Afleveringen
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Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news China seems to be struggling to find its way through the wreckage of its property crisis.
The Chinese central bank left both its 1- and 5-year rates unchanged in their monthly review today, still at 3.45% and 3.95% respectively. The one year benchmark has been unchanged for nine consecutive months now, the five year benchmark for three. These 'holds' come amid a flurry of other loosening activity last week, targeted at reviving their property markets and saving the remaining large property developers.
Analysts are forming the view that the actions China has taken to reinvigorate its property sector won't be enough to achieve that. Bets that much more stimulus will be required are juicing up some commodity markets. Copper, for example, has now risen to US$11,250/tonne, up +7.5% in a week, up double that in a month. Zinc has taken off too, up +10% in a month.
Meanwhile that are chalking up some global success in other areas. The number of new shipbuilding orders in China rose almost +60% in Q1-2024 from the same period a year ago. This accounted for about 70% of global orders for ships. Almost 40% of those orders were for bulk cargo ships, 12% for container ships. But there was a notable surge in orders for oil tankers, accounting for 35% on Q1 orders. Normally they account for less than 10%.
We should get the Chinese foreign direct investment data for April later today and markets are braced for another quite weak result as the two superpower blocks disentangle.
And we should note that the southern province of the Guangxi (at the border with Vietnam) is suffering unusually heavy rainfall currently with widespread flooding. Both hourly and daily rainfall records have been broken.
Meanwhile Taiwanese export orders came in in April at the same level as March, a very good result because that is almost +11% higher than April 2023 and well above the expected +4.5% gain.
And we should also perhaps note that the New Zealand carbon price is falling away quite quickly now, with the NZU down to just $46/tonne. (You will recall it at over $80/tonne more than a year ago.) That is now miles below the NZ$132/tonne EU carbon price, which is languishing but not really falling.
The UST 10yr yield is now at 4.44% and up +2 bps from this time yesterday.
The price of gold will start today up +US$19 at US$2434/oz.
Oil prices are down -50 USc at US$79/bbl in the US while the international Brent price is still just on US$83.50/bbl.
The Kiwi dollar starts today down -20 bps from yesterday at just over 61.1 USc. Against the Aussie we are still up at 91.6 AUc. Against the euro we are softish at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2, and down -20 bps from yesterday.
The bitcoin price starts today at US$68,332 and up +2.4% from this time yesterday. Volatility over the past 24 hours has been moderate however at +/- 2.1%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Renting in New Zealand today is more difficult than a decade ago, with fewer properties available, rents continuing to increase, and the quality of rental properties not much better, Shamubeel Eaqub says. However, the economist and co-author of the 2015 book Generation Rent, rethinking New Zealand's priorities, says it's not all bad news.
Speaking in the latest episode of interest.co.nz's Of Interest podcast, Eaqub says the "lived reality of renting" has got harder over the past decade, but the regulatory settings are slowly improving.
"We need to ensure there's sufficient renters' rights ... because in New Zealand renting is so insecure and is such a problematic thing for so many people."
One area giving Eaqub optimism is the rise of build to rent, where landlords must offer 10-year rental tenancy agreements.
"I've been a long time fan of institutional landlords rather than accidental landlords. When you are in the business of land lording, you want to have as little turnover as possible, whereas if you're an accidental landlord, you are much more interested in having quick turnover and being able to sell it off and all those other bits and pieces. The tenant is kind of incidental to the story and a bit of an annoyance, really."
Eaqub says build to rent offers two types of security; tenure security and financial security.
"Because more often than not [build to rent] will come with contracts that will have a known level of [rental] increase for the next, say three years, so you can plan your finances. Whereas in a normal tenancy you have only certainty for 12 months and then you don't know what will happen next."
Build to rent is adding new housing supply targeted for one particular use, which he says is unusual in NZ.
"If you look at what happens in New Zealand, or how it has generally happened in New Zealand in the past, it's the idea of filtering, right? You build houses which are for new homes and for rich people, and then the older homes that are secondhand, that kind of gets recycled into the rental market."
"So I'm very encouraged to see this new supply that's coming in, that's very much targeted towards renting specifically. Because if you think about the pressures that we see in terms of emergency housing, social housing and all those kinds of things, that's happening because people are falling out of the rental market, because the rental market is short supplied and is very expensive. And so the more we can do to get more supply directly and retained in the rental market, the better it is," Eaqub says.
He also talks about his disappointment at the fracturing of the Labour-National consensus on medium density residential standards (MDRS).
"[The consensus] showed me for the first time the grown-up-ness of the way that our politicians can respond to structural problems, that we can put aside our political differences and just do something because it's the right thing to do, not because you're on one side of the House or the other. But that grown up moment of politics lasted very, very briefly, and we threw it away at the first chance when the election campaign started," Eaqub says.
In the podcast Eaqub also talks about NIMBYS, the construction sector, what's driving rents, problems with local government, his views on rent controls, the accommodation supplement, emergency housing, what the rental market may be like for his kids' generation, and more.
*You can find all episodes of the Of Interest podcast here.
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Zijn er afleveringen die ontbreken?
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Kia ora,
Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news metals prices eye a boost from the Chinese housing rescue.
But first in the week ahead, it will be one dominated by the RBNZ's Wednesday Monetary Policy Statement, one that itself comes about a week before the new Government's first full Budget - and that too is likely to have a key influence on monetary conditions. No-one is expecting any change to the OCR, but signals for when it will be cut will be keenly awaited.
In the US we will get advance PMIs for May, durable goods orders, and new and existing home sales for April. China (today), South Korea and Turkey also have rate decisions dues this week. And inflation rates will be released for Canada, the UK, and Japan. Sentiment surveys will be released in Australia and the EU, along with retail sales data in Canada.
Wall Street has just booked a strong set of earnings reports. Most S&P500 companies have reported now (93%), and they have reported a +5.7% rise in profit growth, matching the outsized gains in Q2-2022 that was off the back of the prior pandemic weaknesses. Almost 80% of these companies came in with better than expected earnings-per-share, and 60% better than expected revenues. These sort of outcomes help explain why both the Dow and the S&P500 are at record highs. And why many investors don't think these equity markets are over-valued. But we should note that PE ratios ae higher than long-term averages now.
In China, industrial production growth recovered in April after a disappointing March to be back yo the expansion level in the prior three months. But this is the only 'good news' in yesterday's data dump from the Middle Kingdom.
Their retail sales rose by only +2.3% year-on-year in April, down from +3.1% in March and missing market forecasts of +3.8%. That is quite a miss.
Electricity production slipped in April from March to be up only +3.1% in the year. That is a long way lower than the +8% rise in the year to December. If 3.1% is a proxy for GDP, they are not on track to achieve Beijing's growth targets.
Prices for new dwellings fell their most since July 2015. Prices for resales fell even more. The depth of their property sector retreat is laid in the official information. It is no wonder they are considered a wholesale state intervention in the sector.
To clear away the drag that their property market has created, Beijing has taken some 'drastic moves'. The central bank has removed its lower limit banks can charge for home loan rates, nationally. It has cut interest rate benchmarks for housing-related lending by -25 bps.
And it has allocated ¥300 bln (NZ$42 bln) for lending aimed at buying by local authorities for unsold housing for "social purposes". They said the ¥300 bln of central bank cash will translate into an estimated ¥500 bln of credit overall.
And we should keep an eye on what is happening to China's Agriculture minister. He was in charge of their food security program, and has suddenly fallen out of favour, receiving the standardised accusation of 'corruption' from Beijing authorities.
More generally. the UN says India’s growth will rise in 2024 to +6.9%, from the 6.2% they estimated in January, driven by strong public spending and growing private consumption. The other big mover is Brazil, up to an expected +2.1% in 2025 from a January estimate of +1.6%. The US is still expected to expand +2.3%, Japan by +1.2%, China by +4.8% and the EU by +1.0%. Australia is +1.6%. New Zealand is ignored by this UN review.
The EU released its final April CPI rate which came in at 2.6% for the bloc, 2.4% for the Euro Area. Both were little-changed from March but sharply lower than a year ago. In April 2023 the EU rate was 8.1%, the Euro Area was 7.0%. Getting rid of dependence on Russian oil and gas has not been at the cost of higher inflation. But we should observe that the range is wide across the bloc between countries. Denmark recorded at 0.5% annual inflation rate in April, whereas Belgium 4.9% and they are less than 700 kms apart.
We should note that the social tensions in New Caledonia are echoing in the nickel market because there is an important mine there. It is the world's third largest producer, and may help explain why France isn't taking any backward steps. Global nickel prices have risen more than US$2000/tonne, up +11.3% over the past week over supply fears. It is a key ingredient for making stainless steel.
The UST 10yr yield is now at 4.42% and unchanged from Saturday but down -8 bps from this time last week.
The price of gold will start today down -US$4 from Saturday at US$2415/oz. That is up US$45 for the week and just off it's all-time high. Silver has shot up too, up +12% over the past week.
Oil prices are still up at US$79.50/bbl in the US while the international Brent price is still just on US$83.50/bbl. Both are a bit more than +US$1 higher than a week ago.
The Kiwi dollar starts today down -10 bps from Saturday at just over 61.3 USc. That is up almost +120 bps in a week. Against the Aussie we are still up at 91.7 AUc and a new one month high. Against the euro we are also firm at 56.5 euro cents. That all means our TWI-5 starts today just on 70.4, unchanged from Saturday and up +80 bps in a week.
The bitcoin price starts today at US$66,732 and down a mere -0.2% from this time Saturday. And up +10.6% from this time last week. Volatility over the past 24 hours has been low however at +/- 0.8%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news the ECB is warning investors aren't taking geopolitical risks into account nearly enough.
But first in China, we are getting reports that Beijing is developing a plan to save their housing markets and SOE developers by having the state buy huge numbers of unsold properties to boost demand. It is a sign of desperation. What wouldn't go wrong? Millions of properties partly occupied are surely likely to give an enhanced sense of rot in the sector, while enriching the developers. The future for such a policy looks bleak indeed.
Under the proposal, local state-owned enterprises would be asked to help purchase inventory from distressed developers at steep discounts using loans provided by state banks, Bloomberg reported on yesterday. Hong Kong shares of developers who will benefit from the "market clearing" zoomed again yesterday.
In the US, housing starts rose in April from March but are still lower than year-ago levels, and that year-ago standard is not high. Previously we have seen stronger residential building consent levels but they are falling on a prior month- and prior year-basis too. The new home construction sector is falling back into line with the general real estate resale market with tepid demand at best.
But that weakness is not reflected in their labour market. The actual number of jobless claims fell last week to 197,000 which was a slightly smaller fall than expected. It is interesting how expectations for rising labour pressure seemed to have turned around.
And the real state of retailing in the US can be tracked by the activity of their largest retailers - and the largest is Walmart. They said Q1-2024 sales levels were strong, growing far more than inflation.
Most serious analysts see the US economy expanding by +2% in 2024. But the AtlantaFed's GDPNow model reckons it is expanding nearly twice as fast as that, currently running at a 3.6% expansion, real.
In one region, the US Philly Fed factory survey turned from a minor positive to a minor negative in May, basically because of a pullback in new orders. But also intriguing is the holding high of survey perceptions of business conditions. They seem confident about the future, very confident.
Industrial production in the US was little changed in April, taking seven of the past twelve months as expansions, five as contractions. But most of the expansions, as small as they have been, are in the more recent half. And that has eaten into the year-on-year deficit, so it is now only -0.4%.
In its latest Financial Stability Review, the ECB says investors are likely to be jolted by negative election surprises in 2024 that will weigh on financial stability. They reckon investors are blind to the sudden shifts in sentiment that geopolitical tensions can drive. And the extra spending they are having to do on the security from is likely to put future strain on European public finances they noted.
In Australia, the April labour force data saw the jobless rate rise to 4.1% from 3.9% in March. (NZ was 4.3% in March.) That means 593,000 of their 14.9 mln labour force are without work. Full-time employment fell by -6100, part-time employment rose by +44,600. It was tougher in NSW where full-time employment fell -16,300 and part-time employment only rose +13,100.
We have previously noted that financial markets had started pricing in a chance of interest rate rises from the RBA. A lowish chance, admittedly. But now we can note that they seem to have abandoned those bets - even though the consensus seem to be that the short-term Aussie Budget won't be especially inflation-friendly.
More globally, the copper price has breached US$11,000 and an all-time high and now we are into the crazy world where short sellers are being squeezed, and having to buy their way out of the frenzy which bids up the price further.
You may recall we reported a sharp rise in bulk cargo freight rates last week. Well, it was temporary and they have now fallen back to the prior week's level now. But containerised cargo rates are still rising as fast as they did last week, up another +11% this week and are now double year-ago levels. All this is driven by outbound-from-China rates roiled by the persistent Canal and security problems.
The UST 10yr yield is now at 4.38% and up +2 bps from this time yesterday.
The price of gold will start today down -US$10 from yesterday at US$2379/oz.
Oil prices are up +US$1 today to just under US$79/bbl in the US while the international Brent price is up +50 USc, now just on US$83/bbl.
The Kiwi dollar starts today with a slight easing from yesterday at just on 61.2 USc. Against the Aussie we are up at 91.6 AUc and a new one month high. Against the euro we are unchanged at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and little-changed from yesterday.
The bitcoin price starts today at US$64,946 down a very minor -0.2% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.6%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again on Monday.
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Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news financial markets are in a risk on mood today.
First, the April US inflation rate brought no surprises, coming in as expected at 3.4%, a dip albeit a small one, from March's 3.5%. But it still qualifies as 'sticky' - there have been nine lower readings in the past twelve. Their 'core' rate fell to 3.6%, also as expected. Airfares and rent remain the key components keeping inflation up in the US. Petrol prices rose a very minor +1.2% over the year. (The other measure we use has them up +2.0%. Either way, petrol is not pushing up inflation there.)
The apparent slowing of inflation is bring debate and market bets on when the Fed will cut its policy interest rates. The Fed itself of tempering expectations, but markets aren't waiting. Yields on US benchmark bonds are falling in secondary markets, equity prices are rising in anticipation (and to record highs), and the US dollar is weakening as a risk-on mood envelopes markets today.
Meanwhile, the official data for US retail sales were up +4.0% in April from a year ago on an 'actual' basis, and now showing 'real' gains above inflation. (But when you seasonally adjust this data and correct for varying holiday periods, the gain isn't that high.) Meanwhile, American business inventories are not rising, in fact posted a small dip in March. They don't currently have an excess inventory problem.
US mortgage applications were little-changed last week from the prior week, to be -14% lower than the same week a year ago. Benchmark mortgage interest rates fell -bps to 7.08%, mortgage brokers report.
China left its 1-yr Medium Term Lending Facility rate unchanged at 2.5% yesterday.
Indian exports fell sharply in April from March, and were only +0.8% higher than a year ago. Presently, India is not a powerhouse exporter or participant in global trade. April merchandise trade exports of US$35 bln in the month is barely more than Australia's.
The EU delivered some better economic results overnight with March quarter economic activity expanding (GDP was +0.4% higher in the quarter than the same quarter a year ago, 'real'.) Although they may seem low to us, they are 'good' for them in the current circumstances.
Their Spring forecasts out overnight see a "gradual expansion amid high geopolitical risks", anticipating growth rising to +1.0% this year and +1.6% next. Industrial production is rising recently, cutting into the prior declines. But they are making hard work of it getting this key indicator to rise on a year-on-year basis.
And staying in Europe, we should note an assassination attempt on the newly-elected nationalist firebrand Slovak prime minister. He has been a pro-Russian, anti- democracy lightning-rod, the subject of large street demonstrations since his election. It is the king of spark that in the past has kindled wider, broader consequences.
Argentina's central bank cut its benchmark interest rate -1000 bps to 40% from 50%, marking the sixth adjustment since December due to a slowing inflation rate, bringing the rates to the lowest since June 2022. The monthly inflation rate slowed for the fourth straight month to 8.8% in April from 11% in the previous month and below market forecasts of a 9% gain.
In Australia, the rate of gain in their wage pay slipped to 4.1% in the March quarter. That is the first time that gain rate has fallen since Q4-2020 and it may suggest labour market pressures are starting to ease there.
Standard & Poor's has been looking at the 2024 Aussie budget. They are concerned about 'structural spending pressures' that won't ease in futute. They are also worried about the broader issue of weak productivity and “how effective spending programs such as Future Made in Australia are in allocating resources”.
The UST 10yr yield is now at 4.36% and down -9 bps from this time yesterday.
The price of gold will start today up another +US$34 from yesterday at US$2389/oz, a move essentially driven by the falling greenback.
That same move has boosted oil prices today which are up +50 USc to just on US$78/bbl in the US while the international Brent price is now just on US$82.50/bbl.
The Kiwi dollar starts today with a broad-based, across-the-board rise, up almost a full +1c from yesterday at just on 61.3 USc and its highest level in eleven weeks. Against the Aussie we are up at 91.5 AUc and a one month high. Against the euro we are +½c higher at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and up +60 bps from yesterday, and its highest since mid March.
The bitcoin price starts today at US$65,097 and up a spectacular +6.3% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news about the latest and pre-election Aussie Budget delivered overnight.
But first, the American retail Redbook Index rose +6.3% last week from the same week a year ago, suggesting buoyant trading in physical stores, gains well ahead of inflation. It is not only the strongest gain of 2024, you need to remember that it is on the back of a rising 2023 which itself was rising strongly in 2022.
Their SME sentiment index rose in April, slightly recovering from a 12-year low in March and better than the forecasts which assumed it would slip again.
Meanwhile, factory prices rose more than expected in April, up +2.4% from the same month in 2023. But this is about average over the 15 year history of this data tracking (excepting the pandemic distortions, of course). But if there is a cloud it is that the month-on-month rise seems slightly elevated.
American household debt rose +3.8% in Q1-2024, just marginally more than the CPI inflation rate over the same period of +3.5%. And this excess brought a small, but noted, rise in delinquencies. As you might expect, mortgage debt rose less than inflation (+3.3%) given their hibernating residential property markets. Car loan balances rose at inflation's level. Student loan balances fell, the only sector to recede. But credit card balances zoomed higher, up a concerning +13% over the year and the basis of the rise in delinquencies. Total consumer debt (including mortgages) is now US$17.7 tln. That is about 65% of US GDP and near the lowest share since these records started in 2005. Back before the GFC it was over 100%.
The American CPI inflation rate gets updated tomorrow and financial markets seem parked up until this data is known. Markets currently expect a very minor improvement, down to 3.4%. Variations from that or the "core rate" expectation could well be market-moving.
US Fed boss Powell was speaking overnight in The Netherlands, but he had the same message again - that inflation is stickier than the central bank wants to see and that rate cuts from them are some way off. But he also repeated that it is very unlikely that their next move will be a hike.
In China there are some signs elements of stress are spreading to insurers now. Several insurance companies have chosen to pay higher interest rates on their capital bonds rather than exercise an option to redeem them early, a sign they are facing solvency problems. Policymakers are focusing on the wider stress points, but still basically about their troubled property markets.
In Germany, their widely-watched ZEW Indicator of Economic Sentiment rose more than expected in May to its highest since February 2022. Improving economic conditions in the EU and China have contributed to a better outlook, analysts say. Expectations for domestic consumption, as well as the construction and machinery sectors, have brought substantial improvements in sentiment.
But today it is all about the Australian Budget, delivered overnight. With the Australian economy the weakest it has been in 23 years, their Treasurer has handed down his third Federal Budget delivering its second consecutive surplus, and setting the Government’s agenda as they head into an election cycle. That election is due in May 2025, so this Budget has to be seen as the last major policy setting before then, that could deliver results before polling. Initiatives such as the "Future Made in Australia" program were at the forefront. Not only is this Budget 'political' (including "tax cuts for all" and a $300 rebate for household power bills), the reviewing media assessments are highly politicised as well.
The surplus announced of +AU$9.3 bln this year is off the back of generous company tax receipts – a pleasant surprise after the -AU$1.1 bln deficit forecasted in the Mid-Year Economic and Fiscal Outlook in December. However, this will swing into a -AU$28 bln deficit in 2024-25 (-1.4% of GDP), with larger deficits in the years following than previously forecasted.
And following up yesterday's note, the copper price is now officially up at an all-time high, US$10,977/tonne.
The UST 10yr yield is now at 4.45% and down -4 bps from this time yesterday.
The price of gold will start today back up +US$20 from yesterday at US$2355/oz.
Oil prices have fallen -UA$1 to just on US$77.50/bbl in the US while the international Brent price is now just on US$82/bbl.
The Kiwi dollar starts today marginally firmer than yesterday at just over 60.3 USc. Against the Aussie we are also a tad firmer at 91.2 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.6 and up +10 bps from yesterday, partly on a weaker yen.
The bitcoin price starts today at US$61,251 and down -2.4% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news China seems to be on the cusp of bringing back its traditional stimulus play to bolster its misfiring economy.
But first up today there is more evidence US inflation isn't cooling as the Fed would want. A respected survey by the NY Fed shows that consumer inflation expectations for the year ahead increased to 3.3% in April, the highest since November, from 3% in each of the previous four months. These year-ahead price expectations rose across the board.
Canadian residential building consent levels were expected to fall in March after an unusually strong start to the year. A -4.5% pullback was expected. But in the end the retreat was much larger, down -11.7% from the February level and down almost -15% from the same month a year ago.
Indian inflation seems to be stable, but it is running high at 4.8%.
In China, we are getting new promises of "opening up". Sadly for them this is just a replay of a tired meme and is unlikely to bring the benefits promised like of the many earlier "opening up" promises made of the past decade (which got them to the current funk).
They need to something necessarily big. And something big seems to be coming. They are readying a ¥1 tln sale of very long bonds (NZ$230 bln) to fund a stimulus program. It may not be the only bond issue for that purpose.
Australia's closely-watched NAB business confidence index stood at +1 in April, holding steady for the second straight month while staying below its long-run average. Weak sentiment in retail, wholesale, and mining offset improvements in recreation, personal services, construction, and manufacturing. But the main feature is the lackluster current conditions.
All eyes will be on the Australian Federal Budget to be released later today, but actually not until about 9:30 pm (NZT). The expectation is that it will report a +AU$9 bln surplus.
We should note that the copper price rose sharply again overnight, now back up to US$10,500/tonne and the peak and all-time high last reached last in February 2022. (It is likely to spike copper theft again. Be warned.) There is no evidence this bull-run is anywhere near over yet. As is usual, it will attract speculators because of the confluence of bullish demand (especially from China) and tightening supply. The sky-high regulatory costs of starting new projects has discouraged miners for years who turned to consolidation until that pressure eases.
The UST 10yr yield is now at 4.49% and down -1 bp from this time yesterday.
The price of gold will start today down -US$25 from yesterday at US$2335/oz.
Oil prices have risen slightly to just over US$78.50/bbl in the US while the international Brent price is now just on US$83/bbl. Both are minor net +50 USc/bbl gains.
The Kiwi dollar starts today little-changed from yesterday at just under 60.2 USc. Against the Aussie we are also unchanged at 91.1 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.5 little-changed from yesterday.
The bitcoin price starts today at US$62,739 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news of generally modest and uninspiring economic data.
We start today with updates from China.
Their April CPI came in +0.3% higher than a year ago, low but not as low as expected and not deflation yet (which they had from October to January). In the circumstances they will be ok with this. But both been and lamb prices fell and quite sharply, not only from a year ago, but from March as well. Milk prices fell as well although by lesser amounts.
Meanwhile, Chinese producer prices fell and at a slightly faster rate than the -2.3% expected, down -2.5% from a year ago.
Also much lower than expected is new bank lending. This activity was far less than in March and far less than what was expected. To be fair, there is usually a retreat in April from March, but just barely achieving the April 2023 level will have been quite a disappointment, especially as Beijing is on record encouraging lending (especially to property developers). The analysts expected lenders to heed the signals, but it seems they ignored them. Overall credit came in with a rare contraction. And the April new yuan loan level is near the trough of levels we have seen since late 2017.
Foreign direct investment fell a sharp -56% on the year in the first quarter of 2024, according to official Chinese data. It rose +US$12.5 bln in March from February 2024, much lower than the +US19.7 bln rise in the same period in 2023, and the +US$21.5 bln in the year prior. Global business are still reluctant to invest in an economy grappling with weak internal demand, and veering into Party controls of business operations. Foreign companies made just US$10.3 bln in net direct investments lower than during the same period last year. It is a falling trend that started by Shanghai's COVID lockdown.
China's vehicle sales grew by +9.3% in April from the prior year to 2.36 million. This follows a +9.9% March increase. Sales of new energy vehicles jumped by 33.5%. But we can also see this current overall sales level is only at the April 2018 level, so the 'growth' only underscores how weak it has been recently. But for car sales, they don't have this on their own.
The coming week will bring updates on China's industrial production, retail sales, fixed asset investments, the house price index, and the unemployment rate for April. None of these are expected to show anything but modest changes or real improvements.
In Japan, household spending there dropped in real terms by -1.2% in the year to March, compared with market forecasts of a -2.4% fall, after a -0.5% decline in the prior month. It was the 13th straight month of declining personal expenditure, dragged by weak spending on housing, fuel, electricity & water charges. In contrast, expenditure for food, transport & communication, and education all rose.
Across the Pacific in the US, the widely-watched consumer sentiment survey by the University of Michigan fell in May and by more than expected. The driver was the expectation that future inflation will rise again and that unemployment and interest rates may all be moving in an unfavourable direction in the year ahead. But we should also note that May often delivers pessimist results in this survey and the current level is +14% higher than a year ago. Since June 2022 the trend has been rising and the latest result is not out of trend.
Global wheat prices rose to their best level since August after the important May USDA updated production and demand estimates. Rising production in the US, China, Australia and Canada is offset by falling output in the huge Russian regions, Ukraine, and the EU. Global corn and rice output is expected to rise. American beef production is expected to be lower as herds are rebuilt in 2024/25. And they have raised their forecast milk price.
Canada delivered its best jobs report in April since the start of 2023 with an increase of +90,400 new jobs in the month with a broad-based rise. But full-time positions increased by +40,100 while part-time jobs rose by +50,300. There are now 20.5 mln people employed in their workforce with a jobless rate of 6.1%.
Indian industrial production rose +4.9% in March, which was less than the expected +5.1% rise and lower than the February +5.6% rise.
The Australian federal budget will be released tomorrow (Tuesday) May 14 and more "pre-budget announcements" are being released. A big one over the weekend was that they will spend more than AU$11 bln on social housing initiatives to try and get on top of their housing crisis for low income people.
The UST 10yr yield is now at 4.50% and unchanged from Saturday.
The price of gold will start today down -US$8 from Saturday at US$2360/oz. It is on the rise again, mainly on Chinese demand, and heading back toward its mid-April all-time high. For reference it was US$2300 a week ago, so up +3.0% in the past seven days.
Oil prices have fallen slightly to just under US$78/bbl in the US while the international Brent price is now just under US$82.50/bbl. These are both the same levels of a week ago.
The Kiwi dollar starts today little-changed from Saturday at just under 60.2 USc. A week ago it was at exactly the same level. Against the Aussie we are also unchanged at 91.1 AUc. Against the euro we are unchanged at 55.9 euro cents. That all means our TWI-5 starts today just under 69.6 unchanged from Saturday but marginally firmer from a week ago.
The bitcoin price starts today at US$61,614 and up +1.9% from this time Saturday. Volatility over the past 24 hours has been low at just under +/- 1.0%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with that there is a surprise renewed jump in global shipping freight rates underway again.
But first, new US jobless claims rose last week. The headline seasonally adjusted rate "surged" to +231,000 and up from +209,000 the prior week. But the actual number of new claims was only 209,000. It rose too, but it is too soon to conclude this is a new trend. There are 1.75 mln people on these benefits, which is a decrease from lasrt week. But it is up from 1.66 mln a year ago. The current level is tiny compared to their employed workforce of 161 mln people.
But the headline "surge" has had echoes in currency and bond markets today.
There was a UST 30yr bond auction earlier today successfully raising US$25 bln (so much smaller than yesterday's 10 year event). It was heavily supported with median yields slipping to 4.59% from 4.61% at the prior equivalent event a month ago. We are no longer reporting rising yields.
China's exports rose to a three month high in April, but basically only back to the general monthly level of the past year. The rise looks good only in the perspective of the past two months. Overall their exports rose +1.5% from the same month a year ago. But this masks some quite big moves. Exports to the US fell -1.0%, to the EU they were down -4.8%. To Japan down -9.2%. to New Zealand they were down -2.0% and Australia down -7.7%. But they rose +21% to Brazil, +20% to Vietnam, +7% to Malaysia although to be fair the dollar values of these increases were not high. Interestingly Chinese exports to Russia slipped -1.9%, and to India were little-changed.
Overnight, the Bank of England maintained its key bank rate at 5.25%, as expected. However, two committee members preferred to reduce the rate by -25 bps, compared to only one member in the prior meeting. Further, officials revised down their inflation forecast and raised the growth outlook. Those projections foresee a decline in their policy rate to 3.75% over the next three years.
There was an unexpected rise in global freight rates for containerised cargoes last week, up +16% in the week, principally on outbound rates from China. These rates are now a massive +80% higher than the same week a year ago. The rise will affect other trade routes globally. Meanwhile, bulk cargo rates rose +30% last week as well although they are "only" 57% higher than year ago levels. It is not clear why rates have jumped in the past week so suddenly but it may relate to renewal of time charter rates after the first flush of increases after the Panama and Suez Canal stresses that just are not easing.
It is cold nationwide this morning. After yesterday's Transpower warning, we should note that as we write this, electricity prices are only marginally elevated indicating a normal situation so far, and not the extreme stress we saw two days ago.
The UST 10yr yield is now at 4.46% and down -3 bps from yesterday.
The price of gold will start today up +US$19 from yesterday at US$2333/oz.
Oil prices have risen +50 USc at just under US$79/bbl in the US while the international Brent price is unchanged, now just under US$83.50/bbl.
The Kiwi dollar starts today up +¼c from yesterday at just under 60.3 USc. Against the Aussie we are softish at 91.1 AUc. Against the euro we are little-changed at 55.9 euro cents. That all means our TWI-5 starts today just under 69.6 and again marginally firmer from yesterday.
The bitcoin price starts today at US$61,901 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again on Monday.
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Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news market-moving data is scarce today but investors should be reading the latest US CBO update.
First, there was only a modest rise in consumer debt in March, up a mere +1.5% and substantially less than the rise analysts were expecting. Stepping back for a longer term trend view, Americans have been growing their consumer debt appetite at slowing rates since 2012. This is quite different to the assumption many jump to.
US mortgage applications actually rose +2.6% last week from the prior week, recovering from the -2.3% decline in that earlier week. But they remain -17% lower than year-ago levels. Maybe one reason last week's level was higher was because benchmark interest rates actually fell, the first reversal in more than a month.
In yet another very well supported US Treasury bond auction, this one for their 10 year Note, the median yield came in at 4.42%, and actually lower than the 4.47% at the prior equivalent event a month ago.
New estimates from the US Congress Budget Office make clear the cost of extending the Trump 2017 tax cuts will likely exceed US$5.8 tln and are the single largest contributor to the swelling American federal deficits. (It is seven times more than their annual defence budget, more than three times their Health & Human Services budget.)
Across the Pacific, Taiwanese exports rose in April by a modest +4.3% amount, the sixth consecutive monthly rise, but far less than the stellar rise in March. There was disappointment all the same because they were expecting another +15% rise.
German industrial production fell as expected in March following the surprisingly good February result. But it is still -3.3% lower than a year ago in real terms. But continuing its comeback was their construction sector.
In Sweden, their central bank cut its policy rate to 3.75%, which involved the -25 bps reduction analysts were expecting. They say inflation is now approaching the target while economic activity is weak. It is their first cut since 2016, following the tightening campaign that started two years ago. They said that if the outlook for inflation stays lower, their policy rate will be cut two more times during the second half of 2024.
Perhaps we should note that Elon Musk's X-Prize competition, the largest ever science competition with US$50 mln to the overall winner, has shortlisted 20 finalists in the carbon removal category, one of whom has a New Zealand connection.
The UST 10yr yield is now at 4.49% and unchanged from yesterday.
The price of gold will start today down a minor -US$2 from yesterday at US$2314/oz.
Oil prices have changed little at just under US$78.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.
The Kiwi dollar starts today little-changed from yesterday at just on 60 USc. Against the Aussie we are +¼c firmer at 91.3 AUc. Against the euro we are little-changed at 55.9 euro cents. That all means our TWI-5 starts today just under 69.5 and again marginally firmer from yesterday.
The bitcoin price starts today at US$62,573 and down -1.2% from this time yesterday. Volatility over the past 24 hours has been very low at just under +/- 0.5%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news the positive global economic news rolls on, despite the best efforts of some regional forces to risk everything with crazy adventures.
First, today's dairy auction brought a welcome, if small, rise. And it is maybe more than it looks given the signals from the derivatives market and the recent GDT Pulse events all pointed to softness. Recent global tensions may have played a part. Turkey suspended all trade with Israel and that included their regionally important dairy trade. Middle East buyers were prominent overnight. Overall prices rose +1.8% from the prior event in USD terms but were little-changed in NZD terms. The important WMP price rose +2.4%, butter was up +2.1% and cheddar cheese impressed with a big +8.0% gain. Perhaps we need to see these shifts as part of the global rise in overall commodity prices recently as the world's major economies build some upward momentum.
In the US, one measure of American economic optimism among investors declined sharply in May, but there seems to be big disconnect between 'opinions' (everyone has one), and behaviour. For example, retail spending at bricks & mortar stores was up +6.0% last week from the same week a year ago, a trend that has built to its highest level since the end of 2022. Equity prices are rising still.
And the US logistics industry is on the rise with a solid April expansion.
Meanwhile the latest UST 3 year bond tender was very well supported, and a feature today was that yields rose much less from the prior even that we have seen in a while. Today's event brought a 4.55% median yield, not too different to the 4.49% we saw in the prior equivalent event a month ago. This is only one tender, but perhaps the rising demand is finally suppressing the upward yield trend. They have a lot of funds to raise but investors are showing they have an even faster-growing appetite for this paper.
Across the border there was also a positive surprise. Their closely-watched Ivey PMI jumped to its highest level in two year, recording an expansion only currently matched by India.
Japan is on a roll. Their services PMI for April has come in at a strong level (54.3), outpacing the US (51.3), China (52.5), and the EU (53.3). Only India (60) tops them among the world's largest economies.
In Europe they also surprised on the upside. Retail sales surged (for them) in March to be up +2.0% in volume (real) terms from the same month a year ago, and far better than what was anticipated.
In Australia, or more importantly Western Australia, their state government has launched a AU$5,000 incentive to vacant property owners to bring them onto the long-term rental market for Western Australians to lease.
Overall in Australia, retail sales are disappointing. In the March quarter they fell, making this the fifth of the past six quarters of retreat in retail volumes.
Yesterday, the Reserve Bank of Australia held its monetary policy positions and rate, and issued guidance that you could take any way. The most you can say is that they remain vigilant to the risks of higher inflation. Pretty lame really. More here.
For those of you anxious about coffee prices (the main media is just picking up on the April rise), be assured current prices are retreating as fast as they rose with good supplies re-entering markets from Brazil and Vietnam.
The UST 10yr yield is now at 4.46% and down -3 bps from yesterday.
The price of gold will start today down -US$9 from yesterday at US$2316/oz.
Oil prices have risen a minor +50 USc to just under US$78.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.
The Kiwi dollar starts today little-changed from yesterday at just under 60.1 USc. Against the Aussie we are firmer at 91 AUc. Against the euro we are unchanged at 55.8 euro cents. That all means our TWI-5 starts today just under 69.4 and marginally firmer from yesterday.
The bitcoin price starts today at US63,355 and up +0.4% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.3%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news the global service sector is in reasonable shape, helping generate new impetus to the world's economy. Equity markets are rising the wave.
In China, their private Caixin services PMI brought some good solid news. It was little-changed in April from the expansion in March, but now the 16th straight month of expansion of services their services sector. This private survey reports a faster expansion than the official version. Of special note is that new business grew the most in nearly a year and the fastest since May 2023. Foreign sales rising the most in ten months.
According to the combined factory and services PMIs, the Eurozone expanded its fastest in a year in April. In fact their services expansion was faster than either China, Japan or the US. Their new business volumes rose for a second successive month and at the quickest pace since May last year.
Only India is expanding faster among the major global economies.
In Australia, the Melbourne Institute monthly inflation monitor for April found an increase in monthly inflation, although annual inflation continues to decline. Annual changes in the cost of living also fell for most household types.
And Aussie job ads rose in April somewhat unexpectedly and halting a longish retreat. In fact they were almost +3% higher in the month from March. Better, the rise was broad-based, except for healthcare. However these levels are still -6.6% lower than a year ago, and as good as the recent rise was, in fact it is trending at a flat level.
All eyes will be on the RBA at 4:30pm today (NZT) and their monetary policy review. They have a history of occasionally acting differently to what markets expect so there is some market pricing tension about what they will come up with. The main 'risk' is that they will be more hawkish than expected, given their sticky inflation levels.
It is very noticeable that some key mineral prices are on the rise again. That includes zinc, nickel, tin, lead, aluminium, and copper. A rise in global demand is behind the broad recent increases. There are some tighter supply points too, as is usual in the transition.
The UST 10yr yield is now at 4.49% and down -2 bps from yesterday.
The price of gold will start today up +US$24 from yesterday at US$2325/oz.
Oil prices have stayed down at just under US$78/bbl in the US while the international Brent price is now just under US$83/bbl.
The Kiwi dollar starts today unchanged from yesterday at just over 60.1 USc. Against the Aussie we are softer at 90.7 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.3 and and unchanged from yesterday.
The bitcoin price starts today at US$63,094 and down -1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news the American labour market data for April seemed to have something for everyone.
But first, in the coming week it will be relatively quiet, especially on the US data front. But the Q1 earnings season is in its final weeks and still includes some major reporting. Elsewhere we will get set-piece central bank announcements from Sweden, England, Brazil and Malaysia, and of course from Australia tomorrow. China's CPI and PPI will also be released, but not until Saturday.
New analysis shows that American labour productivity is rising and at its quickest rate since the the 1990s, and in 2023 that was its highest pace in half a century. It is too soon to credit AI, so this could be a new and important trend. Rising productivity is an essential precursor for rising standards of living.
But over the weekend, the US reported that their economy added only +175,000 jobs in April, on the headline, seasonally adjusted basis, the least since October and a deceleration compared to the upwardly revised +315,000 jobs added in March. It fell short of market expectations for a +243,000 increase. This data underscores a significant slowdown from the brisk pace observed in the first quarter and trails behind the average monthly gain of +242,000 jobs over the preceding 12 months. But between the two months combined the 'slowdown' is quite small.
But in fact, on an 'actual' basis employer payrolls rose +803,000 to 158.0 mln and a record high. On a household basis, including the unincorporated self-employed, they rose +234,000 to 161.6 mln and showing the continuing shift from self-employment to company payrolls that we have observed in prior 2024 months. Either way, there are actually significantly more people employed that the headline levels suggest. Full time jobs rose, part time job levels shifted lower.
But the American labour force is growing slightly faster than these employed levels show so the jobless rate ticked up, very slightly admittedly, to 3.9% and although that is similar to last month it is at the upper range of what they have had since August 2023. (The New Zealand jobless rate was 4.3% in March 2024.)
Average weekly earnings rose +3.9% in April from a year ago, lower than the March level of 4.1%, so there are signs of less labour market pressure. (US CPI is 3.5%.)
And we should not forget that labour market data is a lagging indicator.
A leading indicator is a metric like the PMIs. And the ISM services PMI for April turned negative, dropping sharply to a contracting 49.4 in April from an expanding 51.4 in March. This is their first contraction in the services sector activity since December 2022, and it surprised markets who had expected a continuing expansion. But before we get too carried away, we should note that the new order component remained expansionary, so this overall drop might be just a blip.
The internationally-benchmarked US Markit services PMI is still showing an expansion, albeit a slower one.
So despite the headlines of a labour market and service sector undershoot, the markets liked the implications. Risk appetites returned with the S&P500 rising, bond yields falling, and the USD easing. Basically markets now feel US rate hikes are less likely as inflation pressures are easing - just as the US Fed itself seemed have suggested. The expectations of one 2024 rate cut late in the year are creeping back.
American vehicle sales came in slightly higher in April and the highest monthly sales rate since December, now at 15.7 mln, up +0.5% from the rate in the same month a year ago. For perspective, it reached an all time high of 21.7 mln units in October 2001 and a record low of 8.5 mln in April 2020.
In China, their publicly traded companies took a net profit hit for the first time in five years in 2023, as the protracted property sector slump bled into other industries. The roughly 5,200 non-finance companies listed in mainland China logged a combined net profit of NZ$655 bln last year, according to DZH data. This amounts to a -3% or -NZ$20 bln overall retreat. In Q1-2024 the decline swelled to -5% on that basis.
China returns from its "Labor Day" week of holiday, today. And there are no real signs their property market has bottomed out, as some claim. In fact, banks' mortgage books are now shrinking, undermining claims the market is stabilising.
Global real estate services provider CBRE first-quarter profit beat analysts' estimates for Q1-2024, helped by higher leasing demand at a time when commercial property sales remain under pressure from elevated interest rates. Their revenue rose +7%.
In Australia, eyes are turning to tomorrow's rate review by their central bank. No change is expected, but it will be closely followed for signals of the recently talked about rate rise possibility.
The UST 10yr yield is now at 4.51% and little-changed from Saturday.
The price of gold will start today up a minor -US$1 from Saturday at US$2301/oz.
Oil prices have stayed down at just under US$78/bbl in the US while the international Brent price is still just over US$82.50/bbl.
The Kiwi dollar starts today slightly softer from Saturday at just over 60.1 USc. Against the Aussie we are still at 91 AUc. Against the euro we are also little-changed at 55.9 euro cents. That all means our TWI-5 starts today just on 69.3 and down -10 bps from Saturday.
The bitcoin price starts today at US$64,262 and up +4.0% from Saturday and basically back to where it was a week ago. Volatility over the past 24 hours has been modest at just on +/- 1.3%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news the OECD sees a world economy in recovery and about to expand at an increased rate, despite the many challenges. It is a perspective of resilience.
But first in the US, jobless claims held at a two month low ahead of tomorrow's April non-farm labour market report. There were +189,000 new claimants last week taking the total to 1.76 mln and that is it’s lowest since October.
The very low levels of job cuts reported in April fell from the prior month.
Markets expect non-farm payrolls to have expanded +243,000 in April when they are released tomorrow.
Although they fell in March from February's record high, American exports are essentially holding at a high level and were unchanged from a year ago on goods and services basis.
The American March factory order data was released overnight and that showed another increase, a second consecutive one and up +1.6% from the prior month which was itself up +1.2% on that basis. However these levels are still running -0.9% lower than a year ago.
China remains on holiday. One feature of this year's extended Labour Day break is the return of Chinese making international trips. Japan is the focus this week, but that will spread as Chinese travellers regain their appetite for seeing the world.
Meanwhile, their real estate sector is making no progress toward recovery. It remained very weak in April with major developers’ sales tumbling -45% year on year and holding new very low month-on-month levels.
In Argentina they can sniff real progress in their battle against endemic inflation. So their central bank slashed its benchmark interest rate overnight by -10% to 50%, the fifth change since December and the third in the past three weeks. They see a notable slowdown in monthly inflation and a "rapid adjustment" of inflation expectations. In March, Argentina's monthly inflation slowed more than expected for the third consecutive time, with consumer prices rising by 11% from February to March, below economists' forecast of 12.1%. The new administration has prioritised stringent spending cuts since December to combat inflation, and they now expect monthly inflation to decrease to 3.8% by September. That would take the current inflation rate of 288% down to under 50%.
On Monday, the OECD will release an updated assessment of the New Zealand economy and prospects. Today, its global Economic Outlook update sees an "unfolding recovery" and it has raised its global growth forecast to +3.2% for 2025 from 3.1% this year. They see New Zealand rising from a modest +0.8% in 2024 to +1.9% in 2025. For Australia it is a rise from +1.5% to +2.2%. For Japan, from +0.5% to +1.1%. For the US it is a retreat from +2.6% this year to +1.8% next. For China, they see a slip there too from +4.9% to +4.5%. They expect global inflation to ease but unemployment to rise modestly. For a world with wars and severe security stresses, it is a remarkably sanguine outlook. But that inflation outlook, even if it does ease, points to higher-than-wanted sticky levels.
Global container freight rates dipped a minor -1% last week to take them to +55% higher than year ago levels. The same drivers of high rates (war diversions, Suez security, and Panama drought) are all still there so immediate relief seems unlikely. Bulk cargo rates however slipped -5% for the week and are down -12% for the year.
The UST 10yr yield is now at 4.58% and down -3 bps from yesterday.
Oil prices are down another -50 USc from yesterday at just over US$78.50/bbl in the US while the international Brent price is unchanged at just on US$83.50/bbl.
The Kiwi dollar starts today up +½c from yesterday at just over 59.5 USc. Against the Aussie we are holding at 90.8 AUc. Against the euro we are firmish at 55.5 euro cents. That all means our TWI-5 starts today just on 68.9 and up a mere +10 bps from yesterday.
The bitcoin price starts today at US$59,164 and up +2.5% from this time yesterday. Volatility over the past 24 hours has moderate at just on +/- 2.5%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again on Monday.
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Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news today's Fed positioning is less hawkish that markets had expected.
The US Fed policy announcement today brought no change in their rate targets at 5.25-5.50%. They did note that ongoing inflationary pressures and a tight labour market has stalled progress toward bringing inflation back down to its 2% target in 2024, and they won't shift their rate signals until they actually see progress.
In addition they said they will slow their quantitative tightening activities starting from June 1, 2024. That means they will reduce their balance sheet by only US$25 bln per month from the previous US$60 bln per month.
In remarks after the policy announcement, Fed boss Powell said their next move is unlikely to be a rate hike. Equity markets like that, yields fell, and the greenback eased. But part of the lack of action could be its desire not to make large policy moves in an election year.
Meanwhile the widely-watched ISM factory PMI slipped back into contraction in April, just marginally weaker than the Markit version. The ISM version is usually lower than the Markit one, but both generally move in the same direction. Currently that is a softening.
That came as the US JOLTS job openings report declined by 325,000 from the previous month to 8.488 million in March, so really only a very small change. But markets noticed the slowdown.
But the ADP Employment Report beat estimates adding +192,000 workers to their payrolls in April, more that the expected +175,000 increase but less than the March gain of +208,000. Hiring was broad-based, they found.
All this comes ahead of Saturday's (NZT) US non-farm payrolls report which is expected to record a solid employed labour force gain of +243,000.
Because of the widespread May Day holidays around the world yesterday, there is little other international data released overnight.
In Australia, their statistics agency released "employee living cost indexes" (LCI) separate from the consumers’ price index (CPI). In March, their CPI came in at 3.6%. But the employee LCI came in at 6.5%, mainly because of the sharp rise in their variable mortgage rates which pass through there very quickly. It was notable that the other groups, especially retirees, did not suffer much of a variation from the CPI in their own LCIs.
The UST 10yr yield is now at 4.61% and down -7 bps from yesterday.
Wall Street has risen +1.0% the S&P500 after the Fed announcement.
The price of gold will start today up +US$9 from this time yesterday at US$2303/oz.
Oil prices are down another -US$2 from yesterday at just under US$79/bbl in the US while the international Brent price is now just on US$83.50/bbl and down even more.
The Kiwi dollar starts today unchanged from yesterday at just over 59 USc. Against the Aussie we are holding at 90.9 AUc. Against the euro we are also holding at 55.3 euro cents. That all means our TWI-5 starts today just on 68.8 and down -10 bps from yesterday.
The bitcoin price starts today at US$57,694 and another -4.3% lower that this time yesterday. And this is a new two month low. Volatility over the past 24 hours has remained very high at just on +/- 3.9%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news that as we await our local labour market report, the global economy is expanding modestly, but inflation isn't killed off yet.
First in the US labour costs rose +4.2% in the year to March, up +1.2% from the prior quarter. This is the highest rate of increase since mid-2022 and is more indication that inflation's pressures remain at a stick level - not excessively high, but not tracking down as their central banks needs.
American retail sales at physical stores were up +5.5% last week from the same week a year ago, another indicator that consumers are still spending those higher payroll increases, and keeping inflationary pressures on.
But the Conference Board survey of consumer sentiment retreated in April. What American consumers say and what they do are diverting again. This time it isn't about present conditions which they think are ok, rather about future conditions which they are more worried about. But there are some interesting differences. Those on modest incomes are more confident than those on higher incomes. Those under 35 are more confident than those older.
In Japan, it is becoming clearer that their central bank did in fact intervene in currency markets to support the yen yesterday.
In China, the private Caixin factory PMI survey was more bullish that the official version. The modest Caixin expansion held in April, and in fact the sixth straight month of growth in factory activity recorded by this survey (which is concentrated in smaller private sector firms) and even though low, the fastest pace since February 2023.
On the other hand, the official factory PMI survey, which is more focused on large State-owned enterprises was less positive even if it was their second straight month of (low) expansion in factory activity. Basically it is just holding.
More positive is the official services PMI, but that was less positive in April than March and it came in well below what analysts were expecting, and the softest pace since January, as new orders shrank at a steeper rate. But it is positive still and that streak is now out to 16 consecutive months.
In an earnings call comment, the Yili boss said Chinese milk supply has been higher than demand which isn't growing as it once did. But he was optimistic that the back end of 2024 would improve for the Chinese dairy industry.
In Europe they said their April inflation was stable at 2.4% (Euro Area), and that their overall economy grew by +0.5% in the year to March (whole EU), which was a bit better than expected. Interestingly, it was led by Spain, Portugal, France and Greece, and held back by Germany.
In Australia, retail sales were softer than expected in March, dropping by -0.4% from February and missing market estimates of a +0.2% growth. February was also downwardly revised. It was the first decline since last December as turnover fell in all retail sectors.
Locally, we will get our March quarter labour market data later this morning. We will have a full update then (at 10:45am).
And the RBNZ releases its important Financial Stability Report prior to that (at 9am) and will have full coverage on that too.
And we should note that as speculators unwound long positions, the cocoa price is falling as rapidly as it rose.
The UST 10yr yield is now at 4.68% and up +6 bps from yesterday.
The price of gold will start today much lower, down -US$46 from this time yesterday at US$2294/oz.
Oil prices are down another -US$1 from yesterday at just under US$81.50/bbl in the US while the international Brent price is now just on US$86/bbl.
The Kiwi dollar starts today down -¾c at just over 59 USc. Against the Aussie we are holding at 91 AUc. Against the euro we are -½c lower at 55.3 euro cents. That all means our TWI-5 starts today just under 68.9 and down -40 bps from yesterday.
The bitcoin price starts today at US$60,270 and -4.4% lower that this time yesterday. And this is a two month low. Volatility over the past 24 hours has remained very high at just on +/- 3.9%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news that today we are in the quiet period before some big news coming up in the rest of the week, starting with our own labour market data out tomorrow, and the US Fed rate review on Thursday (NZT).
In the meantime in the US, the pressure from rising petrol prices seems to have completely evaporated. Pump prices reported are just +1.2% higher today than a year ago, and virtually unchanged from a month ago. But we shouldn't overstate the importance of this. Retail fuel prices account for just 4% of their CPI basket. "Shelter" (rent) accounts for more than 30%, and rent inflation is running at 5.6% pa (even though it is far below its recent 8.2% peak a year ago). House insurance has risen by +8.6% in the past year. CPI pressures are shifting
Previously we have pointed out Tesla's share price slide in 2024, down more than -40%. But in the past few days there has been a sudden recovery, up +35% on the news that the under-fire company has apparently won approval for its "full self-driving" technology in China. It has struggled to get those approvals in the US due to the perceived poor safety record of those systems. But China made a political decision to approve after a visit to Beijing from Musk, side-lining regulators.
In Europe, energy ministers from the Group of Seven (G7) major democracies reached a deal to shut down their coal-fired power plants in the first half of the 2030s, in a significant step towards the transition away from fossil fuels.
Germany's consumer price inflation came in at 2.2% in April. This retains its lowest level since May 2021 and was slightly below analyst forecasts of 2.3%. A slowdown in services inflation was offset by a small rise in food prices. A year ago, German inflation was running at 7.2% so this is significant progress since then, and achieved while the separation from Russian energy source reliance was achieved. In hindsight it is an impressive achievement.
EU sentiment was largely unchanged in April, but it is still running at a low level. But at least it has recovered from the sag in the middle of 2023 and held that improvement.
Yesterday's sudden yen devaluation past 160 to the USD has been reversed today just as quickly, now bank to 155 yen to the USD. That has some wondering whether Tokyo authorities intervened although there is nothing more than suspicion at this point. But the Bank of Japan has a reputation of being unyielding in the face of market and trader pressure so perhaps some of those reversed themselves unable to hold their short positions. It is unclear at this point what drove the pullback.
The UST 10yr yield is now at 4.62% and down -4 bps from yesterday.
The price of gold will start today a little firmer, back up +US$3 from this time yesterday at US$2340/oz.
Oil prices are down -US$1 from yesterday at just under US$82.50/bbl in the US while the international Brent price is now just on US$87/bbl. Gaza ceasefire hopes might be behind this shift.
The Kiwi dollar starts today up nearly +½c at just over 59.8 USc. Against the Aussie we are firmish at 91 AUc. Against the euro we are firm at 55.8 euro cents. That all means our TWI-5 starts today just over 69.3 and up a minor +10 bps from yesterday.
The bitcoin price starts today at US$63,031 and down -1.1% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.1%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news that jobs will be in focus this week.
In the week ahead, all eyes will be on the US Fed's interest rate decision on Wednesday, followed closely by their April labour market report on Saturday (NZT). And that comes after our own local labour market report for March on Wednesday.
The US ISM PMI will come out this week (recalling the internationally benchmarked one has already showed a slowdown). And similar PMIs will come for China, Canada, and South Korea among others. The US JOLTs job openings data, foreign trade figures, factory orders, and Conference Board consumer confidence index are also due this week and any one could be market-moving if it steps out of range. And the US Q1 earnings reporting season reaches its peak this week.
Finally, we will get inflation updated for the EU, South Korea, Switzerland, Indonesia, and Turkey.
But first, a weekend data release showed profits earned by China's industrial firms rose by +4.3% in the first three months of 2024, much slower than a +10.2% jump in the prior period. But they actually fell in the month of March from the same month a year ago, down -3.5% suggesting their economy’s stronger-than-expected growth early this year might be tough to maintain. The latest result underlined that the government has struggled to get a recovery momentum amid a prolonged property downturn, persistently weak domestic demand, and lingering deflation risks. Profits in state-owned companies fell while those in the private sector sharply slowed on the three-month basis they like to use. But it is masking building near-term weakness.
And it is not only the Japanese who have a 'currency problem'. The recent volatility of the yuan, depressed profits and unexpected shifts in external demand are combining to make some Chinese exporters less sure about their business prospects – and more likely to park their cash assets in anything but the yuan. The yuan's value has recovered somewhat since October but exports haven't, and business holders of the CNY are sensing a potential official depreciation is imminent.
Markets are also sensing a new official rate cut is imminent in China, and Chinese government 10 year bond yields dropped sharply on Friday - before recovering just as sharply as officials stepped in.
And staying in China, there are reports that property market sentiment is improving, and that has property-based equities rose sharply on the Hong Kong stock exchange - on Friday, but oddly, not yet on the Shanghai exchange. One to watch.
And in a new stimulatory action, China is offering trade-in subsidies for new car buyers. ICE car owners can get a ¥10,000 subsidy (NZ$2325) to buy a new NEV, or they can get ¥7000 (NZ$1625) for a new ICE car with engines of 2 liters and smaller. The world's largest car market is about to get larger and have its profitability problems 'solved'. But this is bringing louder international calls for action to push back on "Chinese overcapacity'. This issue worries the EU and Japan a lot.
The Bank of Japan kept its policy unchanged on Friday, as expectations mount for central bank action to deter further selling of the embattled yen. From the no-change position the yen has continued to fall, primarily against the USD but even against the NZD. At Friday's 93.8 Yen to the NZD, that is now it's 'lowest' since May 1986, thirty-eight years ago. Against the USD, the yen has sunk to 158 to the USD, its 'lowest' since March 1986. Markets are betting that Tokyo is going to have to intervene very soon. While Japanese exports are suddenly much more competitive, a depreciation like this (-15% in the past year) could bring an inflationary shock with it.
Across the Pacific, the American PCE inflation index came in at 2.7% for the year to March, back to levels they last had in November. It has now risen, modest as it might seem to us, for the past three months. Their 'core' rate has held at 2.8%. The financial market takeaway is that American inflation is uncomfortably sticky and that the Federal Reserve is right to be cautious about signaling a cut in its benchmark policy rates. (Again, it seems the Fed has called this correctly, and market analysts got ahead of themselves.)
The same data shows American consumers spending normally with personal consumption spending +2.7% higher than a year ago while disposable personal incomes were only up +1.4%.
The UST 10yr yield is now at 4.66% and down -1 bp from Saturday.
The price of gold will start today a little softer, down -US$3 from this time Saturday at US$2337/oz.
Oil prices are little-changed from Saturday at just on US$83.50/bbl in the US while the international Brent price is now just on US$88/bbl.
The Kiwi dollar starts today marginally softer at just under 59.4 USc. But for last week it rose +½c. Against the Aussie we are softer at 90.9 AUc. Against the euro we are a unchanged at 55.6 euro cents. That all means our TWI-5 starts today just under 69.2 and also little-changed from Saturday but up +40 bps for the week.
The bitcoin price starts today at US$63,733 and down -0.5% from this time Saturday. Volatility over the past 24 hours has remained modest at just on +/- 1.2%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news all about American GDP and reactions to the first quarter results.
US economic activity expanded an annualised +1.6% in Q1-2024, compared to +3.4% in the previous quarter and below forecasts of +2.5%. It was the lowest growth since the contractions in the first half of 2022, the advance estimate showed, although there are two more revisions due (an in the Q4-2023 set, they rose with each revision). The result was held back by a decrease in inventories and a rise in imports. However, disposable personal income rose an impressive +4.5% according to today's release.
However, the PCE data released with this shows inflationary pressures unabated. So the US 10-year Treasury note yield rose to above 4.7%, the highest since early November, as traders to scale back their expectations regarding the timing of a Fed rate reduction, with the the first cut now not priced in fully until December.
We should note that lower growth with still-high inflation equals stagflation, a gnarly public policy problem, as history shows.
Further, today's US Treasury 10 year bond auction reveals median yields rise to 4.47% in yet another well-supported offer. That was +37 bps higher that the prior equivalent event a month ago. (But it does seem curious that the secondary market prices these at 4.7% however, especially when demand is so strong in the primary market.)
Meanwhile the number of initial US jobless claims fell to just 201,000, a bigger than expected retreat and the second-lowest weekly level in the past 13 weeks. That means there are now 1.82 mln people on these benefits the lowest since mid-December.
US mortgage applications fell rather sharply last week, down -2.7% from the week prior and are now -15% lower than the same week a year ago. So it will be a surprise to know that March pending home sales rose +3.4% from February although they are virtually unchanged from a year ago.
New orders for durable goods surged by +2.6% in March from February, following a downwardly revised +0.7% growth in February. The March rise was more than expected, but the year-on-year change is still a negative -2.2%. It was the largest monthly advance in durable goods orders since last November, primarily propelled by robust demand for transport equipment. Orders for non-defence capital goods rose too.
Canada released retail sales data for February, and in real, inflation-adjusted terms, they fell -0.3%.
All eyes are now turning to the Bank of Japan which is meeting today. They have important policies to balance regarding rising inflation, an expanding economy, but a currency that the being depreciated in USD terms, the one relationship that motivates them. But then, many countries are struggling with the rising USD at present.
In China, the Shanghai prime office vacancy rate has hit a 20 year high - at over 20% vacant. That is a lot of spare capacity and it will worry policymakers that it is continuing to swell.
In Australia, Warren Hogan, who was ranked 2023’s most accurate economic forecaster, predicts their rising economy will force the RBA to lift rates to 5.1% this year. He is an outlier, but part of a growing cohort of analysts who don't see inflation beaten yet and the economic expansion rolls on in many of the world's major countries with its pressures.
Better income expectations, economic prospects and a rising 'propensity-to-buy' among consumers has shifted the German GfK Consumer Climate Indicator to it's 'highest reading' in two years (well actually its least negative reading in two years). But they will take the progress.
We should note that copper prices have surged recently and now top US$10,000/tonne and that is its highest since April 2022. (It is now only 6% below the all-time high, also in 2022)
Global container freight rates were unchanged last week on average, making them +55% higher than year ago levels. Bulk cargo rates fell -4.9% in the past week, but they remain little-change from long-run averages.
The UST 10yr yield is now at 4.70% and up +10 bps from this time Wednesday, and that is its highest level since late October 2023.
The price of gold will start today a little firmer, up +US$7 from this time Wednesday at US$2333/oz.
Oil prices are little-changed from Wednesday to just under US$83.50/bbl in the US while the international Brent price is still at just over US$87.50/bbl. In between however it has been volatile.
The Kiwi dollar starts today little-changed at just under 59.5 USc. Against the Aussie we are -¼c softer at 91.3 AUc. Against the euro we are little-changed at 55.4 euro cents. That all means our TWI-5 starts today just on 69.1 and little-changed from Wednesday.
The bitcoin price starts today virtually at US$64,762 and down -3.0% from this time Wednesday. Volatility over the past 24 hours has been modest however at just on +/- 1.6%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again on Monday.
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With economic growth no longer producing benefits seen in the past such as raising living standards for the middle class, and human activity having exceeded some planetary boundaries, it's time to embrace degrowth, argues Jennifer Wilkins.
Wilkins is a researcher and advocate on sustainability in business with a focus on degrowth. In a new episode of interest.co.nz's Of Interest podcast, she discusses the degrowth movement.
"Degrowth is normally described or defined as an equitable downscaling of production and consumption. Other people add in other parts of that definition, which is about reorganising the market for a new role in provisioning. So I think about degrowth as being a transition. Starting from the economy that we have now, which is very much about trickle down wealth and extracting from nature, to a future economy which is more about universal wellbeing in an economy within ecology and nature. And degrowth is really the transition from one to the other," Wilkins says.
"So I don't think about it as being a very rapid change or a very smooth change. I think about it as being a hybrid of emergence and receding ideas, quite a lot of tension and a lot of mutation in the economy. So it's quite a complex thing, degrowth."
She traces degrowth's origins to the 1970s, and Romanian mathematician, statistician, economist and author of The Entropy Law, Nicholas Georgescu-Roegen, "the father of ecological economics."
The push for net zero greenhouse gas emissions is needed but not enough, Wilkins says. With a degrowth economy requiring more of a collective than individual approach, Wilkins says "the jury's out on the role of capitalism." And does advocating for a reduction in production and consumption mean people would be expected to accept a lower standard of living?
"I think degrowth is definitely looking to raise standards of living for the majority of people around the world. I think standards of living are actually decreasing at the moment. I think around the world, middle class lifestyles are decreasing in quality. And so there's this myth, if you like, that raising growth improves wellbeing. But the evidence shows that there's actually a bliss point. Economic growth improves wellbeing up to a certain GDP per capita, and beyond that, it either doesn't make a difference and/or eventually it begins to reduce wellbeing," says Wilkins.
"The bliss point is actually quite a lot lower than New Zealand's GDP per capita. So we have theoretically enough wealth already. We just need to redistribute it. I think people who are very well off will not see a reduction in their wellbeing or their living standards through a redistribution, but I think people who are less well off will see a great improvement in their wellbeing through a redistribution."
Wilkins believes degrowth will become public policy, saying politicians who want to run on a degrowth platform have lots of positive things they can say.
"It's about redefining what we see as value. I mean, at the moment we think about wealth as value and prosperity, but prosperity is really about things like having more leisure time, having a healthier natural environment around us, having more community health and more community cohesion, having more access to services and assets, and having an increase in our democratic participation. And those are all things that degrowth wishes to grow," Wilkins says.
"I think it [degrowth] will become public policy. I think parties will run on it as a platform. It's hard to say when that would happen, but I think in the not too distant future. And I think the thing is that growth as an idea is so embedded as a common sense that it never has to explain itself. And so there's a bit of an unfair playing field in terms of degrowth will have to explain itself to become credible. Whereas growth gets a free pass."
"Growth is not producing the effects that we have experienced in the past, like the raising the living standards of the middle class. That ship has sailed. We're in a different world now. There isn't room for growth to create those kinds of benefits anymore. We need to create benefits in a different way. So growth will fail to evidence itself as a wellbeing, a process for wellbeing in future. And there'll be a confluence of factors. There'll be, you know, this failure of neoliberalism, which I think we're already experiencing," says Wilkins.
There's more from Wilkins in the podcast itself, including what degrowth would mean for individuals, businesses and communities, and what it would mean for agriculture, manufacturing and tourism.
*You can find all episodes of the Of Interest podcast here.
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