Here's our summary of key economic events overnight that affect New Zealand, with news markets have been moved by US Federal Reserve chairman Powell's testimony to Congress and it was a bit more hawkish than markets were expecting. The 2-10 US bond yield curve hit -100 bps for the first time since 1981.
But first, the overnight dairy auction was a lame affair. Overall prices were down -0.7% in USD terms but given the shift lower in our currency they were up +0.7% in NZD terms. The WMP price was confirmed from the Pulse event the prior week, but the cheddar price took a very heavy drubbing, down more than -10%. Butter was essentially unchanged. None of the components lifted in the expected way, so this event has been a disappointment. Overall, this result isn't going to change any forecasts on its own, but it does expose the early February rise as an outlier, and there have been 18 event declines in the past year (of 26 events) and prices are now a third lower than where they were a year ago.
In Washington DC, Powell told the US Congress the Fed is prepared to increase the pace of rate hikes, because the data shows a stronger American economy that has been unresponsive to the rate hikes so far. He signaled that rate hikes will probably go higher than they have previously indicated.
While he was speaking, the retail data for last week came in and it was unusually weak, up only +3% from year-ago levels on a same-store basis and far less than inflation. In fact, it was the weakest rise since late 2021.
Perhaps reflecting the lower mood, the US logistics LMI eased back a bit in February, still expanding, but not by as much.
Across the Pacific, Chinese exports fell sharply, down -6.8% from year-ago levels in February. But this was less than the January fall of -9.9% and also less than anticipated (-9.4%). But despite 'beating estimates' it is a grim reminder of the global pullback in trade. Chinese imports fell a stunning -10.2% and much more than expected or in January.
Taiwanese February exports fell -17% and imports were down -9.4%, also reflecting the grim state of world trade.
Taiwanese inflation is now turning to deflation as the drop in trade pressures their economy. Year-on-year it is down to 2.4%. But consumer inflation rose very modestly in February from January, and producer prices actually fell on the same basis.
Back in China, the National People's Congress underway in Beijing is about to put public security, financial regulation and technology, all areas now handled by the state, under direct Communist Party control. It is raising their authoritarianism to a new level, making them more like North Korea in fact. Xi's grip is tightening. International firms are moving out of China and disengaging their supply chains.
In Europe, Germany factory orders were expected to all about -1% in January from December, but in fact they rose +1% to be up almost +11% from year-ago levels. To be fair much of this will be 'inflation' but not all, so they are facing a good future prospect in factory activity there.
Australian exports rose marginally in January from December which was an improvement over the prior month's slip. But imports rose much more, which shrank their enormous trade surplus somewhat.
But the key Aussie news was the RBA's +25 bps rate hike and the hawkish commentary from them. Some interpreted the Statement to suggest they are nearing the end of these hikes, but that is a wishful interpretation.
The weakening of global trade is also evidenced by the January air cargo data. The 2022 impetus has leaked away starting 2023 in a worrying trend.
The UST 10yr yield starts today at 3.96% and a net -2 bps lower from yesterday. The UST 2-10 rate curve is more inverted at -100 bps a 42 year record. Their 1-5 curve inversion is much more inverted at -89 bps. Their 30 day-10yr curve is also more inverted at -74 bps. The Australian ten year bond is down another -8 bps at 3.69%. The China Govt ten year bond is down -1 bp at 2.90%. And the New Zealand Govt ten year is starting today at 4.68% and unchanged from this time yesterday.
On Wall Street, the S&P500 is ending its Tuesday session down -1.2% in late trade, mostly induced by a hawkish Powell. Overnight, European markets were all down about -0.6%, except London which dipped another -0.2%. Yesterday Tokyo ended its session up -0.3%. Hong Kong fell -0.3%. But Shanghai fell -1.1% in a very sharp fall away in afternoon trade. The ASX200 ended its Tuesday session up +0.5% with all the gain after the RBA decision, while the NZX50 rose a minor +0.1%.
The price of gold will open today at US$1821/oz and down -US$30 since yesterday.
And oil prices start today down -US$2 at just under US$78/bbl in the US. The international Brent price is down a bit more and is now just over US$83.50/bbl.
The Kiwi dollar is down -½c again, now at 61.3 USc and dragged lower by the AUD. Against the Aussie we are up a full +1c at 92.9 AUc. Against the euro we are little-changed at 58 euro cents. That leaves the TWI-5 at 70.2 and also little-changed from yesterday.
The bitcoin price is little-changed again from this time yesterday, now at US$22,298 and a -1% slip. And volatility over the past 24 hours has been modest at +/-1.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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96 Comments
History unfortunately backs your seemingly unthinkable theory. We are due a downturn and the shoots of it are already here. Primarily because the rbnz and govt have avoided taking action for so long that the bubble is huge.. 8% unemployment is definitely a softish landing.
- auckland council will cause significant direct and indirect unemployment as it slashes cost to pay for/down the stupidly massive debt it built up.
- Other councils will follow suit.
- RE agents, banks, conveyencers, developers, tradies will lose most work. as house prices and aales slide and this time there will be less home improvement to fill the void. Already this obvious.
- central govt will at some point slash employees and many more pointless projects and cut costs as tax take dwindles, benefits and pensions soar and it has to spend to maintain core infrastructure (stuff like 3 waters, health and other mergers have failed to happen so its building huge costs for the future.)
- another black swan event (flood, pandemic, heatwave.. which used to be one in 100 year events and now is one per year it seems.. wìll smash govt coffers and key businesses - govt cant keep bailing us out and smash inflation and spend on benefits pensions etc at once).
- private business will struggle as customers pull their head in.
- reserve bank will be stuck in a mess of own making.
- educated smart kids will leave nz. In the short term there will be no prospects here
- china and usa and their allies will threaten more proxy wars and deepen a direct trade and financial conflict. Usa is currently forcing china into a corner.
I see this shift not as doom and gloom but as a great overdue outcome that will lead to a better economy and place to live for kids who will aquire better more useful skills likely with an overdue focus on climate change. But short to medium term it is going to be a bit bloody for many who havent aquired useful skills and assets.
Ps. Wow that was a long write. Was waiting for the tide to turn before i could surf lol. Sorry.
If you had spent anytime in China you would know that the CCP are hellbent on righting a perceived historical wrong to justify their totalitarian regime. Emperor Xi is clearly aiming for a world wide Han state. America is merely letting the CCP know we are not all going to play. The see no evil, hear no evil, speak no evil foreign trade policy of the EU has been a disgrace and allowed China to steal decades of intellectual property.
I agree. Ideally the USA wouldnt have spent years letting China nick or buy their IP and build their manufcturing - in return for globalisation (being short term corporate and personal returns/greed). Instead they might have paid attention to chinas ambitions, log term strategy and wannabe dictator.
We are where we are.. but their new strategy of backing a powerful dictator into a corner is proving a tad dangerous.
USA is run by corporations and money talks.
On the other side of the coin, USA is hellbent on having 50%+ female workers on every (favourable) job in existence. And obsessed with trans genders instead of MAGA.
It's too bad. The USA will fall soon enough at this rate.
Because they idled around far too long, in the notion of the word transitory, the RBNZ started too late and too slow and has been playing catch up ever since. In fact with only 50pts last time, they have now fallen further behind. That means future raising of the OCR is getting to be compressed. Next time a 100pts is likely to be necessary, I would suggest.
Here in New Plymouth, the councillors tried, but failed to tame the beast.
https://www.stuff.co.nz/taranaki-daily-news/131426999/new-plymouth-rate…
+12% last year.
+12% on the cards coming up.
Transitory LOL.
I believe there is a legal oblation as part of the rights to occupy the Park. The clubs just cant shut the doors and walk off. If they did then DOC would pursue the clubs. At least that's my understanding of it. So either club pays or DOC gets saddled with it. They cant just stay there abandoned.
There is no ability to sell them to the public etc.
Maybe they just walk away. Or is that only 'overseas capital investment good for NZ' companies that get away with it.
https://www.rnz.co.nz/news/business/456028/tui-oil-field-decommissionin…
Remember this madness - and it applies to most councils at the time. Load up..
Not just that, but it had never been cheaper for them - 1.5 percent per annum on some bonds.
"[Auckland has] breathing space for the next couple of years...they can increase their borrowing without jeopardising the covenants," Butcher said.
"It's the cheapest time for anyone to borrow. Interest rates are at historic lows and credit margins are really tight.
"It's not a cost reason for councils not to borrow at the moment. Their interest costs have never been as low."
China reopening had already failed massively once, and there really wasn't any rational reason to expect second time would be a charm. More to the point, China's weakness is globally synchronized so Xi is going to ride out the recession. https://youtube.com/watch?v=iVQ-uC1fL_g
Looks like a health crisis https://www.nzherald.co.nz/nz/emergency-departments-under-pressure-ambu…
Yes he is. He was the great hope. He had immense public support and pulled many labour folk across.
He could have been a great PM, instead turned out he was a populist, short sighted with no vision.
Perhaps I expected too much from him, which is why I resent the self appointed Knight so much.
Sir John Key reveals his biggest regret - Newstalk ZB
Former Prime Minister Sir John Key revealed his biggest regret was not being able to change the New Zealand flag.
Of all the things to be regretful of. I mean, he could have said anything from a myriad of regrets e.g. Regret not having lower unemployment and homelessness, better relations with [insert country], better funding for [insert core service]. Nope. His biggest regret was one purely of vanity.
Neither could do anything about 'child poverty'.
Because it is really: Child lack of access to resources and energy.
You can give the child more proxy, but as long as you can still out-bid them, they are disenfranchised.
Both were operating under a fatally flawed delusion - English just more so. Both - interestingly - have a background of 'belief'. Possibly the fatal-most flaw in human consciousness.
Looking at my own healthcare specialty's pay, we received marginally above-inflation pay rises under National. We have gone backwards under Labour - about a 5% pay cut so far in real terms with no further negotiation due until late this year. The chasm with Australian pay scales grows larger and larger.
Staff shortages are not surprising. We found negotiating with National hard - those pay rises came thanks to concerted effort including strike action. Labour have been even worse.
I don't know. There's certainly less motivation these days. If there were no family ties, Australia seems like a no-brainer, and that is where the majority of our trainees head as soon as they are qualified (after us spending 3-4 years effort bringing them up to speed). A recent case was a freshly qualified staff member moving to Australia to higher pay than the head of department he left behind.
There's certainly arguments that could be made to justify it, I'm just stating the facts on what is happening to my group. Not a National apologist - I've never voted for them and have no intention to.
My numbers are adjusted for inflation - under National we averaged a near 1% real terms pay rise each year, since October 2017 we have had a 5% real terms pay cut, which I expect to reach at least ~10% by the time we negotiate another rise (no doubt having to go through the demotivating hassle of striking again in order to get something that isn't too painful).
I should say, before I arrived I think there were a few years of pay freeze under National so if I had earlier data it might be more even, with both parties screwing us roughly equally.
Good one!
You don't work out what political parties are going to do based on policy announcements. Announcing further privatisation of the health service would be an election loser, even the British Tories don't go that far even if practice they are constantly moving towards it.
You go by party ideology, track record and understanding the options they will be faced with.
Cut taxes for the wealthy and privatise, privatise, privatise is the National way.
If they were a true centre right conservative party I would be interested in voting them in but this version would be even worse than Labour.
This comes a day after Robertson flaunts his record fiscal earnings - PAYE up 15% YoY, GST up 29%. This is the worst kind of shrinkflation possible: pay heaps more for rapidly declining service quality.
Expect a sharp increase in the number of Kiwis deeply dissatisfied with the poor state of affairs to be skipping the country for greener pastures in the near future.
Different but the same.
Vet recently was absolutely p$&#@d of after working for free desexing pets at local SPCA mobile clinic. Almost all the clients were ordinary vet clinic account holders with farms, orchards etc. Totally missed the real targets, but SPCA didn't care as they get the "numbers" for funding.
I did wonder how much I miss out on as it never would have occurred to me to make use of such a service. Maybe that's why I'm not rich.
Yes indeed, I was in it. On Monday evening my partner was experiencing terrible back pains (on her birthday ) so I called the ambulance and a specialist arrived about an hour later. He tried various approaches involving both IV and oral medications, but to no avail, so I drove her into Auckland A&E, although Middlemore was suggested. We arrived around 10 pm and were finally finally attended by a doctor at 0800 next morning. This is not unusual for I went into Auckland A&E 4 times over the Christmas/New Year period with much the same experience.
In all of the above I would like to point out how good the staff were, with many of them embarrassed by the situation and apologetic. I would also like to point out that the patient in question is a retired career nurse whose last job was in Auckland hospital and although in great pain, she was very sympathetic towards the staff. The same goes for me who, as tertiary prostate cancer patient is now being forced to consider going overseas for further treatment as funding for people such as me, one of the male, pale and stale, is so limited. For example, my neighbour's wife eventually died about six months ago of cancer, and in her last year he was paying $60,000/year for her unfunded medications - which is funded in Australia.
Like many who get cancer, I have done a lot of research into the disease and its treatments online and through retired doctor friends and have asked my two oncologists for advice on treatments I have found or have been sent to me from my sons in Japan. In all cases I was told by both oncologists that thy do not have time to give such advice. So there.Its a bit like the Covid shutdown's ministry of Truth.
Aussies healthcare system is worlds ahead of ours. the current state of our healthcare system should be an embrassament for the current government. They have had years to get it fixed, instead we poured money into the administration of it, instead of investing in the equipment an doctors and technology.
That's incorrect.
NZ's per capita spend on healthcare is similar to Finland and Iceland, both countries rank very high in quality of healthcare.
On the topic of funding stress, somehow the current government came up with $11b for a back-office restructure in the middle of a pandemic-induced recession but isn't willing to open its wallet for a reasonable pay increase to GPs and medical specialists in this high-inflationary environment.
No it isn't comparable.
Government expenditure on healthcare per capita in Iceland is 39% higher than NZ and in Finland it is 13% higher.
Denmark is 49% higher
Sweden is 57% higher
Norway is 84% higher
I look forward to National's proposal to increase taxes to bring them in line with the Nordic countries. Yeah right!
https://data.worldbank.org/share/widget?indicators=SH.XPD.GHED.PP.CD&lo…
SPX @ 3000 will likely = NZD under US50c. Chart of the current bear market correlation between them:
I read more "If the result isn't what you want, change the rules" talk every day.
"Let's allow the targeted CPI rate to rise to 5% to take pressure off the Central Bank's monetary intervention".
Lunacy.
Anyone whose seen a fresh delivery of refrigerators to a rural store, bought out in minutes by those who live in mud huts without power knows what that leads to. People ditching their medium of exchange as soon as they get it to buy anything, because they know it will buy less tomorrow. We can see the seeds of that today in our own economy. And 'changing the rules' will just bring that on faster.
Agreed. Pop the bubble at the expense of a minority over leveraged speculative, and lets face it, the Banks, who can clearly afford some customer failures. Without this inflation continues to smash everyone especially the retired, all govt employees (nurses, police defense etc) and low income.
It continues to amaze to watch a Labour party pick property values and bank profits over working class and people on benefits.
The property market is a farce - on all fronts. Below is a response from a broker acting for a FHBer couple who queried the ASB. Do we believe that?
"1. ASB were only offering 5.99% on a case by case price-match basis to clients with < 80% LVR
2. It was wrong of the Banker to claim you should have gone straight to them to benefit from the rate - the person clearly didn’t understand your deal and naturally (as often happens) jibed at the broker channel to win favour for their own branch channel… from the top of the bank, they try emphasising equality and respect between the different channels, every now and then individuals step outside that respect…
3. They would only offer 5.99% if you could demonstrate a competitor had offered similar or better."
Sounds about right. There's been enough publicity and outrage after all.
But for those, like this couple, who might brush up against the bank/broker once every 5 years or so, it makes it difficult for those who don't know, to know.
I became a banker because my Uncle Bob was a manager at Barclays Bank, and so was the pride of his family and community. I wanted to be a banker and was proud when I was.
Today, I don't even want to tell people what I used to do.
A day of great sadness https://www.stuff.co.nz/business/better-business/131427521/townhouse-de…
Part of me wonders if he sees the writing on the wall, and knows it will be a bad look to swan around in a Roller and on private jets while the subbies struggle to fill the kids' lunchboxes. It would be fascinating to know what's going on under the bonnet, so to speak.
Also advertising to investors where their money has gone isn't a good look either - note he wanted the press to do a story about his reduced alchohol consumption, lol.
What's the bet he skips the country when the company goes bust and he's personally liable for what's left owing...
Goldman now expects that the median dot will rise by 50bp at the March meeting to show a peak rate of 5.5-5.75% in 2023; and has raised their own forecast of the peak rate by 25bp to 5.5-5.75% as well.
The week the Markets realises there is no Fed Put is going to look real ugly, tho I suspect the usual suspects will be well short via 0DTE.
Looks to me like Nasdaq going towards 8-10k range very soon.
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