Here's our summary of key economic events overnight that affect New Zealand with news the downturn in China is something that could quickly spread regionally.
But first up today, the rise in retail sales at physical stores in the US was +4.7% last week, off the pace of the prior week's +5.1% gain, but still a healthy economic sign, and still well above inflation's level.
Speaking in inflation, American producer prices rose less than expected in July from June to be +2.2% higher than year-ago levels. These muted increases raised bets of a softer CPI result tomorrow, backing expectations of a Fed rate cut next month. Equity markets responded like this.
And the NFIB Small Business Optimism Index in the US jumped in July from June to its highest since February of 2022. It is recovering fast from quite low levels earlier in 2024, and is now +2% higher than year-ago levels.
Japanese machine tool orders rose +8.4% year-on-year in July 2024, slowing from a +9.7% growth in the previous month. This was built on the almost +18% jump in orders from export customers.
In China, their official media is talking up a story that says Beijing should provide additional direct support to consumers worth at least ¥1 tln (NZ$230 bln) either in cash or as vouchers for the rest of 2024 to "effectively address the pressing challenge of lackluster domestic demand".
And overnight China released its July new yuan loan data and it was especially weak. Bank customers are wary of borrowing in their stunted market, despite top-down pressure on banks to push out loans. Chinese banks extended just ¥260 bln (NZ$60 bln) in new yuan loans in July, the least since October of 2009. For a country the size of China, that is an amazingly low level.
We don't often report on South Africa, but today we probably should note that their unemployment rate rose to 33.5% in Q2-2024, the highest in two years, up from 32.9% in the prior period. That was a surprise deterioration because analysts had expected it to ease to 32.3%. The number of workers jobless rose by +158,000, reaching 8.4 mln, marking the highest figure since comparable records began in 2008. They are in a tough spot.
In Europe there was a sharp and unexpected fall in overall economic sentiment in August according to the widely-watched ZEW survey. But that is off a recent surge, taking it back to 2021 levels.
In Australia, the Westpac-Melbourne Institute Consumer Sentiment index rose by +2.8% from the prior month to a six-month high of 85.0 in August, although this is still quite a low level. Views on family finances bounced back from last month but remain weak. But there were some clearer signs of support from tax cuts and fiscal measures. Consumers seem less worried about further interest rate increases than last month, and Australians are still untroubled by jobs outlook. However, home-buyer sentiment sank to new lows as price expectations cooled noticeably.
Australian business sentiment is still positive even if it did ease in July and June's positive reading was revised down a bit.
The UST 10yr yield is now at just on 3.86% and down -5 bps from yesterday. The key 2-10 yield curve inversion is less at -9 bps. Their 1-5 curve inversion is little-changed at -73 bps. And their 3 mth-10yr curve inversion is still at -146 bps. The Australian 10 year bond yield starts today at 4.00% and down -7 bps. The China 10 year bond rate is still at 2.20%. The NZ Government 10 year bond rate is now just on 4.26% and down -2 bps from yesterday.
Wall Street has had a dose of optimism juice with the S&P500 up a sharp +1.5% in Tuesday trade. Overnight European markets were all up about +0.4%. Perhaps Wall Street took its que from Tokyo yesterday which rose a very sharp +3.4%. But it was much more placid in Hong Kong (+0.4%) and Shanghai (+0.3%). Singapore however was up +0.7%. The ASX200 ended its Tuesday trade up just +0.2% and the NZX50 was up +0.3%.
The price of gold will start today down a minor -US$3 from yesterday at US$2465/oz.
Oil prices are -US$1 softer at just under US$77.50/bbl in the US while the international Brent price is now just on US$80.50/bbl. This pullback comes after the IEA warned of a looming crude oil surplus.
The Kiwi dollar starts today up +½c from this time yesterday at just on 60.7 USc. Against the Aussie we are up +20 bps from yesterday at 91.6 AUc. Against the euro we are up +20 bps at 55.3 euro cents. That all means our TWI-5 starts today at 69.2 and up +30 bps.
The bitcoin price starts today at US$61,392 and up +3.5% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.6%.
Join us at 2pm today for our coverage of the RBNZ's Monetary Policy Statement and the latest on the Official Cash Rate.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
119 Comments
Nothing new in the South African Unemployment figures, except perhaps that they are getting better...
"In 1994, it was 47.7%. It increased to a peak of 61.3% in 2000, and subsequently stabilised
before slipping a bit in the aftermath of the 2009 global financial crisis to reach a level of 57.9% in 2016."
We are approaching - indeed traversing - the Limits to Growth.
Neoliberalism chose - deliberately - to ignore those, and their implications. As, obviously, do sycophants...
Health, universities, local government, and our grid woes, tell us what is encroaching. A study of Bernays, tells us why/how the vernacular was stolen. What amazes me, is the fierce tenacity of believers - but then, congregations have always shown an ability to follow rather than think.
Martin Luther comes to mind...
This is not about neo-liberal or any other system, but is about corruption.
While I struggled with apartheid, most South Africans I know who expressed an opinion predicted this state of affairs. The only thing they got wrong was the time frame for it to happen.
I have since read reports that indicate that the vast majority of black South Africans had a better standard of living and were safer under apartheid. To me this is a sad indictment that a racist form of government offered a better outcome than the current tribal based politics.
The report I read came out when Zuma was the President, and I cannot recall the fine detail. Nor was I the author of it. I just took it at face value.
Are you arguing that they are better off now? Politically they may or may not be. Economically - I doubt it. Their current system is far more corrupt than it used to be, and they may not be measured by the colour of their skin, but they certainly are measured by the tribal affiliation they have. Which, if any, is better? Why?
Why can't we aspire to a world where it is peoples ethics and attitude are the only measure?
Disagree.
Read Naomi Klein's The Shock Doctrine (the rise of disaster capitalism).
Every time a change occurs, and things are off-base, the vultures step in. And if things aren't off-base, they make things go off-base, then step in.
Post-collapse Russia was a case in point; many South American countries have been - and some still are - the target of this approach. And sorry, Murray, but the USA (military and spooks) is the vehicle for the worst of this approach, globally. This is important, because our own 3-Clown Circus is in thrall of the mantra, and the near future will see a lot of us and ours, sold out from under our feet. To placate those who fund, or who offer revolving-door lobbying positions post-or-intra-political stints.
So the US caused the collapse of the apartheid regime in South Africa, just like they caused the war in Ukraine?
The bit about the vultures I agree with. Russia is a very good example of that. They still hold sway there. And I am finding it harder to disagree about the current path we are on.
Try travelling around Central and South America, speak to locals and get to know the history of their countries and you will soon find the current and historical influence of the USA is large and revolting in their dealings. Sucking the wealth from countries, influencing governments to benefit the US, and keep them under their thumb.
Yes the US meddling is well understood, especially their part in getting rid of Salvadore Allende in Chile and putting Pinochet in. Swapping a socialist politician for a murderous, fascist dictator. Not a great look.
A couple of questions; their actions in Chile were at a time before technology made information readily available to people worldwide. Could they get away with it today? I know PDK blames Nuland for what is happening in Ukraine. Is he right?
And was Allende really socialist (tending to communism) or was he just really for the people? Note that Ho Chi Mihn was declaimed as a socialist, but the truth is despite being educated in communist universities in Paris and Russia, he understood the need for a capitalist like monetary system to empower the peasants in Viet Nam. My view is that rather than fitting on label, he was in really a pragmatist who found strengths in both systems to benefit the people of Viet Nam. Few could see this. Henry Cabot Lodge did and advised JFK so. To many of us even today still tend to be extremists.
South Africa is neo-liberal so your comment is ignorant and meaningless.
https://mg.co.za/thought-leader/opinion/2022-02-17-anc-and-neoliberalis…
But you attributed it to neo-liberalism.
We are in a good relative position due to the enduring legacy of historical events and structures that took place many years ago (some good some bad) not due to neo-liberalism.
If anything neo-liberalism has put us in a worse position than we otherwise would be in if we'd taken a different path (of course we are better off that other potential paths too) and is a particularly poor framework for addressing our current challenges.
"But you attributed it to neo-liberalism." - can I take that bit back then.
Which non-neo-liberal historical events and structures are you meaning?
I'd argue all the areas we are failing in (the big one being housing) are due to some clowns thinking they know better than the market (e.g. planning rules).
You'd argue wrong.
100%.
The 'market' is blind.
Which either says you stupidly go along with it, as it trashes the planet (which, just incidentally, we need or we're all dead) - or you control it. Which needs rules.
So your argument is dead in the water - totally illogical. Do some homework.
The problem is that we are giving away the environment for free, a big market distortion. The government needs to put a price on environmental destruction on behalf of everyone, and the market will respond accordingly. A much better approach than some dudes making up some random rules IMO.
We keep talking about alternatives to income tax; I think a massive environment "tax" would solve a lot of issues in one go.
What's the current over/under on # of "ponzi" comments throughout the day?
I think I own the words 'ponzi' and 'ponzinomics'. Others are just appropriating the usage. F'more, people like to explain why the Ponzi is not actually a Ponzi - that the word is used inappropriately.
Same headlines everywhere. The Panic of what will happen to Asset Prices unless.....is palpable. We all need More and Cheaper Debt, apparently. And when I say 'we', that means you and me, not those to whom the benefits accrue.
"Why the Federal Reserve may need to ‘cut like lunatics’ to ward off a vicious downturn"
https://www.telegraph.co.uk/business/2024/08/13/is-the-us-already-in-re…
If it's 2.5% in 12 months time, you realise what a terrible state the underlying economy will be in by then?
Lower interest rates aren't a sign of 'things going well' In fact, quite the opposite. They mean Risk Appetite is contracting. The Reward vs Risk Ratio is falling. The prices of everything is....yep...falling (or as we perhaps see today, the prices of the only driver of the New Zealand economy...keep falling)
The economy is struggling because we lowered the ocr too far in the pandemic ( and before that tbh) and people have borrowed way too much and businesses adapted to costs and staff levels that match a much greater level of spend level than our 'true economy' can sustain.
So now we have to pay more to service debt, and businesses have less revenue to chase and need to compete.. there is a lot of whinging that its all got 'hard' so we need to generate cheap credit again (like bingeing the morning after a heavy session to cure a hangover). however by historical standards the current environment is actually pretty 'normal' and the cost of credit not abnormally high, and housing is probably average relative to salaries.
so the economy just needs a hard landing and to adapt.
We can’t narrowly focus on unemployment to define a hard or soft landing.
Your description sounds more like a soft landing to me:
- moderate increase in unemployment
- asset prices increase with rate cuts
- quick recovery period
a hard landing would be:
- spike in unemployment
- rapid economic contraction
- asset prices collapse
- long recovery period
You glossed over “houses become more affordable” to move the focus to demand & prices picking up.
Can you unpack what “houses become more affordable” entails?
I get criticised either way. When I call the current scenario a soft landing I am wrong too.
I think you can have a hard landing and still have a reasonable unemployment rate. It started out in the low 3s, if it went to say 6% I would call that a hard landing from where it started. But at 6% its possible that house prices would go up with interest rates coming down.
We had house price growth not long after the GFC.
"If it's 2.5% in 12 months time, you realise what a terrible state the underlying economy will be in by then?"
You have this the wrong way around bw. The economy is already very bad and it's getting worse and it will continue to worsen, that's why the RBNZ will be forced to cut in bigger increments and all the way to about 2.5%.
The economy is in a bad state. It's an indisputable fact. The only people who don't think so and would like it to sink further are the handful on this site who want a financial revolution. They are extremely anti-debt and cannot wrap their heads around how a conventional modern economy functions, always referring back to the "good old days" where people only paid what they had in their pockets.
You really shouldn't us the word "indisputable" - it implies that the fact is not disputable when it is. According to whom is it indisputable - you ? It makes it sound like you have an agenda to push because you made a bad decision. A more nuanced discussion would be better - just saying.
Nothing wrong with paying for things with what you have in your pocket. To rely on cheap debt is a sure way of getting yourself into trouble. Don't forget that a few years ago people were saying debt is going to be cheap for years - then what happened.
You mentioned how the economy functions - well take on to much debt and interest rates increase may not work out to well. People seem to optimize their borrowing without understanding that things (in this case interest rates ) can change.
I think you doth protest too much. Just saying.
It's the economy, I'm fine. Since you seem concerned for my financial well being, rest assured, I'm looking forward to my 5 weeks holiday in Europe where I will meet friends at the Cannes boat show, spend some time with mum in Switzerland and in our holiday house in Spain. I'll also stay a few days on a friend's nice yacht in Ibiza.
Don't flatter yourself. - I'm not concerned about your financial position - just your motive for using the narrative that the economy is in a bad shape. I'm sure it is not out the concern for those truly hurting. Your attempt at being ostentatious doesn't really help your argument.
Just saying.....
"I'm not concerned about your financial position" I must have misunderstood your post when you said: "is it the economy that is in a bad state or you (too much debt and not enough income)"
Oh well, I was trying so hard not to be ostentatious by not saying that I went to the Maldives for my birthday in May to an amazing resort in an over-the-water bungalow with the biggest under sea restaurant in the world, and also not saying that I spent 3 weeks in my own villa in Bali more recently. It looks like I failed.
The economy is worsening relative to what it was when debt was cheap.
The problem is lowering the ocr will increase imported inflation and reduce unemployment. The levels of both are where rbnz predicted and needs to stablise. So we cant drop the ocr far til other bigger countries (usa) do also. If we simultaneously increase house prices all that will happen will be bad.
The sustainable economy isn't as bad as some make out. The one that relies on very cheap credit is.
I wonder if this will have any influence on today....
https://www.interest.co.nz/public-policy/128058/nz-initiative-complains…
6th highest median wealth per adult in the world. There must be good money in bananas: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult
"The South Africanisation of Everything.
There are many parallels: crumbling institutions, widespread corruption, mass migration; failing rule of law, rising crime rates – especially violent crime; inadequate policing and reliance on private security; identity politics, siloed, ghetto-ised communities within a so-called multi-cultural country; race-based crime, justified because of history; many cultures, each with their grievances, thrust together and by no means living harmoniously."
https://www.theflyingfrisby.com/p/the-great-decline-where-is-this-all?u…
"Then there is a more mobile element that globally [is able to] fairly easily switch domiciles,” Samuel Adams, an economist at UBS, told Al Jazeera.
By 2028, the UK is expected to lose the most millionaires – nearly one in six of its millionaires will lose that status."
https://www.aljazeera.com/news/2024/7/27/where-are-the-worlds-millionai…
China - direct support to consumers - are they sure that the Chinese consumer will spend not just save any handout from the government. The Chinese populace aren't discussing "garbage time" for no reason
https://www.reuters.com/world/china/garbage-time-chinas-slump-spins-out…
I'm betting (see below) that they were stirring anti-clockwise. In terms of the human predicament/trajectory, it's about as important. Orr is operating in a System which has fiercely - like you - chosen ignorance (of the greater/bigger picture). I look forward to his comment re the gas thread - it addresses our real predicament.
Double, double toil and trouble;
Fire burn and caldron bubble.
Fillet of a fenny snake,
In the caldron boil and bake;
Eye of newt and toe of frog,
Wool of bat and tongue of dog,
Adder's fork and blind-worm's sting,
Lizard's leg and howlet's wing,
For a charm of powerful trouble,
Like a hell-broth boil and bubble.
Double, double toil and trouble;
Fire burn and caldron bubble.
Cool it with a baboon's blood,
Then the charm is firm and good.
I think there needs to be two separate polls. What we think should be done, what we think the RBNZ will do. I think RBNZ should cut today, but dont think they will. I do think the rate cut forecast could be brought forward to as early as Nov 2024, but only as a probability.
Looks like 130.000 people have bolted .... Should that be ringing some bells in Wellywood?
https://www.rnz.co.nz/news/national/525072/people-leave-new-zealand-in-…
America's factory boom now a bust as China cuts off graphite sales, likely to push tariff repeals
The United States has seen an epic factory boom, from early 2021 through 2022, which tripled construction spending for manufacturing facilities. Most of these factories are devoted to the electrification of our transportation networks, and to semiconductors. Further, the objective is to build these technologies domestically and thereby wrest control of these supply and production chains from China. But all that manufacturing will require huge production of batteries, which in turn require graphite. China has monopolies on most of the refined and synthetic graphite that is used for such batteries, and in late 2023 announced strict export curbs on the metal. Graphite exports immediately collapsed over 90%, leaving North America and Europe scrambling for new sources. The earliest domestic (US) production of new graphite will be in 2027, and in a best-case scenario will be about a fourth of anticipated US demand. These realities leave China in a most advantageous position: they can either continue the graphite bans and produce all the batteries for the global market themselves, or use their monopolistic position in graphite to negotiate sharp reductions in tariff rates for other Chinese exports.
Breakfast briefing: China faces strong downward pressures
The Entire Global Just Entered a Recession (You Need To Ask Why)
Good grief, Snider has been saying the same thing since 2001! Over and over. Sure he's got many paying clients, but his failure to predict the future must be galling to him. Still, there is the stopped-clock possibility ... I am sure in another 20 years he will still be saying the same thing.
Don't like the 10 yr bond market message? Suits me immensely.
ACT Party leader David Seymour will be pushing the Government to go further in its welfare reforms and sanction those who have children while on a benefit, as the National-led coalition looks to ramp up pressure on those out of work.
This should includes those on Super..so zip it up a few of you on this site..
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.