Here's our summary of key economic events overnight that affect New Zealand with news the core driver of the global economy, the economic activity of the American middle classes, appears to be in improving shape.
US non-farm payrolls came in better than expected with +531,000 new jobs added. This happened despite a shrinkage of -73,000 in public payrolls. A gain of +450,000 was expected. US employment has increased by +18.2 mln since low point in April 2020 but is still down by -4.2 mln from the pre-pandemic level in February 2020. Their participation rate is unchanged at a low 61.6%.
Average hourly earnings rose the expected +4.9% in October from a year ago, basically keeping pace with headline inflation.
But we are still left with the statistical conundrum we raised last month. Perhaps seasonal adjustments are not working as well after the pandemic shocks. You may recall we noted the September headline s.a. gain of +312,000 jobs was far removed from the actual gain then of +647,000. It is more pronounced in October where the actual rise in non-farm payrolls is a rather impressive +1,558,000 from September and taking the employed workforce of 149,217,000. In that context, it does seem like the reported +531,000 greatly under-reports what is actually happening. And the stellar actual numbers probably mean there will be no stagnation with the current inflation.
Perhaps underlining that, American supply chains are expanding fast still. October’s Logistics Manager's Index of 72.6 continues the above-70 level for nine straight months now, a level deemed as a significant expansion.
US vehicle sales which have been falling consistently since April, turned up in October to run at an annual rate of just on 13 mln (but far below China which has also been declining but is a significantly larger market). The recent improvement may be more related to the improved supply of computer chips for cars than of demand.
And there has been more confirmation that the US expansion has legs with the release of September consumer credit data showing a much stronger than expected +8.3% rise at an annual rate.
North of the border, Canada's job expansion slowed in October, rising +31,200 and below expectations, and well below the +157,000 gain in September. But at least they have returned to pre-pandemic levels of employment.
In something of a surprise, Japanese household spending jumped +5% in September from August. That is a large move for them. It has reined-in the year-on-year decline quite a bit. A rise was expected in September from August, but the one delivered was about twice that expectation.
And staying in Japan, a major mobile phone network will soon test technology that will charge small personal electronic devices like earbuds, smartwatches and other wearable devices by simply walking near a mobile base station. And in the West, that is sure to spark more conspiracy angst among the anti-everything brigade.
Economic news out of China seems very controlled these days, with only light-weight 'good news' populating their media. The run of substantial positive data stories seems to have vanished. The lack of public introspection leaves you with the strong suspicion not all is well in the Middle Kingdom.
Taiwanese inflation was unchanged in October from September, and is running at +2.6% year-on-year.
Retail sales volumes in the EU were steady in September from August even if they were slightly disappointing, but are up +2.5% from a year ago, and up +5.4% from September 2019.
The price of aluminium is now falling fast. It has been rising all year, but from mid-August it took off. But after hitting a high in mid-October, it has fallen as fast as the August/September run up. And magnesium is also past its ready heady peak. Further, iron ore just keeps on falling. But just as dairy prices are benefiting from the global re-opening of the foodservice industry, so is palm oil. The seeming global addiction to palm oil is an unfortunate environmental and climate signal, with high prices sure to encourage more planting at the expense of native tropical habitats.
Bond market signals seem quite at odds with other markets. Bond prices are rising again, yields are falling and quite sharply today. These bear signals aren't being respected in equity, commodity or currency markets, nor in technology markets. But one of them will be wrong and at some point a re-rating will occur.
In Berlin, it seems it doesn't pay to disappoint your bosses - if you work in the Russian embassy. This is a very Russian 'resignation'.
In Australia, with the reopening of their borders, professional firms are bracing for an exodus of young talent. Business leaders expect pent-up demand will make the already tight labour market even tighter.
And staying in Australia Delta cases in Victoria have jumped again to 1343 cases reported there yesterday. There are now 18,952 active cases in the state and there were another 10 deaths yesterday. In NSW there were another 249 new community cases reported yesterday with 3,065 active locally acquired cases, and they had another 3 deaths yesterday. Queensland is reporting another three new cases. The ACT has 6 new cases. Overall in Australia, more than 79% of eligible Aussies are fully vaccinated, plus 10% have now had one shot so far.
The UST 10yr yield opens today at 1.44% and down another -8 bps overnight. that is a weekly fall of -9 bps. The US 2-10 rate curve starts today flatter at +107 bps. And their 1-5 curve is very much flatter at +91 bps, while their 3m-10 year curve is flatter too at +142 bps. The Australian Govt ten year benchmark rate is down -4 bps at 1.75%. The China Govt ten year bond is down -3 bps at 2.91%. The New Zealand Govt ten year is down -4 bps at 2.54%. A week ago its was at 2.60% and two weeks ago at 2.44%.
On Wall Street, the S&P500 has opened today up another minor +0.2% in the Friday afternoon trade, up +1.7% for the week and a new all-time record high. Overnight, European markets were all higher by about +0.5%. For the week Paris is up +2.5%, Frankfurt is up +1.8% and London is up 0.9%. Yesterday Asian markets struggled; Tokyo fell -0.6% for a weekly but locked in a +2.8% weekly rise. Hong Kong fell 1.4% and booked a weekly loss of -1.6%. Shanghai ended its session down -1.0% for a -1.1% weekly retreat. The ASX200 ended its Friday session up +0.4% for a strong weekly gain of +1.8% while the NZX50 was the odd man out, ending with a strong +1.0% Friday rise, but an overall weekly dip of -0.2%.
The price of gold will start today at US$1813/oz and a +US$21 rise from this time yesterday. For the week it is up +US$30/oz.
And oil prices have recovered +US$1 at just on US$80.50/bbl in the US, while the international Brent price is now just over US$82.50/bbl.
The Kiwi dollar opens today little-changed at just over 71.1 US. Against the Australian dollar we are little-changed too at 96.1 AUc. Against the euro we are unchanged at 61.5 euro cents. That means our TWI-5 starts today the same as this time yesterday at just over 74.9, but still well over the top of the 72-74 range of the past eleven months.
The bitcoin price has held since this time yesterday, and now at US$61,013 and a minor -0.4% dip. Volatility over the past 24 hours has been modest at just over +/-1.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
44 Comments
Myopic public health policy issues emerge. Or maybe it was just nine years of neglect.
'ERs are now swamped with seriously ill patients — but many don't even have COVID'
https://www.npr.org/sections/health-shots/2021/10/26/1046432435/ers-are…
Bond market signals seem quite at odds with other markets. Bond prices are rising again, yields are falling and quite sharply today.
If the world in general is becoming materially riskier, then who wouldn’t want to own safe and liquid instruments?
Witness the positive gold price and more negative US Treasury real yields.
Bonds are dead.
"Bond prices are rising again, yields are falling, and quite sharply today. These bear signals aren't being respected in equity... markets. But one of them will be wrong ....."
In a World where 'bad news is good news' perhaps that explains why the equity markets are pushing ahead.
Indeed -.the number of unemployed dropped from 7.674M to 7.419M, hence the unemployment rate dropped from 4.8% to 4.6%, below the 4.7% exp.
But from an earlier post:
We have nearly 262 million people ages 16 or older in the United States. Almost 60 percent — roughly 154 million people — are employed. That leaves us nearly 108 million on the sidelines. Of those, approximately 8 million are unemployed, defined as actively seeking employment. This translates to an unemployment rate of 4.8 percent. In South Carolina, that number looks better, at 4.2 percent.
But, as evident in this recovery, the unemployment rate tells only a part of the story. It misses the roughly 100 million individuals (about 1.8 million in South Carolina) who aren’t working and haven’t recently looked for work. Link
Isn't that quite normal? Working age people do all sorts of important roles that aren't employment like parenting, education, pursuing alternative personal endeavours (travel, writing, art, building houses, restoring cars, sports etc.) or even enjoying an early retirement. It would be a very poor society in which every working age person was in formal "employment."
Yes, it's not all bad, but the worst trend is for people of working age to just give up (participation rate drops, not counted as unemployed) because the rewards of paid employment are falling relative to just sitting on a pile of assets pumped up by central authorities.
Employers are responding with a mix of pay increases, flexible working arrangements, and automation, but as you pointed out a couple of days ago, further automation gains are hard won. It's very interesting to see the various reinforcing and opposing forces fight it out.
That time batshit crazy green intermittent energy policy caught up with the world's poor - and no doubt the price of a glass of socialist champagne.
'"To produce a ton of ammonia last summer was $110," said Holsether. "And now it's $1,000. So it's just incredible."
https://fortune.com/2021/11/04/energy-crisis-food-shortage-security-fer…
I thought the latest announcement about the Pfizer retroviral was very exciting as it may offer a way for New Zealand to extricate itself from this policy/closed border quagmire we are now firmly stuck within and actually, you know, make some bloody progress on that which should have been finished months ago:
Pfizer inc. said its Covid-19 pill reduced hospitalizations and deaths in high-risk patients by 89%...
In Pfizer’s trial of 1,219 unvaccinated adults, five days of treatment with its drug dramatically reduced the rate of hospitalization when it was started within either three days or five days of symptom onset, the company said. The drug, Paxlovid, binds to an enzyme called a protease to stop the virus from replicating itself.
Overall, just 0.8% of people who started treatment within three days of getting sick ended up in the hospital and no one died, while 7% of people who got a placebo in that window were later hospitalized or died. Similar results were found when the drug was started within five days of symptom onset.
Link: https://www.bloomberg.com/news/articles/2021-11-05/pfizer-to-seek-u-s-n…
Is any desire by the govt to return to normality? Continual crisis has been great for polls - and pushing through abortion at 40 week legislation, handing veto rights to iwi elites over our water etc.
There may be a reason the vaccine roll was sooo slow compared to our peers.
Seems very promising, at least as effective at preventing serious illness as the vaccine is during its short peak protection period. With this and the Merck pill just around the corner the no jab no job vaccine mandates seem even more unnecessary and heavy handed.
And don't forget your aspirin and D3 chaps. 'Aspirin lowers risk of COVID: New findings support preliminary Israeli trial
The treatment reduced the risk of reaching mechanical ventilation by 44%. ICU admissions were lower by 43%, and an overall in-hospital mortality saw a 47% decrease.'
https://www.jpost.com/health-and-wellness/aspirin-lowers-risk-of-covid-…
'Among those without deficiency who are hospitalized, only 3% die; patients with insufficient D are also 14 times likelier to end up in severe or critical condition, research shows'
https://www.timesofisrael.com/1-in-4-hospitalized-covid-patients-who-la…
Bond market signals seem quite at odds with other markets. Bond prices are rising again, yields are falling and quite sharply today. These bear signals aren't being respected in equity, commodity or currency markets, nor in technology markets. But one of them will be wrong and at some point a re-rating will occur.
Actually both can be right. Bond buyers may also be expecting lower long term inflationary pressure while equity and commodity buyers may be expecting long term low interest rates boosting profitability. The bear part is the uncertainty where no one knows when or if it will happen and its duration.
https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audi…
Now commentators too are admitting that Transitory is not few quarters but few years.........from when does three or five or years will be Transitory...........when cannot change the data change the defination, this is what reserve bank has managed to convinced so called experts and economist.
I suggested that 'China was standing on the edge of an economic precise' earlier this week. Some of the above items probably support that. But worse. It's becoming very apparent that the RBNZ is just about to turn a corner into something rather nasty; and so New Zealand is also looking into that same economic abyss.
Bond prices are rising again, yields are falling, and quite sharply....
The RBNZ is likely to be in the horrible situation of falling growth and plunging wholesale interest rates, and asset markets will again be seen as the 'go-to' for safety. And in our case, that means only one option - property and more debt.
The problem that they, and we, face is that we never got the last expansion of property based debt under control when we had the chance. That's what all and sundry (John Key and all) are trying to do now.
So what does the RBNZ do? Drop rates, and see the sore of the property market metastasise into a whole-of-economy consuming cancer? (if it isn't already) or continue to enforce the changes that are hinted at today, in an effort to control last years (decades) problem?
LAST November I optimistically wrote that I thought we had 'seen the bottom' of economic vandalism with the election of an unencumbered, majority, Government, only to change my mind on the 11th of that month as it became apparent it was going to be business as usual. "I was wrong" I wrote.
We've driven so far down the wrong road (all of us) that the option of safely turning back is gone. The result is going to be - running out of economic petrol in the middle of nowhere, at midnight, in the dead of winter, with every other vehicle of rescue (China etc) also out of petrol, stopped on the side of the road.
There is still hope, IF the RBNZ can see that by turning around now, as it appears to have, we'll be closer to safety than by blindly pressing on. But I'm not sure that they have the biggest ingredient needed to effectively manage a crisis - courage.
Time, as always, will tell.
From past performances it seems that the RBNZ, once it has set a course, is loath to change it, let alone do as such rapidly. Case in point the consistent OCR hikes by Dr Bollard’s team prior the 2008 GFC. Started too late, went too high too fast, and stayed on too long. And I would not be confident that the present regime has any greater navigational ability in terms of flexibility of thought and speed of reaction.
"We've driven so far down the wrong road...".
Of course. And the sort of courage it would take to reduce the debt burden now we are so highly leveraged would be letting some people go bust. It's just not going to happen except by force. With this level of debt it's all held up by confidence, which is taking a lot of hits now in places that matter (China, US eg Zillow). I can't take the RBNZ or the NZ Govt seriously when contemplating NZ's future - in the context of the forces at work they hardly matter, even to NZ.
I watched "The Big Short" again last night, still a Holy Crap experience for me. Nothing much changes.
Economic news out of China seems very controlled these days, with only light-weight 'good news' populating their media. The run of substantial positive data stories seems to have vanished. The lack of public introspection leaves you with the strong suspicion not all is well in the Middle Kingdom.
Premier Li Keqiang, once Keynesian defiant (2016) across the economic divide from his superior, is now firmly settled into Xi’s inescapable ideological orbit. Just yesterday, China’s Number Two referred to “downward pressure” and “cross-cyclical adjustments.” - Read more
Lord Key states that "research from ANZ Bank (Key is the chairman of its New Zealand board) had shown that roughly 40 percent of Australians and New Zealanders had gone into the pandemic with less than $5000 of savings in the bank."
Such a low level of cash savings comes as a shock to him. More to the point, can anyone point to the ANZ research? I'm interested in the extent to which the sheeple are living paycheck to paycheck, despite all the 'fake wealth'.
https://www.msn.com/en-nz/news/national/john-key-on-the-next-gfc-ingred…
But no shortage of government IOUs (bonds) monetised by bank IOUs (Crown Settlement Account deposits) to oil the wheels of commerce in the form of government transfer payments to those in need..
I owe you + you owe me + magic banking laws = Money out of thin air
Any news about Pfizer CEO arrest? https://m.investorshangout.com/post/view?id=6278263
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.