sign up log in
Want to go ad-free? Find out how, here.

US growth tame; PCE rises; Norway wealth fund drops; Argentina raises rates by +300 bps; NZ migrant friendly; US complains about Pharmac again; UST 10yr 2.96%; oil unchanged, gold up; NZ$1 = 70.9 USc; TWI-5 = 73

US growth tame; PCE rises; Norway wealth fund drops; Argentina raises rates by +300 bps; NZ migrant friendly; US complains about Pharmac again; UST 10yr 2.96%; oil unchanged, gold up; NZ$1 = 70.9 USc; TWI-5 = 73

Here's our summary of key events overnight that affect New Zealand, with news faster economic growth is eluding the Americans

The first estimate of American economic growth for the March 2018 quarter is out and shows an expansion of +2.3%. This was slightly higher than analysts expected (+2.0%), but well below the December 2017 quarter rate of +2.9%. Today's result is the slowest growth rate over the past year. Basically consumers reined in spending even though tax cuts improved take-home pay in many households.

The data also showed personal consumption expenditures (PCE), the inflation metric the Fed likes best, rose at a slightly faster rate. The 'core' measure, which excludes food and energy) was up +1.6% year-on-year although the q-on-q rate was at a more noteable +2.5% rate. That is high enough for some analysts to change their forecasts to expect four Fed hikes in 2018 rather than three.

And the other major US consumer sentiment survey was out today, confirming the positive reading although the high levels are slipping. It dropped 2.6 points from a month earlier to a reading of 98.8 in April. Still, that figure was nearly 2 points above the level posted a year ago.

Norway's giant sovereign wealth fund is struggling to make gains now. It actually posted a loss in the first quarter of 2018, mirroring the difficulty other investors are having. Their equity portfolio was down -2.2% and their bond portfolio was down nearly -0.5%. Their unlisted real estate investments rose +2.5% (although they represent less than 3% of their portfolio). It is a fund that is skewed towards ethical investments. And it is enormous at almost US$1.1 tln so it finds it hard to beat overall market directions. It's actual quarterly loss was US$21 bln, which amounts to about 80% of the size of the NZ Super Fund's total current value.

Argentina’s central bank surprised markets overnight by jerking its key interest rate up +3% to 30.25%, citing the effect a stronger US dollar is having and vowing to act again if high inflation persists. Inflation is running at +25% in Argentina.

In England, their growth rate slipped to just +1.2% in Q1-2018 and there is talk of 'stagnation' in their economy. Their currency fell on the news. And in March, 86% of all English properties sold for less than their asking price, the highest level seen since this metric started in 2013.

In Australia, the ir tax office has released updated data on who pays their income tax. It shows higher income earners continue to pay the bulk of income taxes even amid politically-charged complaints that inequality is rising.

The OECD has updated its tax wedge analysis and reports that New Zealand has the second lowest in the group of 35 developed countries. A tax wedge measures the difference between what an employer pays for an employee and what the employee actually gets after taxes and benefits. The wedge in New Zealand is about half the average; and that average is elevated by very heavy taxing by European countries.

New Zealand also scores highly in an international survey measuring the acceptance of migrants. Only Iceland was more welcoming in the surveyed countries and only by a whisker. One interesting feature of the survey is that it found that for people who claim they are religious, they are much less accepting or tolerant of immigrants. The survey is based on three questions Gallup asked in 138 countries in 2016 and in the US and Canada in 2017. Eastern European countries are the least accepting. Overall, better educated people are more accepting, and in age groups, baby boomers the least accepting.

The US is complaining about Pharmac again. Overnight it issued a report in which they downgraded Canada for not protecting their big pharma companies (and poor border enforcement). The same report complained about how New Zealand has a "lack of tansparency (sic), fairness, and predictability of the PHARMAC pricing and reimbursement regime, as well as negative aspects of the overall climate for innovative medicines in New Zealand."

The UST 10yr yield is now at 2.96% and down -1 bp overnight (although the same as it was this time last week). The Chinese 10yr is up to 3.66% (+2 bps) while the New Zealand equivalent is at 2.91% (unchanged).

The VIX is lower than this time last week and the index is now just over 15, still elevated. The average index level over the past year is 12. The Fear & Greed index is moving more toward a neutral level and just on the "fear" side.

Gold markets have not yet closed but at this time the price is at US$1,323/oz in New York. That is up +US$7 since this time yesterday.

Oil prices however are unchanged overnight at just over US$68 and the Brent benchmark just under US$74.50/bbl.

The Kiwi dollar is ending the week down at 70.9 USc and another retreat over the week; it was 72 at this time last week, so another fall of more than -1c. On the cross rates we are at 93.5 AUc and 58.4 euro cents. That puts the TWI-5 at 73.

Bitcoin is however at US$8,988 and that is a net gain of +5.3% over the week.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

Select chart tabs

Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
End of day UTC
Source: CoinDesk

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

12 Comments

Has anyone else noticed that the trademe listings for houses for sale in Auckland have been going up rather than down?

Up
0

Yup, sure is. Next, spring will unleash another wave of listings too.....

Up
0

Our tax wedge could be even smaller if we had a land tax.

And the US should stop complaining about Pharmac and look at the cost of medication in their own country.

Up
0

No representation without taxation!

Up
0

I wonder if the fact that both Iceland and New Zealand are rather hard to get to other than through legitimate methods colours people's perceptions of migrants. We both have better defences than any wall Trump could build which results in a nice and orderly flow of immigrants.

Refugees fleeing war torn areas, poverty, criminal violence and so on are far different to your university educated and hard working Chinese family hoping to find wider horizons for their kids.

Up
0

Exactly.

Up
0

Yes. And politicians understand how immigration feeds GDP, which can then be referred to as an indicator of "economic success", while at the same time you have to spend more time in your car everyday before entering your mouse wheel. To assuage any creeping doubts you may have, Granny Herald will tell you how lucky you are and qualify that with a "#1 country in the world 2017 " from a travel magazine. Middle NZ likes its self assurance to be gamified.

Up
0

A more interesting question would be if "economic migrants" were truly able to choose to which country they could migrate - where would New Zealand be in the rankings. As was pointed out in an article the other day over half of all international students were from China but a majority of intentional students were studying for a qualification lower than degree level.

https://www.stuff.co.nz/business/103421524/most-international-students-…

Additionally China has several universities if the top 100.

Up
0

It puzzles me that the Chinese entrepreneurs granted permanent residency out-number Indians by forty to one. Given the commonwealth, English as educational language and historic ties it ought to be the opposite.

Up
0

Perhaps it has more to do with property rights than the Commonwealth ties.

Up
0

Most international students in NZ from India hail from the Northern parts of the country where English, though the medium of education, is much less spoken compared to the Southern half.
Indians from the South are the highly educated in tech and engineering, fluent English speakers of the country are more likely to migrate to the US and Canada than NZ.
FYI.. CEs of Pepsico, Google and Microsoft are all from the Southern regions of India.

Up
0

Brilliant and that's actually true. Can we try to bring some of these geniuses into NZ. They probably don't know how good life is here, much better friendlier people, good work opportunities and no nutters running around with guns.

Up
0