whatsoever that slowdowns in Chinese capital outflow are having a significant impact in Auckland.
Another scenario I see in Auckland regularly is that particularly with large greenfield or brownfield sites, they have often changed Chinese hands several times, and they often reach a ridiculous price point that effectively scuttles any feasible development opportunity.
Ah Fritz, have you looked at the amount of Auckland greenfield and brownfield for sale on Trademe? It makes up almost 10% of the properties for sale in a market that is up 50% than this time last year. I find this very interesting for the simple reason anyone who has the wherewithal and smarts to do a bit of land-banking in a Booming market, would probably have a fair idea when to flog it... or better/worse still (depending on your view point) some land-bankers are starting to feel a bit of panic. Just my two cents worth.
Zach I am guessing this 2-bed 1-bath cottage in Remuera DGZ will go for > $4m
#LoveYourArea and watch this space. https://youtu.be/SBSiZm1ZB1Q
http://rwremuera.co.nz/auckland/remuera/36-st-vincent-avenue-17084892/
I think the lead lights are the real deal although I am no expert. The weatherboard paint is mixed with something like sand, can't remember what it was called, to give it a textured look. Was quite popular a few years ago but annoying if you want to get rid of it as the whole house needs to be stripped right back. Can be over painted.
Of course the improvements, meaning the house, are only about 200k while the land is worth close to 4m. Mowing the lawn will keep the owner fit unless they have a ride on.
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