Here's our summary of key economic events overnight that affect New Zealand, with news supply chain cost pressures seem to be easing now.
But first, US mortgage applications fell again last week and are now -23% lower than year-ago levels. Benchmark mortgage interest rates rose to 5.8% which puts them back to their highest since 2008. The American housing markets is in the doldrums, undermined by those rising rates.
On Saturday NZT we get the next American jobs report and today we got the ADP pre-cursor employment report. It has been tracking the non-farm payroll quite well in its revised format. But they say the era of supercharged jobs gains may be over. They report a shift toward a more conservative pace of hiring in August, possibly as companies try to decipher their economy's conflicting signals. They say American jobs grew just +132,000 in August from July. The latest consensus for the non-farm payroll gains is +300,000 however, suggesting the strong jobs expansion remains on track.
The ISM Chicago PMI for August in this heartland manufacturing region has the moderate expansion rolling on even if not as hot as it has been. But new order levels were up and order backlogs are growing in their region they say. They also say jobs are now easier to hire for.
The official measure of Chinese factory activity contracted for a second straight month and the fifth decline in the past six months. These signs of weakness are building up now. Meanwhile the official Chinese service sector PMI is still expanding but at a slower pace. They can take some heart from that expansion even if it is their slowest in three months. The extended weakness has some analysts reducing their 2022 growth estimates down to just 3% and for such a large economy, that is a long way from Beijing's target of "about 5½%".
China needs its stimulus projects to work, to pay off not only now with employment and spreading demand, but long-term by avoiding these 'investments' becoming white elephants. Sadly there is no assurance that will be the case. We may have underestimated how much is being committed to these projects. Some say US$1 tln, some say up to three times that once debt and company investments are added to the official largess. But will China get anything like US$3 tln in benefit from these projects, however laudable they may sound? It is pretty clear that all the prior stimulus they invested hasn't worked long term as planned - or they wouldn't have needed the new stuff. If this is rinse-and-repeat, we are witnessing waste on an epic scale. Central planning gone mad.
It is not only the Chinese property market that is causing company pain, their airlines are reporting deep losses as well.
India said its economy expanded +13.5% in Q2-2022 from the same quarter a year ago, the most in a year, but less than the expected +15.2% gain. It is actually a remarkable spurt for the world's sixth largest economy. And it stands in stark contrast to China at the moment. But the Indian spurt, which came after a series of much lower gains, isn't expected to be repeated any time soon.
Germany reported its unemployment rate as 3.2% in July, tighter than for June, and given their inflation stress, a somewhat surprising result. They have unusual pressures but they are yet to show up in their labour market. Employment is still expanding.
The EU said its CPI inflation rate was 9.1% across the zone in August, a small rise from an already high level. They also said their core inflation rate was 4.3% however. But food prices were up more than +10% in August from a year ago.
Russia reported a series of economic statistics overnight and none of them were positive, except perhaps their jobless rate which officially held at a low 3.9% level in June - which seems odd given all the other very negative data.
Russia said it will shut down its NordStream 1 pipeline to Europe "for three days, for maintenance". The Europeans were expecting this new pressure. It not the first such shutdown and has only been operating at 20% anyway.
In Australia, total construction work done unexpectedly fell by -3.8% on a quarter-on-quarter basis for the three months to June, sharply missing expectations of a +0.9% rise and following a -0.9% fall in the first quarter. It was the second straight of quarter decline in construction work done, due to a fall in building work done (-4.6%), residential (-6.8%), non-residential (-1.1%), and engineering work (-2.7%). Don't move to Australia for a construction job.
Australian house prices took their biggest fall in 40 years in August, down -4.7% from year-ago levels. Prices in Sydney led the way down. Sydney is currently stuck in the chaos of public transport strikes, making life very difficult at present if you commute.
Internationally, container shipping costs are falling faster now, down -4% last week, down almost -40% in a year although they are still well above five-year averages. Freight rates for bulk cargoes are falling fast now too and are now lower than pre-pandemic levels. The extreme cost pressure surrounding international supply chains are easing quickly now.
The UST 10yr yield starts today at 3.14% and up +2 bps from this time yesterday. The UST 2-10 rate curve is less inverted at -32 bps. Their 1-5 curve is unchanged at -20 bps. And their 30 day-10yr curve is also little-changed at +79 bps. The Australian ten year bond is -6 bps lower at 3.62%. The China Govt ten year bond is little-changed at 2.66%. And the New Zealand Govt ten year will start today at 3.97%, also little-changed and still near a two month high.
Wall Street is down -0.3% in late Wednesday trade as they go through their end-of-month squareups. Overnight, European markets were all lower by more than -1%. Yesterday Tokyo fell -0.4%. Hong Kong ended little-changed after a soft start. And Shanghai fell -0.8%. The ASX200 closed its Wednesday trade down -0.2%, while the NZX50 ended down -0.4%.
The price of gold will open today at US$1714/oz and down -US$10 from this time yesterday.
And oil prices start today down -US$1.50/bbl at just under US$90/bbl in the US while the international Brent price is now just under US$96/bbl.
The Kiwi dollar will open today at 61.2 USc and little-changed from this time yesterday. Against the Australian dollar we still down at 89.4 AUc. Against the euro we are down to 61 euro cents. That all means our TWI-5 starts today at 70.5 and another small retreat.
The bitcoin price is now at US$19,982 and up +1.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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32 Comments
But it is not 'Central planning gone mad'. DC used to blame everything and the kitchen sink on Trump, too.
In all these cases (to paraphrase Malthus), we need to stand back and ask what the real problem is?
In that light, both the 'injection' of 'trillions' to 'stimulate growth', and the election of a promiser-of-the-impossible, can be sheeted-home to the impossibility of achieving endless growth on a finite planet. We - in the West, then China - have managed temporary growth, via draw-down. We though that way of life was 'normal'- which it was only from WW2 until perhaps 2008. In China, I'm guessing nobody has been told there are limits, any more than we have been. In both arenas, politicians have pretended that growth will re-start, in just a little while. Aided and abetted by a compliant media. Aided and abetted by the majority of movers-and-shakers.
None of them appear to be psychologically capable of addressing realities - even as they are demonstrably unfolding:
https://www.resilience.org/stories/2022-08-31/review-an-inconvenient-ap…
Authors emphasise the word “we.” Remarkable that a two letter word, throughout history entirely, has carried such contradiction, confusion and conflict. Very first word of the Constitution of the USA and throughout as well as with the Declaration of Independence. Eighteenth century society, ambitions and dogmas hardly as expansive and/or complex as today obviously, but you would certainly have had a better chance of defining “we” way back then. Rather a potent word when it gets down to determining who exactly “we” includes or excludes.
politicians build careers on being able to avoid identifying and having to deal with the 'real problems' PDK. It'd be a little naive to think that would change just because the planet is going into melt down. They're all so 'special' the consequences won't apply to them!
PDK you just need to get out more instead of hunkering down in a bunker
The end of the world has been nigh for a few thousand years now not just since you were born
Not to say our species wont face more calamities - Darwin is right you know
What we need to keep doing is to value community as much as self - and its a tough gig given the current crop of idiots in charge trying to destroy the trust
Murray - absolutely agree. Trump upset their applecart, and they don't want stuff on them, held by anyone but them. The problem is that they can't say what they're trying to repress... so we'll never be told what they were after. And Trump can be spectrumly clever and spectrumly stupid, but I'll bet if he had anything on him, it wasn't there.
Reminds one of Hedy Lamar's first hubby - wanted to eliminate the porno movie she'd done. So he went to buy up all the copies of it. Which made folk produce more copies....
Not so sure that the evidence wasn't there. i agree pretty much with what you say but the pics on CNN suggest some pretty highly classified documents at Mar a Largo. The big question for every one what was his intentions? There is a report that he was bragging to someone about knowledge he had from FBI or CIA reports on Macron's love life. I really do hope they manage to nail him to a wall!
Can’t say American politics has never been entertaining.Hamilton &/Burr right through to JFKs conquests and on. Each party represents a trough of goodies which the devotees await to be filled snouts at the ready. Don’t really prioritise the worth of the identity provided he or she, produces the good oil. Too big, too discordant, too much to control by any political system. Some time ago someone remarked anyone born in the USA can grow up to be the President , and if you don’t grow up, you can be Vice President. Either way, hardly true today.
But will China get anything like US$3 tln in benefit from these projects, however laudable they may sound? It is pretty clear that all the prior stimulus they invested hasn't worked long term as planned - or they wouldn't have needed the new stuff. If this is rinse-and-repeat, we are witnessing waste on an epic scale. Central planning gone mad.
Over the past 50 years, almost every government has overseen lower economic growth than its predecessor – even as it has promised the opposite. That’s according to figures produced for this column by Kevin Albertson, a professor of economics at Manchester Metropolitan University. He analysed national income per person, adjusted for inflation, and then calculated a yearly rate of GDP growth for each prime minister. The end results are the sort of ugly truth Britain badly needs.
This is half a century of an economy becoming ever more stagnant, even as its leaders point excitedly to any passing ripple. And those ripples have normally meant more debt: Albertson’s analysis shows that every extra £1 of real GDP growth between Thatcher and the great banking crash came with nearly £2 of borrowing by households and government. Link
China’s investment in R&D was 2.8tn yuan ($403.6bn) in 2021, up 14.6% yoy, accounting for 2.44% of GDP. Beijing govt's biggest expenditure is in education at 15.5% of its annual budget. They understand the foundations upon which a nations future development depend. Link
I've just heard that country Garden has announced a decline of 96% in profit. Go to 4.34
Farmers have a real problem with rape in India.
" India has harvested a record rapeseed-mustard crop, but crushing could lose momentum in the coming months as many farmers are holding back from selling to oilseed processors in the hope prices will rally further."
https://www.reuters.com/world/india/indian-farmers-hold-back-record-rap…
"India, the world's second biggest wheat producer, is prepared to meet any extra demand for wheat from buyers in south Asia and Southeast Asia, and also from countries further afield in Europe, West Asia and North Africa.
India's new season wheat harvest is underway, with this year's production pegged at a record 111.32 million tonnes - making it the sixth season in a row that the country has produced a surplus."
https://www.reuters.com/world/india/record-wheat-crop-high-stocks-help-…
They've had some great progress restoring their water supply environment in multiple regions, allowing year round permaculture, leading to small but sustainable gains in health, education and living standards, although still below 1st world levels, its a step in the right direction and shows what on the ground cooperation can do.
https://www.youtube.com/watch?v=-8nqnOcoLqE&ab_channel=AndrewMillison
https://www.youtube.com/watch?v=I1Vt8oPCZiE&t=129s&ab_channel=DownToEar…
https://www.youtube.com/watch?v=Ix9LNZIbTpc&ab_channel=JustHaveaThink
Thomas Malthus would be rolling in his grave.
Difficult questions now posed by the influx of new EVs with LFP batteries that are far more resilient than the Leafs, modern charging capability (Type 2/CCS for the local market vs Japanese Chademo/Type 1 setup) and better range. A new EV with full rebate is now cheaper than a second-hand Leaf E+ with the second-hand one.
And now that supply constraints appear to be easing, we'll likely see more trade-ins and turnovers. Interesting times ahead.
The EU said its CPI inflation rate was 9.1% across the zone in August, a small rise from an already high level. They also said their core inflation rate was 4.3% however. But food prices were up more than +10% in August from a year ago.
Traders price an almost 75bp ECB hike by Sep followed by another 50bp hike in Oct. Link
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