Here's our summary of key economic events overnight that affect New Zealand with news the global economic expansion seems to be settling in now for an extended stay, one that features much lower inflation. Perceptions of 'normal' appear to have returned.
But first, the US is ending its summer with a major national three-day-weekend holiday, Labor Day. Their markets return in full on Wednesday NZ time.
But before that weekend started, another set of their policy jigsaw was put in place for the US Fed, the PCE inflation level and that came in low and little-changed, confirming the conditions for a September rate cut. The July core PCE price index rose just +0.2% from the previous month and the market-expected change. The +0.2% monthly increase in headline PCE prices was also in line with expectations. That puts it +2.6% up on a year ago. Nothing disturbed market expectations here - although it probably means the chance of a -50 bps Fed cut is completely off the table.
Perhaps helping, there was a slight improvement in the Chicago PMI from the American industrial heartland although this is more of a "contracting less" situation rather than an expansion. New order levels edged up.
The 'flash' gain in the University of Michigan consumer sentiment survey was confirmed overnight for August.
Canada said its economy grew at a good +2.1% rate in Q2-2024 and that was better than what was expected by analysts there (+1.8%). Higher wages and savings helped, which drove more government spending.
India also released its Q2-2024 GDP and that rise was in a different league - up +6.7% from a year ago. However analysts had expected a +6.9% rise to that result was tinged with a slight disappointment.
Japanese industrial production expanded in July, a good recovery from the June dip. But Japanese retail sales rose at a slightly slower rate than expected.
The annual inflation rate in the Eurozone fell to 2.2% in August from 2.6% in the prior month, matching market expectations to result in the smallest rise in consumer prices since July of 2021. Much lower energy costs allowed the moderation.
Australian retail sales were a disappointment in July, with no rise from June and up +2.3% from the same month a year ago, well short of inflation's impact. It is worse on a per capita basis. And given the elevated inflation level they face the real prospect of an interest rate hike. (Financial markets however are not pricing in a hike.)
Global container freight rates fell modestly again last week, down -3% from the prior week to be +265% higher than the pre-pandemic average. Nothing has ben resolved around the causes of these high costs in the Suez Canal/Red Sea choke-point with security there still terrible. But the Panama Canal lake levels are returning to their five-year averages. Bulk cargo rates rose +4% last week.
The UST 10yr yield is now at just on 3.91% and up +4 bps from this time yesterday, up +11 bps for the week The key 2-10 yield curve inversion is less at -2 bps and much flatter than last week's -10 bps. Their 1-5 curve inversion is little-changed however at -71 bps. And their 3 mth-10yr curve inversion is now mujxs less inverted at -137 bps. The Australian 10 year bond yield starts today at 4.00% and down -2 bps. The China 10 year bond rate is at 2.19% and up +2 bps. The NZ Government 10 year bond rate is now just on 4.30% and down -2 bps from yesterday and up +7 bps from this time a week ago.
Wall Street is ending the week firmer with the S&P500 up +1.0% in its Friday trade with a late-session surge. That gives it only a +0.1% weekly gain however. Overnight European markets were all little-changed. Yesterday Tokyo closed its Friday session up +0.7% capping another +1.3% weekly gain. And Hong Kong was up +1.1% for a +1.6% weekly rise, with Shanghai up +0.7% on Friday for a -0.5% weekly retreat. Singapore rose +1.1% yesterday. The ASX ended its Friday session up +0.6% and was up +0.9% for the week. The NZX50 was up +0.8% on Friday to end down -0.7% for the week.
The Fear & Greed Index ends the week in the 'greed' range, from last week's 'neutral' range.
The price of gold will start today down -US$23 from yesterday at US$2501/oz. A week ago it was US$2510, so little net change.
Oil prices are down - US$2.50 from yesterday, now just under US$73.50/bbl in the US while the international Brent price is now just under US$77/bbl.
The Kiwi dollar starts today down -30 bps from yesterday at 62.4 USc but up +10 bps from this time last week. Against the Aussie we are unchanged at 92.3 AUc but up more than +½c in the week. Against the euro we are down -0 bps at 56.5 euro cents. That all means our TWI-5 starts today at 70.4 and down -10 bps from yesterday, up +50 bps in a week.
The bitcoin price starts today at US$58,681 and down -1.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.1%. A week ago it was US$60,305 so down -2.7% since then.
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106 Comments
Seems like we are in an odd period where data that comes out is constantly mixed, some good and some bad. However the general trend seems to be inflation going down, and labour market resilient (to a degree). Perhaps history repeats itself and sends the world into a deep recession after more central bank rate cuts, but to deny the possibility of a soft landing is just delusion. Only time will tell.
Chuckle.
No - I know what goes in (real) and what comes out (real). Real stocks of finite, or restrictedly-available resources, including the finite energy-lever one which made all else possible, go in. Entropic, dissipated, degraded wastes, come out. The input isn't growing - so I know that whatever David is reporting, is based on selected data. Another way of putting that, is that it isn't telling the whole - the bigger - truth. The accumulating output, though (and of course) IS growing; it is cumulative.
That isn't something that can be 'agreed-to-differ' on; that's either a truth or it ain't.
So what is the widening difference? Virtual claims on future resources (financial transactions, parasitic transactions, and bets-in-waiting), seems to be the answer. And even-bigger collection of future bets, on an ever-being-depleted future. Backchecking that, we note that no economic appraisal ever addresses draw-down or ultimate scarcity of an irreplaceable input, or the limits of sink-capacity (like CO2/global atmosphere/human survival envelope). I call that: avoiding the truth.
Higher wages and savings helped, which drove more government spending.
Govt deficit spending creates savings, just like new loans do.
Deficit spending and net bank lending create the surplus that enables profits and real wage growth.
We would have more sensible economic discussions if more people understood this basic reality.
True enough....but neither credit creation method can increase output as of right and it is (real) goods and services that are needed....not (disconnected) inflation.
He may needle many but PDK is correct to observe that energy underwrites it all....'money' is in itself useless.
Yes, I agree. We have people, energy, materials and time. What we do with those things is what is important.
Our current economic system relies on under-utilising people while enslaving others, over-using natural materials, and destroying ecosystems. But other than that, it's all good.
Yeah, I remember when we killed the last whale, everyone died of starvation in India, the planet boiled. If only we could tap in to the abundant drama queen resource.
"Studies of whale populations make it clear that virtually all species are now increasing. Humpback numbers have risen sharply, along with blue and minke whales. The main exception is the North Atlantic right whale, which has suffered badly from vessel strikes and entanglement in fishing gear.
However, the rest of the world’s whales are doing well, said Bridgewater. “Species numbers have bounced back since the moratorium to varying degrees levels. And that is the point of our message to the IWC: ‘You have done your job. It’s been really good work. You have got a result. Now it is time to hang up things and go with dignity.’”
https://media.nature.com/lw767/magazine-assets/d41586-024-02604-1/d4158…
Dismantle ‘zombie’ wildlife protection conventions once their work is done
I'm paid to comment by Big Whale Oil. Everybody know that.
"We are bombarded by doomsday headlines that tell us the soil won't be able to support crops, fish will vanish from our oceans, that we should reconsider having children.
But in this bold, radically hopeful book, data scientist Hannah Ritchie argues that if we zoom out, a very different picture emerges. The data shows we've made so much progress on these problems, and so fast, that we could be on track to achieve true sustainability for the first time in history."
https://www.penguin.co.uk/books/453652/not-the-end-of-the-world-by-ritc…
Checkout US savings rate despite wartime like deficit spending:
https://x.com/nickgerli1/status/1829578192606355646?s=46&t=MUwQeKa7MkEJ…
"The U.S. personal saving rate is personal saving as a percentage of disposable personal income. In other words, it's the percentage of people's incomes left after they pay taxes and spend money."
Check out how much households have got in the bank thanks to all that deficit spending...
Good chart - massive spike huh during Covid.
Strange that chart is so high and yet nearly half of Americans can’t put there hands on $1,000 for an unexpected emergency.
https://www.cnbc.com/amp/2024/01/24/many-americans-cannot-pay-for-an-un…
Perhaps the savings you show in the chart above are highly concentrated in the wealthy?
"Perhaps the savings you show in the chart above are highly concentrated in the wealthy?"
You're both on the right track.
Split the data that you and JFoe posted by decile and the two reconcile but paint a disturbing picture - and not in a nice way either.
(Politicians love using averages as they support whatever bias they want us to believe.)
To those suggesting economic greenshoots, I call bullshit on that. Down in Wellington with my dad, hospo and retail is getting smashed:
https://www.stuff.co.nz/nz-news/350398632/wellington-cafe-suffers-worst…
most hospitality business owners would agree things were tougher now than during the Covid years
No s**t. The public sector was in such a blind hiring frenzy during Covid years that those with few skills/experience to offer could crack a job in the bureaucracy making 90-120K.
I personally know a few who went from waiting tables to HR/PR advisor roles overnight, and doubled their wage. Others bragged about changing jobs every 6 months or so from agency to agency getting a good pay bump each time and recruitment agencies clipping the ticket in the process.
Sounds harsh but these sob stories of the taxpayer-sponsored good times ending don't deserve any media attention. Nobody in their right mind should've expected such frenzy to occur let alone last long.
Yes, it was totally unsustainable. I mean people who are typically excluded from the labour market were able to find work. We saw plummeting numbers of people relying on benefits. People with health conditions and disabilities found work - reversing a 15 year trend. Young people went into work in record numbers.
Great. So all we need to do is open up a public sector office in every town of the country, doesn't matter which one, and hire people off the streets to keep the economy rolling and people employed.
Pay them to count beans, push paper around, sing waiatas all day - who cares.
Slowly but surely we will beat Argentina in economic prowess.
I would think removing incentives for people gamong the system (housing investors and dole bludgers) would be the solution. But wasting money by inflating the bureaucracy is your solution in your humble opinion.
What does the maths look like to continually borrow to pay people over the odds to under produce?
Say for instance we paid everyone $120k a year to produce say, $20k of value?
The assumption that "if only people weren't investing in housing, we'd all be prosperous", is extremely problematic.
Correct. It was a bizarre kind of Dutch Disease from all that borrow and spend, with private firms unable to compete for workers with the public service and their bottomless pit of money.
For example, just over a year ago, DIA were hiring contract administrators at $80/hour and job description writers for $165/hour. That latter one is more than the going contract rate for experienced data scientists in the insurance sector - Link
It's a twofold issue.
Public sector can out compete the private sector for limited labour resources.
Public sector is able to act as a jobs program for people who struggle to add value in the private sector.
Apparently though, the public sector jobs are creating an intangible value that people in the private sector aren't capable of understanding. Or the general public who are recipients of state services.
Comment posters (and articles in this case) from the likes of PDK keep me on this site - not the 'paid' staff.
Give me a blue tick option to pay for the platform infrastructure, even better the option to pay commentors and article writers that I see as adding value (per comment/article) and let's see where the money flows.
.... exactly ... they're an integral part of our residential & commercial sectors ... property rental is a legitimate industry ....
The previous government were financially illiterate numb skulls .... they painted landlords as some kind of evil ... much as they pilloried " foreign ownership " of houses ... Hipkins is an empty cranium in search of a brain ...
The good ones do . The bad ones screw small business to pay more rent , market rates you know. Yet , you can bet your boots , none of them are offering reduced rent to struggling cafes , and other business. they 'd rather see a shop empty , than on a reduced rent , because its all about the capital gain , building value based on rent.
Arseholes like this sell properety based on screwing the tenants for higher leases , or boot them out and relase at higher cost.
https://www.bayleys.co.nz/listings/commercial/waikato/hauraki/61-belmon…
"But let's keep funding landlords and gold card holders ...totally sustainable in your world huh? No cut backs there..."
@Baywatch, make no mistake, the landlords have taken a hit too with the mortgage interest rates having skyrocketed. As well as prices for insurance/rates/maintenance etc.
Not to mention equity erosion, but this is just paper value so it's not important to the cashflow.
"...in recent years hundreds of thousands of people wanting work or more work. The fact that we run the economy cool so that these people can't be mobilised is a total failure."
In recent years the number of immigrants on work visas approx equals the number on Jobseeker.
What's wrong with this picture? (hint, define "wanting work")
So, you live in a small town and have some family / care responsibilities. You want to work. You see a job 40 minutes drive away doing night-shifts (4 on / 4 off) in a care home. Do you apply? What about a job 100km away living in a shed and paying board for the pleasure? Do you pack your bags?
Employers used to compete for workers - and wages reflected how desirable / undesirable a job was. Now, when crap, precarious jobs don't clear at the low wage offered, employers go bleating to the Govt about the labour market being too tight. I say let the market determine which jobs get filled.
What's wrong with this picture?
Your hint for a start - comparing apples with oranges has always been fraught...
It is that those already here have Residence or citizenship worth many hundreds of thousands of dollars. Something those immigrants will receive if they move here for as little as a few years. Try offering a few hundred k to those Joe talks about as a bonus after a few years of work and let me know if engagement improves.
That is the tendency for many full employment systems, no faith involved.
We are already doing this to a degree, with an employment level that's reliant on credit to cover our deficit.
I find it hard to see how if we extended that to convert the remaining 3-5% unemployed to employed status, how exactly the increased shortfall would be covered. Perhaps I just lack the imagination.
How was it covered in the post war period until the 80s?....We effectively had a jobs guarantee over that period. As to innovation, those that seek to innovate are not constrained by guaranteed employment, the constraint is the availability of investment to develop an idea and later, access to a market.
How was it covered in the post war period until the 80s?
Market conditions had a very high demand for jobs. The demand for labour in many Western economies was so great that employers needed to offer increasingly attractive perks and incentives to capture employees. That started trailing off in the 70s, it took until the 80s for governments to react.
Typically systems that guarantee employment lack the incentive levels for a higher degree of innovation amoung organisations and workers.
Ask yourself, what percentage of he population are the innovators?...I cant provide a figure but would suggest it is a low %...single figures.
So we have in excess of 90% of the population who are unlikely to innovate (to any significant degree, they may on a personal level) ...how are the innovators impacted if we provide guaranteed employment for that group? First off we are providing secure income that is available to (indirectly perhaps) invest, we provide a (more) stable environment for the innovation to occur and the subsequent spending power to adopt any innovation produced.
Remembering that by not providing guaranteed employment we incur costs associated with unemployment both direct and indirect.
Think it was Rutherford who said something along the lines of "we had no money so we had to innovate".
Well, we'd have to determine what we mean by "innovator". If we're just talking genius level inventor type, you're right, pretty small.
But on a personal level, it's kind of hard to dispute that if someone is offered incentive over and above the bare minimum, their approach to what they're doing changes. Whether or not everyone actually responds that way, is another matter entirely.
How does your system define who's an innovator and is offered the incentives, and who's not and just gets a set dividend for attendance?
FWIW, I think employment is broken, and that we need less employment, not full. But I also can't see how that's possible in a societally satisfactory way, we have too much emphasis on making money as a value.
I think I see both sides of the argument here. I think that the issue is that it's not really worth making an inventive repair to your potato spade for the vege garden when any job pays more than $22.50/ hour and spades cost $15. Which does stifle the end of innovation that isn't high tech or revenue.
There is if you can work out a way to make a better spade....or even fix the broken one you own for less than the cost of a new one (and the time/energy required to purchase it)...or even change what you were doing so a spade isnt needed.
Innovation knows no bounds, and it aint always about dollars.
The 'system' isnt required to define innovation....personal desire fuels innovation, investment sometimes is required to enable it....the most a 'system' can do is attempt to control/direct it, usually through regulation.
The attendance 'dividend' is unrelated...there will always be varying levels of productivity in any environment involving humans due to our disparate natures/abilities.
I can't see how we need less employment when we currently import 10,000s of thousands of both temporary and permanent labour, often unskilled and we are increasingly energy poor....the health system for a start could do with an influx of bodies to (on the job) train for needed roles.
That's a miss-allocation of labour.
The attendance 'dividend' is unrelated...there will always be varying levels of productivity in any environment involving humans due to our disparate natures/abilities.
It's hard to overlook that an economy with higher degrees of incentive gravitate towards being more innovative and productive than those that aim for mass participation.
"It's hard to overlook that an economy with higher degrees of incentive gravitate towards being more innovative and productive than those that aim for mass participation"
Persisting with the statement with no evidence or explanation of the mechanism does not validate it.
Was NZ (or most of the western world) a managed economy in the post war period? The definition applied I recall is 'mixed'...elements of of market and controlled...indeed (west) Germany and Japan were held as examples of the success of planning. Your claim that innovation was stifled in these economies dosnt pass the sniff test.
Innovation is distinct from employment policy....it is innate in those so inclined, and offering security of employment to those not so inclined does nothing to constrain it.
You are 100% correct about the agencies, the pay rates, work that doesn't bring one more cent into the country,
Dont forget about young people buying first homes in wellington overpaying because they had a job that overpaid them.
Is this an unintended consequence of a government out of control, or a lack of financial education in general. How many of these buyers owned a house in 1998, or 2008, I would say none, as anyone who has been through those times, would walk away before overpaying for a house, no matter if it was Wellington or Westport.
What is happening right now, was very predicable, so stop your bleating and open your eyes.
Yer/Nah..
The average salary for staff in David Seymour's new Ministry for Regulation is more than $150,000.
The Wellington agency is more than four times the size of the Productivity Commission it replaced, hiring 91 staff.
That’s despite ACT, and coalition partner National, campaigning to reduce the public sector wage bill, make 15,000 public servants redundant and slash “wasteful spending” in the sector.
The anti-red tape ministry was a flagship policy for Seymour at last year’s election and was established in March.
The economy will not pick-up until Govt go big on deficit spending - either directly or via a whole suite of stupid Private Finance deals. We have only seen overall bank credit / govt deficit stimulus this low twice in modern history - 2001 and 2009. I mean look at business bank balances! It beggars belief that the media, commentators rely on reckons and vibes for their forecasts, when the data that tells you clearly what is happening (and what will happen) is sat on RBNZ and Stats NZ websites.
Which is probably why Bishop wants a 'bipartisan' approach.
I reckon they know they're between a rock and a hard place - only being saved by inept journalism NZ-wide.
I reckon they know that debt incurred NOW, has Buckley's chance of being meaningfully repaid (rampant inflation being the 'out' there).
And the intellectual ground upon which they built their narrative(s) - perpetual economic growth, free markets, trickle-down - is disintegrating as we speak. Globalism reversing, contention rising, civilisation polarising - Fukuyama clearly got it wrong.
https://www.stuff.co.nz/nz-news/350398632/wellington-cafe-suffers-worst…
does not sound that soft
must have posted at same time sorry
AFAIK there's still more public servants that were only employed by Labour in 2023 than have been cut in 2024. The failure of the weak public sector management to stop their working from home rorting won't help.
Stuff is spinning the story to suit their own agenda: anyone who goes into Wgtn knows that the CBD decline & business closures are the compound result of the years of Labours temp housing "solutions", associated rough sleepers & transients all over the footpaths harassing people, an unsafe & dying city with a dysfunctional council led by an incompetent mayor elected by students.
That’s not very diversity friendly of you Mr. Just because she is an incompetent drunk, that seems to also like to use her allocation of sick days, she is also a woman and a Māori so that makes it all ok.
Just kidding. The sooner the useless idiot is gone the better it will be for wellington.
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