Here's our summary of key economic events over the weekend with news the IMF is starting to worry that the US expansion could become unsustainable unless it is matched by national productivity gains.
But first we should note that it is a public holiday in Australia today.
However all eyes this week will be on Thursday (NZT) when the US Fed will opine on where they think inflation is going and their expected policy rate track. This will be in their dot-plot. Earlier in the same day, the US releases its May CPI data, a crucial piece of their puzzle. US PPI data comes on Friday.
But China also releases its CPI data this week, on Wednesday, followed on Thursday by their important new yuan loans data.
Then Japan will weigh in on Friday with its interest rate policy update.
But over the weekend in the US, markets were anticipating a 'good' rise in non-farm payroll jobs of +185,000. But in fact this headline number was up +272,000. Even more impressive, hourly pay was up +5.3% from a year ago, weekly wages up +5.6% on the same basis.
But as regular readers know, we also look at the 'actual' data. There are now +917,000 more people on employer payrolls in May than in April. Overall there are now 161.3 mln people employed, although that is little-changed from April. So all the gain is a shift from the unincorporated self-employed on to employer payrolls. That may be why the pay gains are well above inflation.
Whatever way you slice it, it is a pretty good result, and markets are assuming the Fed will look at this and see pressures that are unlikely to quell inflation. The bond and FX markets reacted, but the equity market went quiet at unchanged levels (although they may argue this gain was already priced in).
The March rise in American consumer debt levels was a pretty modest +US$6.3 bln from the prior month and April was expected to catch-up with a +US$11 bln but still-modest rise. But in the event, April consumer debt levels only rose +US$6.4 bln again, up just +1.5% from a year ago. There is no evidence here that Americans are stretching themselves further with additional debt obligations.
Meanwhile American household net worth rose +3.3% or +US$5.1 tln to more than US$160 tln at the end of March 2024 from December 2023. The value of household equity holdings increased +US$3.8 tln, while the value of real estate held by households rose by +US$900 bln. In complete contrast, American household liabilities were up only +US$100 bln to US$20.6 tln. There is a huge amount of overall resilience here. (We are not suggesting this is evenly spread, because clearly it isn't.)
Canada also released labour market data over the weekend. Their payrolls rose +27,000 and more than the +22,000 expected. But it was all part-time jobs that rose and by +62,000, and full-time jobs shrank -36,000. Their jobless rate rose to 6.2%. They are probably not happy with this outcome but at least their central bank has cut its official interest rate and that may bring some relief to employment in the rest of 2024.
Perhaps proving important context to the zooming container freight rates, exports from China soared +7.6% year-on-year in May and beating market expectations of a +6% rise. It was also up from a +1.5% rise in the previous month. It's the steepest rise in outbound shipments since January, fuelled by a lower base from last year and sustained overseas demand. The big export destinations were ASEAN countries (+9.7%) and South America, especially Brazil (+26%). Elsewhere little-change or decreases. China's imports were weak however, virtually unchanged from a weak May a year ago.
China's foreign exchange reserves rose to US$3.23 tln in May from US$3.2 tln in April and above market forecasts. Their gold reserves were unchanged at 72.8 mln troy ounces, an unusual pause because they had risen for 18 consecutive months. But the rise in the gold price saw the value of their holdings rose to almost US$171 bln.
In India, their central bank held its policy rate unchanged at 6.5% and said inflation's pressure at 4.85% is not changing much. Their policy target is a very generous 2%-6%. But food prices are rising and were up +8.7% in April from a year ago. Given their heat and water stress levels, food price pressure is an economic consequence they will struggle with.
In the EU, their GDP rose its most in Q1-2024 since Q3-2022, but to be fair the annual growth from a year ago was only +0.5% for the EU, slightly less for the Euro Area (+0.4%).
The IMF is pointing out that growth without sufficient productivity improvement is a problem for the world's financial stability, especially when the largest economies drag the chain on productivity. They seem to be pointing to the US on this, and that their expansions won't be sustainable without the commensurate improvements in productivity.
World food prices were up only marginally in May but are still running below the levels of each of the past three years. Global food security seems ok and at prices that are affordable (even if there are pockets of real stress and distress). Dairy prices are one area prices are rising and they have been for eight straight months. Meat prices are low and relatively stable.
The UST 10yr yield is now at 4.43% and down -1 bp from Saturday after the US non-farm payrolls surprise. The key 2-10 yield curve inversion is little-changed at -43 bps. Their 1-5 curve is unchanged at -73 bps. And their 3 mth-10yr curve inversion is still at -93 bps. The Australian 10 year bond yield is still up at 4.33%. The China 10 year bond rate is unchanged as usual at 2.32%. The NZ Government 10 year bond rate is now at 4.69% and little-changed from this time Saturday. But it is down -17 bps from a week ago.
The price of gold will start today down -US$10 from Saturday at US$2293/oz and down -US$83 from Friday.
Oil prices have been retreating slightly over the weekend and are now at just on US$75/bbl in the US while the international Brent price is just under US$79.50/bbl. A week ago these prices were +$2 higher back then.
The Kiwi dollar starts today at just on 61 USc and little changed from Saturday. Against the Aussie we are unchanged at 92.8 AUc. Against the euro we are marginally softer at 56.5 euro cents. That all means our TWI-5 starts today still at 70.6, and also little-changed from this time last week.
The bitcoin price starts today at US$69,632 and up +0.9% from this time Saturday. Volatility over the past 24 hours has also been very low at just on +/- 0.4%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
60 Comments
A bit of fun for monday morning... how many of these do you pronounce incorrectly?
https://businessfinancing.co.uk/most-mispronounced-brands/
Not sure how you can get Fonterra wrong? 🤔
(Also, it's "pronunciation" not "pronounciation" ;) )
Stinky layer after stinky layer, and you're left with tears...
This is a good write-up and perhaps the best summary of the facts I have read thank you.
The US is a particularly interesting place but we cannot throw any stones. Our government corruption and largess is in scale. Also our press is similarly captured, and being able to see sense between the misinformation is becoming more difficult.
Recent polls (even discounting for an almost certain agenda driven sample selection and survey composition) here have the population already bemoaning the government for making the decisions they were elected to make. I don't blame them when they are fed what the activists want to feed them, and when the small number that can be bothered to complain do they are formally ignored.
One thing I recall with favour about President elect Trump 2016, was a question at a press meeting something like - well, from that, you are not expecting to have a very good relationship with the press then. Answer - no I’m not. Might question in NZ whether the media here is generally snitched off with this government because the subsidies provided by the previous government have been choked off.,As far as I know working in any role in any form of the media is just a vocation as per any other employment. Yet there appears to be some sort of entitlement amongst many of them that thinks that it is not so?
I know a couple of people who are career media, one a personality. They do not actually think they are biased, and the nature of their work is intensely network driven (they literally need to work for each other in their known network - there is no role advertising) they cannot afford to stray outside the narrative, even if they wanted to.
A conversation about other realities makes them excessively uncomfortable and so, our relationships are not what they could be. They are both still really good people, who I share a lot of social values with, but they are completely unable to tell stories outside the mainstream narrative.
What lovely clickbait. A mixture of Russian talking points and illustration of misinformation. I can argue that this is just people not understanding nuisances
Regarding 85% of that German casualties being on the Eastern front. Without US lend lease it has been stated that the USSR would not have been able to defeat Germany. the casualty rate while important is not the whole story.
The comment about the war in Ukraine is just a Russian talking point. Doesn't mention that some states that have been affected by Russian occupation may have a different view on Russia and it's actions (such as the Baltic states and Finland)
Depends on what you think is wrong. To some degree (not in all cases) the people now seeking employment outside the government will re-skill as required to meet the needs of the actual economy (or as likely head to Australia) and this should make us a more productive economy in the long run.
It certainly is not kind, I'll give you that!
Agree. Not kind...but then we are a very small economy that seems to be super non productive. So there is a real need to the government to be a role model in doing more with less and cutting taxes an red tape... as well as the need for them to reassign money to useful stuff.
We also quickly need to move (anyone who isnt already) away from the mindset that government jobs are safe for life or government employees dont need to continually reskill themselves. Ditto private sector and those on benefits. Employment and benefit income in the west is no longer likely assured... debt, Ai etc are all piling up.
Countries that have bloated governments won't do well.
OldSkoolEconomics,
"cutting taxes" Sounds great, who doesn't want to pay less tax? Perhaps you believe in the laffer Curve. Since we are not very productive and don't rate well as an exporting nation, then that means we must accept that we can't afford the stuff we want like a decently funded health service, infrastructure etc. Is that ok with you?
"... and join a more productive enterprise"
Bit harsh.
Can you provide a link to any analysis that shows NZ's public sector is any less productive given our size, demographics, geography, etc. than similar public sectors overseas? Or perhaps you're just saying we should get rid of all doctors, nurses, teachers, firemen, winz staff, etc. and stop providing road crews, construction crews, etc with jobs - i.e. all publicly funded services and product - as they are 'unproductive'?
It's pointless talking to people who have drunk the neoliberals cool-aid of public service bad private sector good.
I just saw that the Zuru owners are now the richest in NZ or something like that. The private sector rewards individuals who produce plastic junk and prey on young kids with marketing tricks that are literally banned or at least heavily regulated when they are used for adults.
And yet, people on here would rather those same people run our public services, yeah, nah.
I consider myself to be fairly pro-entrepreneurship/pro-business, but Zuru doesn't sit right with me. I've never deliberately purchased any of their product, but through kids party goodie bags and presents gifted we've wound up with some. Just a sea of plastic junk, destined for the landfill.
When I compare and contrast to some of the great toys we've purchased second hand, made from more durable and sustainable materials and processes, it's chalk and cheese.
I consider myself to be fairly pro-entrepreneurship/pro-business, but Zuru doesn't sit right with me. I've never deliberately purchased any of their product, but through kids party goodie bags and presents gifted we've wound up with some. Just a sea of plastic junk, destined for the landfill.
Apparently Zuru is planning a full production factory to provide affordable housing. What a horrible and self-centered vision (sarc).
People bemoan plastic toys, yet they use plastics unconsciously countless times in their daily lives.
We should not be so pious.
It's nice they are doing that, I guess (I'll believe it when I see it as I feel like we've heard so many stories over the years about affordable pre-fab housing). But it doesn't change the fundamental nature of the main business.
I'm typing this comment on a plastic-encased Logitech keyboard. The difference between that and a Zuru toy is the keyboard isn't designed to be some disposable throwaway - I've had it for about 5 years and it will easily last the same again, if not longer.
The difference between that and a Zuru toy is the keyboard isn't designed to be some disposable throwaway
You could argue that PET bottles are also 'disposable throwaways' but they were not designed to be that at all. They were designed as containers for RTD beverage. The irony is that companies like Coca Cola have contributed more to 100% recyclability. The biggest barrier to achieving that goal is human behavior.
Yes you are right, that was a bit harsh, I suspect our public sector is similarly performing to our peers. (a far cry from Estonia of course)
Incidentally, I have worked a fair amount in the public sector, 10+ times both as a government employee, a contractor and a consultant. The government has a higher percentage of administrative staff in my experience. This is the part of the sector that weighs most on it's performance in my opinion.
Glad we agree. :-)
I too have worked in both the public and private sector, both in NZ and overseas. To be honest - I see little difference.
Every organisation has areas of 'waste' and 'foolishness'. One thing that does strike me over and over again is that the public organisations generally have more complex functions to fulfil than private organisations. Or put another way, the private organisation is generally single focused where a public organisation - Councils for example - are doing so much, in so many different areas, with many being quite complicated, that the average voter simply has no idea.
The public sector is inefficient because it has to respond to the public no matter how fucking stupid the public is.
If Council's could turn round and tell dickheads who knows nothing about most of the stuff council employees are actually trained to deliver it would be super efficient. I've worked in both private and public. It has nothing to do with the size of the organisation.
Any know it all resident can kick up a fuss about any decision a council employees makes and the council have to respond. Say they decide they need to take out a car park to provide a crossing for kids, boom some dickhead will kick off saying they don't think kids should walk to school, and the car park is more important. In the private sector you'd just ignore them.
They are fundamentally different beasts, if the private sector could do what the public sector does there would be no need for the public sector, they can't so there is.
On standard measures, the most productive job in the NZ economy is the humble real estate agent, with management consultants and financiers following way behind. Now, is a real estate agent, management consultant, or bank trader more productive than a nurse or a teacher? Are they more useful?
What if the management consultant is working on a public sector infrastructure contract - alongside a group of public servants. Is the management consultant more productive because they generate a profit for KPMG shareholders? Or, are they all equally productive because they are working on a project that will generate real benefit for the country?
This whole public vs private thing is just super dumb. I prefer to ask the simple question - is person X in job Y actually contributing anything positive to the rest of society.
Which raises the question as to what productivity is...
It is not just "work ethic" . Its also intelligence that leads to innovation.... and this requires individuals who are keen to..."give it a go" ( maybe call this entrepreneurship ? ).. ( I Watched the Movie about Blackberry.... really interesting and a great movie )
The end result ...is that it increases a Nations/individuals standard of living. ( In that regards productivity is far more important than growth ).
An example is the interest.co post on the guy who won an apple award...
https://www.interest.co.nz/technology/128138/new-zealander-devin-davies…
Innovation leads to "change" ...and in my experience, very few organizations have a culture that embraces change/innovation.?
( Most of the Old Boys are still fighting the last war... so to speak )
just my view..
Productivity and "contributing anything positive to the rest of society" are very different things. Take your nurse for example, if they are prolonging the life of someone who is unproductive (pensioner, no hoper, etc), then they are probably reducing productivity, but as a society we don't want people to unnecessarily die.
Yes, my point was exactly that - productivity is a subjective concept that depends on someone's values. So whereas you think a nurse looking after a pensioner (or someone doing whatever you think is useless) is somehow unproductive, I would argue that people looking after the ill or dying is at the very core of what it means to be human.
Not sure what you think of this, Jfoe. I posted this on another thread ("The moral hazard of lower interest rates") in response to some very out of date ideas on what effect boomers would have as they retire. If the RBNZ has similarly out-of-date thinking it would explain a lot about what they're currently doing so wrong. Anyways, it reads ...
Liam Dann actually has a article in the NZ Herald that relates to exactly this issue.
Will ‘stingy’ Baby Boomers help push interest rates lower? – Liam Dann
It's paywalled but here's a snippet.
Economists (the boffins, not the magazine) had assumed that, in retirement, Boomers would be unleashing their wealth on the world
The Economist cites the classic model – called the “life-cycle hypothesis” – that economists use to plot spending patterns based on demographics.
Developed in the 1950s, it assumes that individuals plan their spending across their lifetimes. They take on debt when they are young, assuming future income will enable them to pay it off. Then they save during middle age to maintain their lifestyles when they retire.
In short, as The Economist puts it, “in old age, they spend more than they earn, funding their lifestyles by selling capital (such as houses) and eating into savings”.
Based on that theory, there have been all sorts of concerns and articles written about a wave of Boomer wealth being unleashed. These have included the prospect of mass selloffs of large suburban homes and rising levels of consumption pushing up inflation and driving up global interest rates.
But new research suggests it isn’t happening and the traditional model is breaking down.
Boomers are still saving.
They aren’t selling their homes or unlocking capital with reverse mortgages at anything like the levels predicted a decade or so ago.
Many are choosing not to retire and to keep working into their late 60s and early 70s.
Their spending and saving behaviour suggests they still live with the burden of financial stress. Or that they feel they do... which might be more to the point.
There’s no doubt inflation has been tough for many older people on fixed incomes. Through the first phase of the pandemic, young people were able to leverage the tight labour market and their job mobility to boost their incomes.
But that phase didn’t last.
Higher interest rates pose less of a problem for older generations; in fact, they boost savings. And the biggest economic risk in a recession is losing your job.
That, too, affects age groups disproportionately. The unemployment rate, at 4.3 per cent, still sits well below the historical average of 5.5 per cent.
But youth unemployment figures typically run at three times the average, according to Stats NZ.
Data out this week from credit agency Centrix paints a stark picture of the generational differences in this tough economy.
“The cost-of-living crisis has not impacted everyone equally, as evidenced by consumer arrears, which are a sign of financial stress,” Centrix managing director Keith McLaughlin said.
A clear divide had emerged since 2022, “a tale of two economies”, he said.
Consumers under 25 were among those hardest hit, as they were more likely to experience cashflow problems and had limited savings to rely on.
But consumers aged 40-49 were increasingly experiencing debt stress, with many having home loan commitments and grappling with higher mortgage rates.
“In contrast, consumers aged 50 and above are faring better, with lower levels of arrears since 2020,” he said.
...
Older generations are not only handling the economic downturn better than younger ones, but it looks like we might actually be in better shape than we were before Covid hit.
Just an aside, that opening sentence is far from correct. Many economists - myself included - never believed "Boomers would be unleashing their wealth on the world". We predicted exactly what we are seeing now. We also predicted - and as this article points out - that the OCR would become less and less effective as a tool for controlling inflation, and a more inter-generationally unfair tool to be using to boot.
(The original? Economist article here: https://www.hindustantimes.com/business/babyboomers-are-loaded-why-are-…)
response to some very out of date ideas on what effect boomers would have as they retire.
You did work for an investment house in the 90s as your evidence.
Boomers currently are twice as likely to invest in a high security, low interest vehicle like a bond, compared to someone under 50.
Proclaiming risk won't be re-priced as our society ages is a bit of a long bow.
I could not agree more. So many of the assumptions underlying the economic models used to generate advice for Govts, central banks etc have these obvious flaws at their heart. My interest in macroeconomics (as a lapsed engineer) stemmed from unpicking some of the neoclassical models and finding ever more outlandish assumptions behind the math. The 'Nobel' winning Nordhaus work on climate was what really got me hooked - pure nonsense. Just incredibly bad.
My view is that the focus on the individualistic concept of 'saving up' for your retirement has real flaws. Humans throughout history saved collectively - building the infra, housing, social structures required to support people when they got older (and to benefit from their experience and reduced working hours). Now we have a minority of boomers amassing huge amounts of wealth that their grown-up kids just inherit and pour back into the housing market, while young people turn to crime, frustration and fascism (see Euro elections), and older people live increasingly isolated and miserable lives. It just doesn't make sense.
My personal view is that organised religion started out as a tool for pacifying and oppressing the working class - enabling and supporting feudalism. We then had the transition from feudalism to capitalism (Adam Smith) - but this spectacularly lost its way in the 1970s as Chicago school economists took over the world. Now we're in a kind of technological feudalism - where rentiers own the digital, physical, and legal commons and extract value from entrepreneurs and the wage-earning serfs.
Long ago read Paul Johnson “History of the American People” and was struck by the vital role that religion played for the pioneers in providing, society, structure, direction and discipline to the communities. And thought this was predominantly replicated some years later in NZ and judging by what was still largely in play when I started school.
- French President Emmanuel Macron has dissolved the French Parliament and called snap elections in the wake of tonight's European election results
- Exit polls show Marine Le Pen's National Rally are set to trounce Macron's party in a historic win for the party
- The French parliamentary elections will be held on 30 June and 7 July
Perhaps Trudeau will freeze the bank accounts of people who don't vote for him
https://edmontonjournal.com/opinion/columnists/david-staples-federal-co…
Poilievre is certainly impressive, it's hard to see him losing but Canadians have surprised before. Canadians share some important similarities to us and have had a similar political landscape, what's interesting is that Australia seems to have escaped the academic poisoning, Tradies, is there anything they can't do??
No wonder the right did so well.
"Surging Right parties are plotting to dismantle EU net zero laws after the European elections on Sunday, Green politicians have said.
Nationalist forces will overturn the bloc’s ambition to hit the 2050 zero carbon target in the same way they hardened European migration policy by dragging it to the Right, they said.
“For them, the next horizon, the next battle, is indeed to kill these green, woke policies,” said Philippe Lamberts, the co-president of the European Greens."
https://www.telegraph.co.uk/world-news/2024/06/08/right-threat-eu-net-z…
Inevitable as it was predictable. The flim flam of ideological politics is now being exposed. The population is unsettled and unhappy. Unprecedented immigration of dubious value and warmongering from the east and the hangover from covid still hanging around. Invariably people under national pressure start looking inwards.
More of this NZ banks .... (And less pumping houses ...)
People have to walk up to banks to lend money, and they have to present a plan to repay it.
Most houses have a value (though current values are ... questionable).
Income - rent via appraisal
Costs - rates and insurance, some maintenance
If you want to start a business in NZ and borrow money you need security... in 99% of cases this will be via property.
How is it up to banks to make people start businesses....
You know you can borrow directly from people rather than banks? Sometimes they'll want a slice of the pie (shares), sometimes just a good RoR (interest rate), and sometime just because they think what you're about to build / create is really cool and they want to be involved and provide input, and sometimes because they're trying pull a fast one over someone else. Most people are conditioned to think one must start with banks. When I was young, I thought likewise. But once I started to meet people who were involved in 'broking' and 'non-retail banking' my view changed completely. And often, having direct contact with the person doing the lending, i.e. with skin in the game, can be hugely beneficial.
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.