Here's our summary of key events overnight that affect New Zealand, with news the rise of the gig economy might be messing with how we measure our labour markets.
But first, American retail sales for October came in with a strong result, up +5.9% from the same month a year ago and beating estimates, boosted somewhat by storm replacement demand.
In Canada, residential sales levels came in much lower than expected. They were down -3.7% in October compared to the same month a year ago, and house prices eased -1.5% from September although up +2.3% year-on-year.
Meanwhile, the latest (unofficial) indications of their job market showed a surprising fall of -23,000 jobs in October, after a very strong September result. A small gain was expected.
Back in the US for a moment, a part of the puzzle of why their employment rate is so low may have been answered. New official research shows that maybe as many as 3 mln people in the gig economy are not being counted as employed when they clearly are. Numbers at that level will make a huge difference to how we see the the American labour market.
In Beijing their official statistics agency released data on house prices showing broad stability. In this data there is no sign of the tensions and stress reported elsewhere of falling prices and the social anxiety these are apparently causing. Chinese censorship rules are now extending to official economic data reports following "instructions" not to changshuai (bad mouth) the economy.
In the EU, car sales are still falling in October data out overnight. They are down -7.3% on a year-on-year basis, although the fall-off is at a more moderate pace than in we saw in September. But results vary widely by country. Spain (+10.0%) saw the highest growth rates, followed by France (+5.7%) and Germany (+1.4%). By contrast, registrations declined in Italy (-3.2%) and the United Kingdom (-7.2%).
The EU trade surplus came in much lower than expected in September. Although their surplus with the US swelled, their deficit with China is unchanged but still very high (and bigger than the US surplus). In fact, Germany's bedrock economy unexpectedly shrank -0.2% in Q3 2018, according to data published yesterday. It was the first quarterly contraction since 2015, with a drop in exports suggesting the trade war skirmishes are dampening the powerful EU engine.
In the UK, their prime minister was fighting to save her Brexit deal just hours after it was sealed, as a series of ministers resigned amid deepening political turmoil over the terms.
The CEO of Australian insurer IAG has warned a failure to reduce carbon emissions could result in a world that is "pretty much uninsurable".
And the RBA is sweating the fallout from the credit tightening following their Hayne Commission review. They see the resulting pullback pushing house prices down, itself restraining lending even more. "There is a risk that this process overshoots leading to a sharper or more protracted decline in activity than we currently expect," said a senior official yesterday.
The UST 10yr yield are at 3.11%, rise of +2 bps. Their 2-10 curve is still just on +25 bps. The Aussie Govt 10yr is at 2.71%, up +1 bp, the China Govt 10yr is at 3.43% and down -3 bps, while the NZ Govt 10 yr is at 2.78% and that was down -2 bps overnight.
Gold is up +US$10 today at US$1,213/oz.
US oil prices are little-changed today and now still just over US$56.50/bbl. The Brent benchmark is now over US$66.50/bbl. There are reports the Saudis are very unhappy with US exemptions for the continued purchase of Iranian oil and may cut output sharply, this time against US wishes.
The Kiwi dollar will start today firmer yet again and now at 68.2 USc. On the cross rates we are down slightly at 93.9 AUc after breaching 94 yesterday, and at 60.3 euro cents. That puts the TWI-5 up to 72.8 and a new five month high.
Bitcoin has stayed down and is now at US$5,533, another -2% slide overnight. It is now at NZ$8,111 which is its lowest in local currency since October 2017. In the intervening time it rose to NZ$27,664. Triggers for this latest fall are still unclear. This rate is charted in the exchange rate set below.
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51 Comments
David's afternoon data on housing values was interesting not because we have over a trillion of the stuff, but that even with the lowest ever interest rates ,the percentage of renters/home owners continues to increase. The June year saw 90066 property sales , 4.8 percent of housing stock turnover , an additional 27200 properties added, and net rental properties increased at twice the rate of owner occupier . The June years turnover rate at 4.8 percent was half of the 2003 period being an incredible 9.6 percent, or basically 1 in 10 of every New Zealand housing stock was sold. The lowest turnover of housing stock this century was in 2010, when the magical 4 percent number was breached, at 3.9 percent or 68202 sales. Although housing wealth has increased, over the past year, stripping out the additional property added,and the increase in housing debt, we are getting close to treading water .Now we are back to cash backs and ipads and mortgage lows any increase in mortgage rates rates will lead to some harsh difficulties.
Thankfully for the time being the NZD appears to be heading upwards on a lift.
https://www.resilience.org/stories/2018-11-15/the-climate-crisis-as-see…
'This is what a group of powerful people look like when they lose touch with reality'.
is it any surprise that since Brexit and Trump, the number of articles and discussions about the failure of the rich and powerful to protect the world, and its people are increasing at a dramatic pace. Superficially there is an element that suggests many of the politicians don't get it, and the rich clearly lobby them, and probably bribe overtly or subtly to ensure the laws always favour them. It's almost funny. Because they have the most to lose, the destruction of the planet will impact them the most. They will try to avoid the impacts, using their money and influence, but there will be no avoiding the consequences. Case in point - how many rich and famous homes have been destroyed in the recent wild fires in California? So when will these people start using their money and influence to change the politicians?
Hanlon's Razor adequately suffices to describe the behaviour.
It has been a known issue for generations. Now it is a dark joke that humanity can never really act in its best interests long term because we lack the cognitive capacity to grasp truly long term planning, higher learning across a broad range of issues and have the ability to act on that knowledge. The brain and physical state is limited, either one goes into a position to effect change at a significant level or one learns about the issues and most beneficial effective changes. The time frame for this is also exceptionally limited both physically, financially and socially.
In addition social campaigns just tinker in the bottom corner doing nothing but promoting false marketing for someone else's business interests and they are literally limited to the common knowledge of the lowest denominator, not any specialist understanding at all, unfortunately because too many cannot do either the learning or gain powerful positions because they literally have to focus on survival and practically nothing else.
Humanity pushed to solely focus on survival can be a great driver for apathy and a lack of housing along with basic need financial pressures sufficiently drives the increase in apathy, as well as discarding of ethics, morals, social involvement, and improvement. Hence why retirees are more likely to engage with social submissions and volunteer work, not to mention also being the ones most in need of critically community changes to survive. They have the time, more living needs supported in income, care work and housing, have benefited from more equitable access to higher learning across a broad range of subjects over time, and they have the impetus that those basic living needs are directly under critical threat should access be removed in a direct manner, not an indirect manner requiring more complex thought to process such as most suggested policy or economic changes.
That Aussie housing information was intriguing.
In summary, if interest rates rise, or employment drops, the impact on the wider economy will be exacerbated by excessive debt - and especially so those investors on interest-only terms, as they'll look to exit the market early doors, find few buyers, etc etc
Despite the lack of appetite for interest-only loans by NZ banks - I don't see the NZ situation as materially different - interest rates and employment numbers are in a goldilocks zone at the moment - as soon as one or both move, that increased level of indebtedness will come into play.
I've often felt that NZ was never really in control of it's own destiny - tiny fish in huge global pool. Still feel that way, and given the rising costs of global borrowing and relatively low deposit levels - the cost of lending is bound to increase in the near term - the small fish can only swim against the tide so long before becoming exhausted.
40% interest only mortgages in 2016 according to this - https://www.stuff.co.nz/business/100611670/reserve-bank-monitoring-inte…
The banks have encouraged speculative gambling in a core societal asset, investors essentially having no intention, nor I believe any means, of paying that money back, created from debt from their existing assets, a massive can-kicking, debt pile that should never have been allowed to happen.
The article is completely dodgy analysis, misunderstands the RBNZ data. Actually, it is plain wrong. The RBNZ data on this shows interest-only (using the unadjusted and generous definition) was 29.1% of all mortgages by value in 2016 (and nothing like 40%). It has since slipped on that basis to 26.5% by September 2018.
But what that journalist and many readers miss, is that the unadjusted definition includes revolving credit. If you know anything about revolving credit facilities you will know that they come with a sinking limit, which has the same effect as making a principal repayment. In that case, they should be treated just like P&I loans. We just don't know what the real interest-only level is, but I would guess it isn't much more than 5% of all loans.
Hi David
It shouldn't be hard data to discover so why are the banks not asked to disclose it?
I respect your opinion but I think that a suggestion of 5% of all loans is very very optimistic. Buyers wouldn't have been able to pay the recent 'bubble' prices if 95% were subject to interest and capital repayments.
I think we shall have to agree to disagree again.
David, not sure what you see on revolving credit is what my experience has been (as an ex-banker and a home owner). As an ex-banker we used these all the time with no requirements to reduce, outside of the Annual review process, and seldom did they ever drop - fixed terms were far more likely to be reduced with increases to revolving credit lines to help this re-positioning. As a home owner we had a revolving credit facility during our whole mortgage with the only changes when I have asked for them. Maybe it is different for an investor at the moment, but it has not been my experience.
On a totally separate note, I think most people should not have revolving credit now unless they have large lumpy cashflows (and can budget well for tax) as the differential of variable to fixed term 1 year is so large.
Gig economy - people being encouraged into this, & the entrepreneurial push at universities & schools.
However, the benefits of a regular salary for most is hard to overlook.
Also - there seems to be a bias against Gig-workers trying to re-enter the full-time permanent workforce - maybe no longer trusted to be fully compliant?
the gig economy is the modern slavery. It general traps people into a low income model with few if any benefits. The only people who get anything out of it are the highly qualified "consultants" who charge exorbitantly, but most do not get to negotiate a rate. they are generally taken on at or near the minimim wage with bugger all benefits. Can't afford a holiday or much else.
You cannot get a mortgage when you rely on a zero hour contract that can have instant loss of work at any time for no reason. They do not even get the benefits of most contractors. Top that gig workers have no career path to improvement, nor investment or legal obligations by the company. They literally have to quit to get even basic employment rights as well. Long before gig economy buzz words we had other words for these types of roles, but in most professional industries shit blisteringly awful suffices. Hence the fight of unions rises again. But with the new framework of gig role acquisition companies can use legal loopholes to avoid employment law. Much like ICOs being the same sht different name, with no regulatory cover likewise a different technical implementation can skip through loopholes created because the law relied on a ethical approach and working on a very fixed framework definition.
Thank God for free speech and the Fourth Estate in our country and our ability to criticize or "bad mouth" authority when they try a pull a fast one on us !
I am always astonished at how China is able to control what people think , say and do , especially given the population are well informed, intelligent and savvy people .
Group-think can only partially explain this phenomenon of how they get co-operation and everyone ( or almost everyone ) singing from the same song-sheet .
Saw this herald article, China is doing it's best to control what we think...
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12160570
Thank God for free speech and the Fourth Estate in our country and our ability to criticize or "bad mouth" authority when they try a pull a fast one on us !
I am always astonished at how China is able to control what people think , say and do , especially given the population are well informed, intelligent and savvy people .
Group-think can only partially explain this phenomenon of how they get co-operation and everyone ( or almost everyone ) singing from the same song-sheet .
I recommend this book, so far it's scarring the living daylights out of me.
https://www.amazon.com/China-Dream-Ma-Jian/dp/178474249X/ref=sr_1_1?ie=…
Mate just sold his house, made a bundle, he's gone and purchased a yacht on the med silly bugger, cost him 100k euros. Looks like a fine boat he's single no kids Why don't more of us do that? It's unsettling all his friends. My children are all go, pestering me but I was thinking just the wife and me not 5 dependents.
If the world turns to hell you wouldn't even know, unless you get blown onto the African coast, when it would be right in front of you.
I'm neither 45 (yet) or single, but I don't agree. Some people don't feel the need to pair up and settle down. Certainly they are in the minority, but I have no problem with them cutting their own path in life. Some people are quite comfortable with their own company. I'd agree that generally they are financially disadvantaged by that decision.
My wife does not understand me...Luckily I have a sense of humour....and it is Friday. I hope you all have a sense of humour too. If you are religious....pray...............forgive me.
Marriage is a Life Sentence, full stop, of Religious proportions.......Or sometimes with time off for "Bad Behavior"...if lucky.
Even with murder you are out in less time, with little propensity to do it again....if ya choose. Marriage, not so much...these days. Live in Sin, it is a more sensible option....once you have tried it.
Marriage is a means to an end to keep us in line, producing off spring, until they turn you insane into the Winter of our discontent, religiously. Some find that repeating the process is insane, but like smoking...luckily I quit. Costs a packet.
Why do men generally die, before Ladies...."they choose to"...as one can actually be nagged to death...and ladies, get away with murder. Then they are free to Marry again...when the right man comes along. Repeat after me....Why do men die first...Because they choose to..........I just pretend I am deaf...nagging has no effect on me...I will live to a 100.....it may be a life sentence....but I will get my own back.....Eventually.?
In my day, sex before marriage was a sin. Luckily my Church forgives sin....Practice makes perfect. So I keep trying.
Marriage is now a mix of races, more so than a race to the finish line, inconceivably. Keep taking the tablets.
Marriage can cost an arm and a leg. If you try it more than once, you might not have a leg to stand on.
A lot of Ladies marry in haste and repent at leisure...men keep working to pay for the wages of sin...and a roof over their heads, often with a tiny deposit...and a life time to regret.
A lot of man is to suffer the consequences of a one night stand. The lot of ladies, is to raise the child benefit scheme to the nth degree. We taxpayers all pay in the end....do we not?
And finally...
Why do some Priests and religions marry people, but do not suffer the consequences.....Themselves.
Cos...That would be insane.
Have fun this Friday.........Just off to the Divorce Lawyer...see ya.......Ladies...nod...nod...wink wink.
Just joking..... I cannot afford a divorce...the wife would kill me.
Word to the wise, a boat you live on is another marriage, just one where the weather and break downs risk your life significantly more. The financial, work and social cost of both can also be rather the same if not more draining on a boat. More like being a carer to a disabled partner than a partner who is able to live independently of you. Not to mention some wives don't like threesomes.
Good news just out
New houses are starting to fall in price in Auckland, as builders reposition themselves for the city's cooling real estate market.
Chris Aitken, chief executive of Hobsonville Land Company, said he had seen several builders reducing their prices as finished houses hit a market that's peaked.
"The market for 2018 is the different market for 2018, and a number of builders right across Auckland have repriced new stock now that it's come to market."
At some point something usually breaks. Builders of spec houses go bust. Construction projects stop half built. The RBNZ and banks are not yet in panic mode. There is a severe global downturn going on, so far we have sailed along quite happily, with only the currency weakening. Hopefully that continues. Our low government debt should protect us from the fate of Argentina but these things always seek out weaknesses.
So, the kiwibuild stats have been updated on the website..
And the results are rubbish.
12 Homeowners (up from 4 two weeks ago) So not even all the papakura houses (18) have settled yet.
222 Pre-qualified buyers (up from 214 two weeks ago)
This is in spite of the ballots still being open for
10 houses in Wanaka (extended due to lack of interest)
18 apartments in Mt Albert
10 houses in Te Kauwhata
10 homes(apartments?) in Otahuhu
and another 5 four bedroom Papakura homes being added.
Edit: kiwisaver stats also updated, an uptick in FHB withdrawals from Sept to October, but still an overall downward trend.
Still drastically less homes than pre qualified applicants. How fast do you expect banks to acts because getting mortgage approvals done for first home buyers with no backup property and little equity is certainly not done in a day, or a week, a month might get them across the line. Likewise for moving out of a rental with no notice when they win the lottery. Do you expect their landlords to be happy with them decamping over a weekend with no notice. God forbid any of them are on a longer term lease and need to wait a while before they move or break the agreement.
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