Here's our summary of key economic events overnight that affect New Zealand, with news that today's key data shows the giant US economy with resilient strength while inflation is slowing.
The US economy added +199,000 jobs in November, more than the +150,000 added in October and better than the expected +180,000 gain. The strength was across the board, including for manufacturing.
Away from the headline seasonally-adjusted data, the actual employer payrolls came in at a record 158.5 mln, up a strong +488,000 from October. For the broader household survey of employment which includes the unincorporated self employed, it rose to 162.1 mln and also an all-time record, swelling +473,000 in the month (revealing a small shift to company payrolls). Either way you look at it there were many more workers getting paid in November than October, +3.4 mln more in a year (+2.8 mln more on company payrolls). It is a significant shift (and achievement).
The golden jobs run is lifting confidence. The University of Michigan's consumer sentiment survey surged to 69.4 in December, rising from 61.3 in the previous month and surpassing market expectations set at 62.0. It was the highest level recorded since August, largely driven by positive shifts in the expected path of inflation. They dropped to 3.1% from November's 4.5%, marking the lowest level recorded since March 2021.
And there doesn't seem to be any stress showing up in American consumer debt levels. They rose a much tamer (and minor) +US$5.1 bln in October from September to US$4.968 tln or just 18.1% of US GDP. A modest +US$9 bln rise was expected and that too would have been low. Rising employment and solid pay increases (+4.0%, so higher than inflation) are helping consumers keep a lid on their consumer (non-housing) debt. If the global economy does wobble, it won't be because of US household finances in the current state.
All this run of positive data has markets pulling back on their enthusiastic expectation that the Fed will be cutting rates in 2024. Again, it is the Fed that is getting the future view right, not the commentariat.
The release of the December version of the USDA WASDE report caused barely a ripple, mainly because they report a sanguine crop and livestock situation worldwide with adequate stocks and balanced demand and supply. US beef import estimates are raised for 2024 on expectations of demand for processing-grade beef. US milk production is retreating somewhat.
The UN FAO also reported on December global food prices and they said the same. Food price stress has long eased and the global costs of meat and dairy have eased more than most other categories. Overall prices are falling and back to early 2021 levels and far below the intervening bubble.
Taiwan's export growth was expected to have turned positive in November and that is how it turned out - although the year-on-year gain wasn't quite what was expected even if the miss was minor. It has been a year and a half since they have had a gain like this.
Later today China will release its November CPI and PPI inflation rates which are expected to confirm they are back in solid deflationary conditions.
But even in the face of current and obvious economic restraints, Beijing looks set to launch an ambitious growth target for 2024. Maybe as high as +5%. But there is no indication that huge stimulus programs are about to be launched. New debt support however will be a part of it. One thing is becoming clearer however, Hong Kong's days as a financial center are drawing to an end with mainland policies undermining its judicial independence and court transparency. Contracts entered into their have to meet Beijing's control measures. This sort of window dressing doesn't apply when it puts the CCP in a bad light.
The Reserve Bank of India held its benchmark policy rate at 6.5% for the fifth consecutive meeting overnight. They seem confident they are keeping inflation within their generous 2-6% target range. The rate hold was in line with market expectations. India's annual inflation slowed to a four-month low of 4.9% in October.
In Australia, the incoming Labor Government ordered a competition review of how banks treat retail savers. They were particularly keen to get banks to automatically switch savers to the 'best rates' on rollover. Borrowers got the RBA's rate changes in a full pass-through, but savers did not. That review has now ended and the results will be tabled this coming week. It will be interesting to see whether the industry responds with generally lower savings rate offers, or higher lending and deposit rates.
The UST 10yr yield is on the rise again, up +12 bps from yesterday at 4.23% on the jobs data. A week ago it was at 4.21% however. The key 2-10 yield curve is marginally less inverted by -48 bps. Their 1-5 curve inversion is also less inverted, now by -90 bps. And their 3 mth-10yr curve inversion is now -116 bps and much less inverted. The Australian 10 year bond yield is now at 4.37% and up +9 bps from yesterday. The China 10 year bond rate is little-changed at 2.70%. And the NZ Government 10 year bond rate is up +6 bps at 4.98%.
In New York, Wall Street is satisfied it can handle the jobs data and is up +0.3% its Friday session on the S&P500, heading for a weekly rise of +0.8%. Overnight European markets were book-ended by London up +0.5% and Paris up +1.3%. Yesterday Tokyo ended its Friday session down -1.7% to be a full -3.0% lower for the week. Hong Kong was unchanged yesterday but down -3.5% for the week. Shanghai ended Friday up +0.1% but was -2.1% lower for the week. The ASX200 rose +0.3% yesterday to be +1.7% higher for the week while the NZX50 finished its Friday session down -0.1% but was up +1.1% for the week.
The Fear & Greed index we follow has stayed in the 'greed' side as risk appetites remain.
The price of gold will start today just on US$1997/oz and down -US$23 from yesterday. We have ended -US$63 lower than a week ago.
Oil prices are up +US$1 from yesterday at just on US$70.50/bbl in the US. The international Brent price is now at US$75.50/bbl. A week ago these prices were US$74.50 and US$79/bbl so a net -US$4 shift lower since then. Lower prices are showing up at our pumps, but given that the biggest component of the petrol price is our taxes on ourselves, the reductions are not as large as the crude price changes.
The Kiwi dollar starts today at 61.1 USc and more than -½c lower than yesterday. A week ago we were at 62 USc. Against the Aussie we are down -40 bps at 93.1 AUc. Against the euro we are down -30 bps to 56.9 euro cents. That all means our TWI-5 starts today just on 70.2 and -40 bps lower from this time yesterday, -50 bps lower than a week ago.
The bitcoin price starts today at US$43,699 very little changed from this time yesterday (+0.1). However, a week ago it was US$38,773, so +12.7% a rise from then. Volatility over the past 24 hours has been modest at +/- 1.1%.
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29 Comments
All this run of positive data has markets pulling back on their enthusiastic expectation that the Fed will be cutting rates in 2024. Again, it is the Fed that is getting the future view right, not the commentariat.
ING THINK: Bank of England to push back against rising tide of rate cut expectations My Take: All Central Banks are in this position of their own making. They need to devalue debt rapidly as their is a massive spigot of new issuance for as far as the eye can see. A splurge of new issuance is not an environment for increased debt valuations [Rate cuts] Debt devaluation, means higher rates, regardless of economic health of the nation state or global economy. Interest rate Spikes on a debt market collapse are more likely than sustained cutting cycle. Who is gonna bid for the US $1 Trn in new issuance for this year? Nevermind the expiry on existing debt roll's etc. https://think.ing.com/articles/bank- Link
Not sure I agree with David's comment. With inflation continuing to fall, once it is within range, the Fed and other central bankers have no reason to persist with higher rates, and normal risk weighted practices will come back to the fore.
At present central bankers - rightly or wrongly - are jawboning markets to maintain disinflation. This can only go on for so long before they have to withdraw and say, "Job done".
Just a side note, under Biden's policies there has been more-than-usual investment in production capacity in the US. Add that to China's now spare production capacity and demand side inflation should be contained for quite a few years. (Supply side shocks, as always, can appear from nowhere.)
The golden jobs run is lifting confidence.
RH Plunges After Big Miss On Soaring Mortgage Rates, Warns Housing Market Remains "Frozen"
Wellington Water chair Nick Leggett said the cost of bringing the region’s infrastructure up to scratch could be as much as $30b over the next 30 years.
No way councils in the Capital region can raise that kind of capital by collecting rates from a small population of 550k or so.
As Leggett puts it mildly, [the nationwide problem of] housing the rapidly growing population is going to aggravate the problem. Meanwhile, the additional local body revenue from a larger ratepaying base is going to be a trickle in comparison to the huge upfront infra costs.
We're quickly growing our way towards a poorer future!
Australian income tax bracket creep costing households more than interest rate increases...snap
https://www.abc.net.au/news/2023-12-09/tax-hitting-household-savings-mo…
Which would you rather have to fight inflation?
Even higher interest rates funneling even greater profits to banks and the already rich?
Or slightly higher taxes (with the better off paying more) while keeping the money in Australian hands?
Now is not the time for tax cuts. Maybe when inflation is down and greater production capacity has been added. About two years away?
(Don't tell NACTF that tho. Watching them cripple NZ Inc is a laugh a minute ... with lots of sobs afterwards.)
Bad news for the Maori haters. Luxon throws Seymour's big win on the bonfire only a couple of weeks into the coalition.
First time I've been impressed with Luxon for reading the room.
https://i.stuff.co.nz/national/politics/301023763/national-regains-semb…
She's just reporting what Luxon said. The Bill will go no further than select committee. Ouch! kick in balls for Seymour from his coalition partner. Couldn't have happened to a nicer bloke hahaha.
Maybe Luxon will confound my expectations like Mayor Brown has been doing recently and start making some sensible decisions now he's in power and faced with the reality of having to govern. I guess it depends on the National party donors how many promises he's willing to renege on.
The select committee will have quite a bit of work to do for a year or so, including extensive (ie both sides) public consultation however it should be all ready to go on the table at the next election. What do you think the electorate will vote for?
"To uphold the principles of liberal democracy, including equal citizenship and parliamentary sovereignty, the Parties will: • Remove co-governance from the delivery of public services. • Ensure government contracts are awarded based on value, without racial discrimination. • Issue a Cabinet Office circular to all central government organisations that it is the Government’s expectation that public services should be prioritised on the basis of need, not race, within the first six months of Government. • Repeal the Canterbury Regional Council (Ngāi Tahu Representation) Act 2022. • Restore the right to local referendum on the establishment or ongoing use of Māori wards, including requiring a referendum on any wards established without referendum at the next local body elections. • Pass the Constitution (Enabling a 4-Year Term) Amendment Bill through first reading in the first 15 months of the term. • Introduce a Treaty Principles Bill based on existing ACT policy and support it to a Select Committee as soon as practicable"
National_ACT_Agreement.pdf (nzdoctor.co.nz)
I think it's a waste of time to spend civil service resources on a bill that will go no further than committee stage.
It's performative politics, the worse type, the sort of stuff Trump does. What a great use of the bureaucracy, rebranding and discussing bills that are dead in the water.
Using the term "Maori haters" stops you from having to think about the issue. Read Seymour's proposal agnostium, it's about promoting democracy and creating equity. Maori don 't really get a mention. Quit the name calling and read the proposal.
As a "Treaty Issue" it promotes the treaty and returns to what it actually says, as versus the inventions of recent years.
Absolutely disgusting actions today from the US to block a ceasefire in Gaza. Blood all over their hands, once again, as they continue to transfer arms to Israel to murder civilians which account for over 70% of deaths in the conflict. Once again they are showing they cannot be trusted as the peaceful, rules based leader they proclaim to be, instead opting to support war crimes. Their actions simply embolden other super powers to take over the reign of leadership on the world stage. One more nail in the coffin of the US hegemony.
Not even the tiniest surprise.
A ceasefire that blocks Israel from wiping out most of Hamas won't happen - it has been obvious they are determined from Day One, and of course 'Merica has their back so they can get the job done. The only variable is who runs Gaza when the dust settles.
My guess is (once Hamas are finished) there will be an election and someone like the son of the founder of Hamas (who now despises Hamas) will find he has deep pockets on the election trail. There will be a peace deal, reconstruction, but the New Gaza leadership will need to drive around in tanks for generations.
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