Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE/LOAN RATE CHANGES
BNZ cut its floating rate by -25 bps, the last of the main banks to do so. Its new reduced rate of 8.44% is the highest of these same main banks. The Co-operative Bank also cut its floating rate -25 bps. All rates are here.
TERM DEPOSIT/SAVINGS RATE CHANGES
The Co-operative Bank cut is savings accounts as well, as did BNZ. All updated rates less than 1 year are here, for 1-5 years, they are here.
BOTTOMING OUT?
The retail impulse in July basically held little-changed, which was in contract to the notable falls in the prior five months. This is data that corroborates Governor Orr's view that we are the final 'dark before the dawn'.
JULY INFLATION RESULTS MIXED
A range of inflation components that StatsNZ tracks monthly were released today for July. They show food prices are rising again after a fall in the year to June. They also show rents increasing 4.3% which although his is the slowest rate of growth since November 2023. Petrol and travel costs are lower, with some falling quite a bit.
SCEPTICAL CONSUMERS
Households still doubt inflation will fall back under 3%. The latest quarterly Household Expectations Survey for the Reserve Bank finds households still see inflation above the RBNZ's 1% to 3% target in two years' time. And they are less optimistic about chances of being able to get another job.
NZGBs POPULAR AGAIN
The latest NZGB tender today for $500 mln on offer brought 96 bids worth $1.273 bln. 38 of those bids were accepted. The April 2027 bond is now yielding 3.71%, down -83 bps from 4.54% 19 weeks ago when it was last offered. The April 2034 bond went for a yield of 4.17%, -11 bps from one week ago. The May 2041 went for 4.50%, down -16 bps from one week ago.
PREMEDITATED LYING & MORTGAGE FRAUD
An Auckland judge has decided that Francis John Peters who was guilty of three charges of obtaining credit by deception and one charge of obtaining property by deception relating to a $1,350,000 loan obtained from Westpac for the purchase of a property in Auckland is sentenced to 9 months home detention. But it might make more sense to know Peters was a lawyer.
JAPAN SHINES, REALLY SHINES
In Japan, they released their Q2-2024 GDP result today and it expanded a very strong +3.1%, way more than the +2.1% expected, and far better than the -2.3% fall in Q1-2024.
MORE EMPLOYED, MORE UNEMPLOYED
In Australia, their July labour force rose with now 14.47 mln employed (+58,000). Their participation rate rise again (to 67.1%), and their jobless rate ticked up to 4.2%, or +23,900 to 637,000. Full-time adult average weekly total earnings were up +4.6% to AU$1994 (NZ$2200).
CHINA DOESN'T SHINE
In China, the data out today reinforced their tough economic conditions are extending. Retail sales were up just +2.7%, industrial production rose less than expected at +5.1% but electricity production (a better metric?) rose only +2.5%, and prices for new houses dropped -4.9% and the most since 2015. For secondhand houses, who knows? No cities reported year-on-year gains, the first time that has happened.
SWAP RATES LOWER
Wholesale swap rates are probably a lot lower following the RBNZ signals as the market considers them. Our chart below will record the final positions. The 90 day bank bill rate is down -10 bps at 5.27% reflecting the OCR change. The Australian 10 year bond yield is down -6 bps from this time yesterday at 3.92%. The China 10 year bond rate is up +4 bps at 2.20%. The NZ Government 10 year bond rate is down -4 bps at 4.21% and the earlier RBNZ fix was at 4.19% and down -3 bps from yesterday. The UST 10yr yield is unchanged from this time yesterday at 3.85%. Their 2yr is now at 3.97%, so that curve is now at -12 bps.
EQUITIES FIRM EVERYWHERE
The NZX50 is up +0.3% in late trade today. The ASX200 is up +0.2% in their Thursday afternoon trade. Tokyo is up a full +1.0%. Hong Kong is up +0.3% at its open. But Shanghai is up +1.0% in its opening trade. Singapore has risen +0.8% at its open. Wall Street ended its Wednesday session with the S&P500 up +0.4%.
OIL SLIPS AGAIN
The oil price is down -US$1 from this time yesterday, now just under US$76.50/bbl in the US, and at just over US$79.50/bbl for the international Brent price.
CARBON PRICE EASES SLIGHTLY IN LIGHT TRADE
Today the carbon price is down slightly -50 USc at $53/NZU today in light trade. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.
GOLD SOFTISH
In early Asian trade, gold is down -US$8 from this time yesterday, now at US$2451/oz.
NZD EASES BACK SLIGHTLY
The Kiwi dollar has fallen marginally from this time yesterday, now at 60 USc. Against the Aussie we are down -10 bps at 90.7 AUc. Against the euro we are soft at 54.5 euro cents. This all means the TWI-5 is down -10 bps from yesterday at 67.6.
BITCOIN FALLS
The bitcoin price has fallen -4.1% from this time yesterday, now at US$58,404. Volatility of the past 24 hours has been high at just on +/- 3.1%.
USE OF AI
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87 Comments
BOTTOMING OUT?
The retail impulse in July basically held little-changed, which was in contract to the notable falls in the prior five months. This is data that corroborates Governor Orr's view that we are the final 'dark before the dawn'.
Hang on retailers, inflation is on the way!
...although I'm not actually sure if that will help their businesses much.
RP, you should stick to Rabobank, as the money you give them gets invested in productive enterprise ie farming. If you give your money to ANZ etc for term deposits, you are actually helping the ponzi, as your money is being used by the banks for residential home loans.
“Price ramping and misrepresenting income, equity and payment of a deposit are well-known forms of mortgage fraud. In this case there was clear planning and a high degree of premeditation, underscoring the complex tactics often employed by professionals who facilitate fraud.”
And just to make sure you don't do it again, the sentencing judge may as well have said, I am writing you a letter drafted in the strongest of terms, that you are to stay at home for 9 months and promise not to do it again.
(There is no hope......)
Innocent? In house lawyer at Fonterra probably without public practising certificate and not able to act for third parties including family so should not have been witnessing any docs. And if so, also would know he was in breach of his employment terms. Guy has a problem with ethics even if you want to excuse his blatant dishonesty.
In China, the data out today reinforced their tough economic conditions are extending.
Yes indeed. Just checked Fortescue's stock price. The slide continues. Looks like an altcoin in 2022-23.
China’s steel industry is facing a crisis more serious than the downturns of 2008 and 2015, the world’s biggest producer warned, highlighting a need to preserve cash and likening conditions to a “severe winter.”
The crisis will likely be longer and “more difficult to endure than we expected,” Hu Wangming, chairman of China Baowu Steel Group Corp., told the company’s half-year meeting, according to a statement.
China’s steel market — by far the world’s largest — is flashing multiple warning signs as the property downturn and weaker factory activity have ravaged domestic demand this year, with prices plunging to multiyear lows and mills racking up losses. Baowu alone produces about 7% of the world’s steel, and Hu’s stark message will likely be a worry for rivals across Asia, Europe and North America as they grapple with a fresh wave of Chinese exports.
https://www.bloomberg.com/news/articles/2024-08-14/china-steel-industry…
Indeed. Leaving German coal for Chinese coal.
German FDI in China hits ‘record' in H1, shows commitment to China market
J.C. Take care.
I expect you know already ... China is not one country, and less so than the USA, but others may not be so aware.
For others, "China" is a massively diverse set of economic regions. At least as diverse as the USA. Let that sink in. (It probably won't. But, hey, I tried.)
Personally, I was impressed with Orr’s humility and compassion yesterday. I also believe he should have dropped rates a few months back.
Saying he shouldn’t cut the OCR until the backward looking CPI data hits the target range is like saying you shouldn’t break until you see the stop sign in your rear view mirror. It’s a fundamentally illogical argument for obvious reasons.
I'm guessing their trade surpluses give them some flexibility that we can't replicate? $144 Billion in 2023.
Their trade surpluses are a tail wind in terms of external balance, however a terms of trade shock or economic slowdown will hit them like a jack hammer. Their Super balance is nbow up to $2t and that's offsetting FDI as well as it is being invested iin the US stock markets.
Perhaps what the FX market hadn't priced in was the RBNZ's prediction of just how bad the ensuing recession will be? (Certainly it passed by many commentators on this site.)
That was a bigger to surprise to many who study these things than the change to the OCR which was mainly a matter of 'when' rather than 'if'. It was never going to 'jump a tad'. The mess the RBNZ has created is huge.
JAPAN SHINES, REALLY SHINES
In Japan, they released their Q2-2024 GDP result today and it expanded a very strong +3.1%, way more than the +2.1% expected, and far better than the -2.3% fall in Q1-2024.
Cripes, even Russia beat that.
Russian GDP up 4.7% YOY in H1 2024 — Economy Ministry
Just when you think Tony might be returning to some objective analysis…
https://www.oneroof.co.nz/news/tony-alexander-the-reserve-banks-rate-cu…
TVNZ news tonight. Leading news:
1. Meth in lollies (affecting <10 people, breathless nonsense about how many might be affected)
2. Disabled issue (going on forever)
3. Supermarket refunds & a jump in food prices (vague stuff & going on forever - nothing ever gets done)
4. Kim Dot Com. (Paul goldsmith claiming relevance.)
5. Charter schools. (ACT, actually David Seymour claiming relevance to detract from govt failure)
6. Some sensationalist trial (sex, money, drugs)
7. PM overseas talking about nonsense about infrastructure (that his party is helping to make worse!)
8. Some religious building (that a very small number) in ChCh care about.
That's the first 15 minutes.
9. An assault on a schoolboy. Black eye. (This happens every day.)
10. More on that religious building on ChCh (and how devastating it will be to the ChCh economy.)
11. Ukraine's counter offensive. (Breathless fluff. This started over a week ago.)
12. WHO declaration that monkey pox is serious (low risk stuff).
13. More on poor Lochie's inquest. (Nothing concrete. Lots of innuendo.)
So 30 minutes in - the rest is sport, and weather, and fluff (Stonehenge FFS !!!) - And nothing on what the RBNZ has done.
Is it any wonder that Kiwis are financially naive when one of their major news sources tells them nothing about the fact one of our most powerful public institutions has completely screwed the economy while wasting billions of dollars - with billions still to come - of their money, blood, sweat and tears (and not a few suicides)?
This latest version of Covid, I mean MPox, seems to be serious. I trust that the news coming out is not so as prepared as Wuhan was.
Its at least worth watching I would not dismiss it so easily. WHO wanted to call pandemic / epidemic early but china did not let them and the head seemed captured, lessons have been learnt, watch this evolve it has legs. Still its likely that the case numbers are 10 times higher then expected dropping the kill rate. this kills young people, no comorbidities required.
https://www.theguardian.com/world/article/2024/aug/14/mpox-outbreak-afr…
More resources for research were also vital, they said, with “massive unknowns” about a new variant spreading between people in the Democratic Republic of the Congo. As of 4 August, there had been 38,465 cases of mpox and 1,456 deaths in Africa since January 2022, including more than 14,000 cases and 524 deaths in the DRC alone this year.
These included clades I and II of the virus, as well as a new type, clade Ib – an offshoot of clade I, which appears to be driving the outbreak in the DRC and neighbouring countries, and to which children appear particularly vulnerable.
Now I am interested in their mandate (I assume there is one as a publicly funded funded broadcaster)
Is it ‘serve up trivial tidbits of semi-news in an entertainment-framed style, in an overly long running slot, to keep all the simpletons entertained from 6-7pm’
my dad’s sister thinks Simon Dallow is ‘lovely’
This should be shocking to no one.
Oldies will make the Lions share of the audience.
Long form investigative journalism has little to no market in NZ.
The closest thing I've seen to that in regards to Orr is that reporter from the Herald.
If you want truth, the media won't be the ones to get it from.
I never liked Kim DotCom and they shouldn't have granted him residency. I do like the USA. But he is quite right to start his statement with ""the obedient US colony in the South Pacific just decided to extradite me..."". He committed no crime in NZ. Not certain he committed any crime in the USA either.
It stinks. The delay of 12 years makes it worse.
Incoming Global Shock ? lucky we are a diversified exporter with robust savings in case of a rainy day....
Maybe Aussie could tender those new subs, China has surplus capacity and might do a good deal on something like that ...
‘Steep plunge’: China’s economy flailing, new data shows
Beijing | China’s weakening economic momentum has failed to pick up as sluggish confidence weighs on consumption and investment, putting the annual growth target for the world’s second-largest economy at risk.
Fixed-asset investment unexpectedly slowed to 3.6 per cent in the first seven months of the year, while consumption remained weak despite a seasonal uptick last month. Capital spending by state-owned enterprises slowed to 6.3 per cent in the seven months to July 31, from 6.8 per cent, while that of private firms stagnated from a year ago.
As a long term China skeptic (from more than 7 years ago) it’s no surprise to me.
Of course HouseMouse was just being a DGM again 😂
As you say, great that our wise leaders saw this in advance and started a pivot to diversify….. oops that would require foresight and strategic thinking 😂
We tried to sell as much to people with sounding surnames at the top.
I have a good friend who reads here but does not comment much due to his current employer. In a conversation yesterday after the OCR , I asked what NAct could do to replace the engine of credit NZ has had in the last 20 years. I mentioned that I had way more faith in Cullen's mental ability then Willis, who seems to like to speak slowly with small words, but says nothing. we have not had a visionary Fin Min for a long time.
He said "The problem is bigger then anyone or any party now".
Suggested there is no way anyone can come up with a credit engine to replace the housing bubble. All very JFoe related re the credit creation and lack of any way NAct can release fiscal stimulus in the same way the P did. Its going to be messy.
Ask your friend whether an overhaul of the tax system would direct investment to where it is needed.
Not the immediate fix that many crave (and many would vote for, whether it was realistic or pie in the sky) but over time it would fix the mess. And yes, your friend is bang on the money that such a change is bigger than any single party now. It would need cross-party support and the parking of party ideologies.
He takes an interest in property valuation systems, so perhaps he see's taxation moving more towards an increase in effectively land tax. History tells us they will extract tax in any way they can. The common people making tax free capital gains cannot be appealing to the tax man.
No one can be expected to replace an old bubble with a new one, hard graft does not appeal like free money. Therefore no one is going to try and pick a winner. I would suspect it will be technology related, it normally is, maybe tech and clean/er energy. I like JFoe's? electrification idea.
We are lucky that we can feed ourselves in NZ. If we had 100% energy we would be the most desirable place to live, apart from the shit climate, though it seems to be warming by itself?
Look at china, all that wealth and you cannot drink the water or trust anything that grows in the ground to be healthy, the richest only eat foreign produce and milk etc
Hard graft takes way too long to achieve the sorts of fortune improvement expected.
We can add tech to what we are currently doing, that's actually an ongoing process but even that really takes years between conception and measurable outcome.
I'd like to see some numbers around the electrification idea. As in, cost to deploy, cost to maintain, and time to recoup. I feel you'd be spending boatloads for a marginal improvement over the status quo.
Everything else is as you say, a bubble. Vertical farms, AI, crypto, fake meat. All get a tonne of money thrown at them, with very little clarity about an actual path to market. With most of these bubble industries mostly going bang at some point.
I am willing to bet, like PDK, that the retirement industry where you give other people your money and they are magically going to hand you enough to retire on back may well also be a bubble. My sons god parents , who live in London, are an interesting mix, she a Jewish girl and he an Arab fashion importer (took a long while for families to settle down). They have an interesting savings policy, you buy gold 10% of income a year , once 65 you simply sell it to fund retirement, no management fees, they own a stack of property as well, always funded in the downturns by... gold sales.
Maybe gold is the next bubble.
We can already see that many entities aren't able to pay out the pensions they offered to people, and those that can do so by crushing today's workers.
It may be there's asset classes that will fund people through their retirement, but that'll come down to luck more than anything - the mere belief something is a sure bet, inflates it's value to the point you need continual new entrants believing the same thing to fund it.
The most reliable method is to surround yourself with people that support one another from cradle to the grave. And culturally we have burned that.
We are so wise.
We have had a political structure hell bent on pushing cultural liberalization, while offering it's services to cushion the consequences.
There's absolutely no way the state is capable (either financially or logistically) to replace what a community used to provide itself for free.
And before any one misconstrues my views, as is often the case - I like China, it’s an impressive place, their development has been highly impressive, and despite its current woes I think it will continue to be an economic force. But not the same force it was. Hence the need to diversify
Like Japan, it'll struggle there. Up to a point they're implementing existing systems and practices; build out of infrastructure, power generation, industry, etc. Done to a tried and true, but familiar order. To offer a cheaper, sometimes better new manufacturing source than incumbents.
The incumbents have mostly struggled to diversify beyond being manufacturing economies themselves, harder again for societies/economies that are already mimicking that which has come before.
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