Here's our summary of key economic events overnight that affect New Zealand, with news growing labour markets are thwarting central bank efforts to slow things down.
We start with positive surprises all over the place in the US today. The biggest was from their labour market where the headline gain in non-farm payrolls came in very much higher that anyone expected, up +516,000 in January. That's its best January increase ever. Only a +185,000 gain was expected. And this data is from the usual "Establishment Survey" of employers. The data from the "Household Survey", which in the past has been less positive, is in fact even more positive this month, up +894,000 employed on the same seasonally adjusted basis. Unadjusted both surveys give a January level the best in more than a decade, probably longer.
Their unemployment rate is now its lowest since 1969.
Any way you look at this, it is strong. More people are in paid employment than ever before; either 160.1 mln in the Household Survey, or 155.1 mln in the employer survey (and the difference is probably unincorporated sole traders).
Also 'positive' in an economics way, wage growth is slowing. Average weekly earnings in January were up +4.7% from a year ago.
But the strong American results don't end there.
The widely-watched ISM services PMI reported a strong recovery in January, up from a small retreat in December. New order levels were the star here. The January level reports a healthy expansion again, and largely confirms the non-farm payrolls report. This is in contrast to the US Markit services PMI we reported earlier last week, which didn't show these gains; a rise to be sure, but that report was contracting still.
In Canada, housing sales in their largest city, Toronto (population 6.3 mln), "collapsed" to just 3100 in January, -40% below year-ago levels and prices down -20%.
The private services PSI survey for China confirmed the official PSI rebound in their services sector in January. (Recall this same private survey did not confirm the factory improvement.)
The end of pandemic restrictions is restarting a migration of China's wealthy to move overseas taking their money with them. Canada is the most favoured destination but the shift to Singapore is substantial too. Other countries will get this flow too. A feature of the 2023 flows is the urgency that these migrants bring with their desire to leave.
Meanwhile, Hong Kong retail sales fell -0.7% in December on an inflation-adjusted basis, but that was a lesser decline that the -5.3% drop in November. For the whole 2022 year, sales fell -3.4% on an inflation-adjusted basis.
In the EU, their producer price data didn't come down in December as it had trended earlier. In fact it rose unexpectedly, but 'only' at a +13% annualised rate from November, about half the year-on-year rate.
In Australia, the value of new home loans for owner-occupied homes in Australia fell -4.2% in December from November, sliding for the seventh straight month and coming in worse than forecasts for a -2.75% decline. Refi is strong there however.
Overall, commodity prices are reacting today to the rising US dollar, but other than that are holding their levels after a steady run-up over the past few months.
The UST 10yr yield starts today at 3.52% and up a sharp +14 bps from this time yesterday. It has been a rocky week, pressed down by the Fed signals, now back up by the jobs report and the net result is unchanged in a week. The UST 2-10 rate curve is slightly more inverted at -75 bps. And their 1-5 curve is less inverted at -111 bps. Their 30 day-10yr curve is a lot less inverted at -105 bps. The Australian ten year bond is up +9 bps at 3.49% and reversing much of yesterday's shift lower. The China Govt ten year bond is unchanged at 2.93%. And the New Zealand Govt ten year is starting today at 3.96% and another -14 bps lower and its lowest since September 2022.
Wall Street is ending its Friday session with a -1.0% reversal on the S&P500 but will likely end the week up +2.2%. Overnight, both London and Paris rose about +1.0% but Frankfurt fell -0.2%. The means for the week, Frankfurt is up +2.7%, Paris is up +2.6% and London is up a lesser +1.8%. Yesterday, Tokyo ended its Friday session up +0.4% for a weekly gain of +0.5%. Hong Kong fell -1.4% on the day to be -4.1% lower for the week. Shanghai ended down -0.7 yesterday to be -1.4% lower for the week. The ASX200 ended up +0.6% yesterday for a weekly gain of +0.9%, while the NZX50 ended up +0.4% on the day to finish the week +1.4% higher.
The price of gold will open today at US$1862/oz and down a very sharp -US$54 from this time yesterday. It is down -US$67 in a week, or -3.5% lower.
And oil prices start today down -US$3 at just under US$74/bbl in the US. The international Brent price is now just on US$80/bbl. That pushes the weekly drop to more than -US$5 or -6.3% for the week.
The Kiwi dollar is soft as the greenback surges. It is now at 63.5 USc and down almost -1½c. Against the Australian dollar we slightly softer at 91.4 AUc. Against the euro we are down -¾c at 58.7 euro cents. That all means our TWI-5 starts today at 70.7 and down -75 bps from yesterday and from where we were this time last week.
The bitcoin price is now at US$23,606 and down -0.9% from this time yesterday and up +2.1% from a week ago. Volatility over the past 24 hours has been modest at +/- 1.9%.
Finally, a reminder that this is a long holiday weekend in New Zealand and most businesses will be closed on Monday for Waitangi Day. This update will return on Tuesday, February 7, although there will be additional content posted over the whole weekend.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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75 Comments
The arms industry loves a war. What’s better than an American war, this war because there are no U.S. casualties to erode public support. It’s also forcing the US to consider arms supply for a major war between states and that will help them prepare for a war with China.
it’s such a great strategic outcome for the US, they are destroying Russias military capability and not taking a single casualty. Brutal for Ukraine of course.
The only way this ends is if Putin decides to end it or he is deposed.
I am also not convinced with last weeks sentiment and big falls in the swaps. I think some have jumped the gun on the turnaround, the labour market also very strong (and wage gains) in NZ. I dont think the battle is going to be won so quickly, especially while consumers are still spending and on discretionaty items. Im keeping an open mind on inflation and interest rates for at least the next 6 months. NZ swaps will rise again on monday I believe.
US pension funds are on the brink of implosion – and Wall Street is ignoring it.
As public officials across America prepare to funnel even more of government workers’ savings to private equity moguls, an alarm just sounded for anyone bothering to listen. It is a warning that Wall Street executives, busy skimming fees off retirement nest eggs, want you to ignore. The longer the warning goes unheeded, however, the bigger the financial time bomb may be for workers, retirees and the governments that pay them.
https://www.theguardian.com/business/commentisfree/2023/feb/02/us-pensi…
A feature of the 2023 flows is the urgency that these migrants bring with their desire to leave.
Well they won't want to come here, back home they're only living in an Orwellian despotic regime, here we have the living hell of a higher cost of living.
"Tomatoes for $10 a kilo? I'd rather a gulag!"
Companies across the Adani Group of companies have seen a huge sell-off that took the total group’s losses past $110 billion by Friday close, after the Hindenburg report accused the conglomerate of “brazen stock manipulation and accounting fraud scheme over the course of decades.”
Makes the FTX scandal look like amateur hour.
It’s hilarious watching “bulls” claim victory on rate hikes in one thread and then this happens.
Accept it, inflation will keep coming back stronger the more hope we provide to crack addicts in the market until people truly panic.
If central banks are going to do their job, it will have to hurt a lot more unfortunately.
There’s a time for optimism, but it ain’t for a looong time.
Lies, damned lies and statistics!!!
Big mess in payrolls. Benchmark changes. NAICS 2022 coding. Another huge annual population control factor. Bottom line, though, it's another month where Est Survey says jobs are good and HH Survey shows they aren't. SSDY. CES +517k CPS +84k Same planet, different world. Link
"The adjustments increased the estimated size of the civilian noninstitutional population in December by 954,000, the civilian labor force by 871,000, employment by 810,000, and unemployment by 60,000." Census finds more Americans of working age, so BLS assumes they're working. Link
Even *with* population control factor, level of full-time employment still lower than last March. That's the huge red flag here in all this mess. Jan 2023 132,577,000 Mar 2022 132,587,000 On a comparable basis, it has to be a lot lower but BLS doesn't revise historical #s. Link
After every crisis be it economic, financial system or currency (with attendant market meltdowns in stocks, housing, bonds, commodities etc) the permabull says "that was the last one ever!". The permabear says "the countdown to the next one begins". Who is the realistic one and who lives in perpetual delusion? And which type is running modern civilization? So as years go by, the permabull's optimism evolves into mania in the hottest asset class(es) of the cycle. Thus creating the next crisis which they deny is going to happen in the face of myriad signals up until the day denial becomes impossible. No More Boom And Bust!
You cannot trust any of the figures coming out of the USA anymore. Employed to them means working a couple of hours a week. Some people over there probably have 5 jobs just to survive. I prefer to look at information like thousands of tech jobs are going and the fact 75% of Americans are now living pay check to pay check and credit card debt is through the roof. The numbers are not going to save you when it all finally hits the fan and everyone realises the emperor has no cloths.
Not hard to understand increase in US Population. Homeland Security reports 2.7 million arrivals last year at the Southern Border, and add to that they reported in December 1.2 million "Gotaways". They can better track the "Gotaways" now due to all the upgrading at the Southern border of Camera and Sensor Technology during the last Administration. Labour pool at the bottom of the ladder will thus be bursting at the seams.
Libraries are probably the most under-rated public space/utility.
Just about lost it at some colleagues who tried to argue that if you think the new Chch stadium is a waste of money, that libraries must be a waste too.
Last time I checked, I could walk into the library regardless of whether or not there is an event on, and it didn't cost me a cent.
Markets are a human construct, not gifted to us by nature in all its perfection. These do get dysfunctional from time to time, just like every other human creation and needs repair.
Why do you argue for more migration then? Shouldn’t market wages take care of skill-supply gaps?
Markets are humans valuing things. Whilst I agree libraries are of value, it'd appear much less so by the wider public.
As for migration, well, no civilisation has ever successfully managed depopulation very well, and the future without it is more taxes for less services.
Personally I'd rather less people, but there's some grim realities you can't escape.
It could simply be called Trading. Nothing goes in a straight line forever, and traders try to enter and take profit when they can.
It's surprising how often clarity emerges when they don't have a position any longer. The question "Now what?" can often be "Get back into it!" as the trend become clearer.
The price of gold will open today at US$1862/oz and down a very sharp -US$54 from this time yesterday. It is down -US$67 in a week, or -3.5% lower.
Silver price been under pressure of late. The Western investment banks are very much still in charge of this game. For how long remains to be seen. The gold price manipulation is one of those open secrets but nobody really cares because most people have little interest in or exposure to gold as a store of value.
The end of pandemic restrictions is restarting a migration of China's wealthy to move overseas taking their money with them.
Not a day passes without the media (or people like Elizabeth Warren) screeching about crypto and money laundering. But when it comes to all the machinations behind China capital fllght - much of what is drenched in ill-gotten gains - into the Anglosphere, Asia, and Europe, the ruling elite is as quiet as a doormouse. Indirectly many people are profiting from all this and it plays a part in the property ponzi. It's also interesting how some of our ex-politicians become born-again Sinophiles later in life after careers and lives spent with zero interest in Chinese culture (Key, Shipley, Tremain are all examples).
Vancouver is an interesting case study. The place is basically the end of a money funnel with all kinds of nefarious people involved. What has been most disturbing is how the political systems enable this and how many people are captured. NZ is no different. Same with Aussie. And it's not just all about the Chinese community. Unrelated (but related), look at the NZ China Council and those clamouring to get involved with it. Has a healthy quota of middle-aged Pakeha men. Related to non-Chinese getting their snouts in this trough, Aussie is far, far worse.
https://www.occrp.org/en/investigations/following-a-trail-of-tainted-mo…
President Xi Jinping’s decision to dismantle Covid travel restrictions is accelerating an exodus by wealthy Chinese, who could fuel billions in capital outflows as they plow cash into property and assets abroad.
Investment in non-GDP qualifying assets is of no consequence - just an exchange of changing asset capital valuations between private citizens.
The more serious inward Chinese investment in other nations productive materials and assets is something to note: China and the U.S. Are Wooing Indonesia, and Beijing Has the Edge
Obviously, his wife's clerical job paid well....
Chen Runkai told immigration officials that he made at most 41,000 Canadian dollars a year. His wife, he said, was employed as a clerk….He is the owner of a Tudor-style home with mountain and ocean views he purchased in 2016 for CA$15.6 million. It sits a few doors down from another mansion his daughter purchased in 2012 for about CA$14 million — without a mortgage — when she was 25, while listing her occupation as “student.”
Which begs the question "Has that Parnell mansion sold in 2017 to a buyer reportedly out of China by our former Prime Minster at such an unexpectedly high price re-sold yet?"
https://www.nzherald.co.nz/nz/sir-john-keys-former-parnell-mega-mansion…
Chippy is going stale already and it's barely been a week: https://www.newshub.co.nz/home/politics/2023/02/waitangi-politicians-wh…
... his " honeymoon " as the new PM will be over quicker than a fart in a hurricane ...
Because , unlike that scaredy cat Ardern , Chippy will front up to the tough media interviewers ... and at times , they'll roast him ...
... the ghastly overbearing big government knows best policies are mostly all still in place ... and he had a hand in crafting some of them ... out of stagnant pond ooze ....
Don’t think so gummy…..
the press has cottoned on that National have no plan yet that they can tell the public.
and Hipkins is a likeable chap. It’s not going to be the landslide some think.
National need a complete clean out from the top down.
I’ll have a bet Luxon doesn’t make the start line.
his polling will dip and he will resign
100 % certainty that the Gnats are unified as a team & fully behind their leader , Luxon ...
... their plans will not be fully released until 4 or 6 weeks out from October 14 ... as is always the way , no matter how much the media bay for details right now ... wont happen ...
The only polling to dip will be Chippy & his Scum-Sucking-Pond-Dwelling-Low-Life-Labour-Government-Sad-Sacks ....
Oh dear, I have little time for either major party, but I think the Nats and Act would be the bigger disaster. It doesn't really matter though - Luxout is dead in the water. The Nats need to show the same ruthless streak that Labour have just shown.. but who do they have as backup that middle voting kiwis would feel any warmth for?
Those who believe in the long Kondratiev wave would say we are in the fourth turning. But its very different times.... QE kicked the can down the road, we are now standing facing the can, what do we do? No amount of cheap printed "Money" is ever going to make food, energy etc cheap again. Only three options, pay the money back, inflate it away or write it off. The third tends to punish the old, who have savings. The second is dangerous it can ... get away on you. Bens Bernanke final solution was to devalue the USD vs gold. I think we are closer to this than ever before. I do not think we can pay the mass of debt back, we are effectively borrowing to pay the interest already.
Are you adding private and public debt there? They are opposite sides of the balance sheet.
Both. There are lower estimates depending on whose source you use. The IMF suggests that total debt (public plus non-financial private debt stocks) to GDP is lowe than 4x.
Anyway, if we assume the idea that all debt is distributed in a ledger, then arguably global debt would be net zero.
Ok, well how's crypto performing against eggs over the past 12 months?
Not sure what the point of this is. Should there be a correlation between the price of eggs and the fiat value of BTC?
Eggs can be a medium of exchange and a short-term store of value. And in some ways, they don't have counter party risk.
But that's about the limits of the comparision I can see.
If the past 12-24 months is a guide then basic food items are a better inflation hedge.
The ability to transfer through time and space doesn't appear to have been that highly valued. I'd argue that function has almost no value, once it has to be done legitimately.
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