Here's our summary of key economic events overnight that affect New Zealand with news the world's second largest economy may be seriously out of balance, with implications for everyone.
With the US on holiday, the big global influences come from elsewhere today. First up, the private Caixin PMI for Chinese factories moved up from a minor contraction in July to a minor expansion in August. According to this survey, output growth accelerated amid an upturn in new orders and a stabilisation in employment. Meanwhile, price pressure eased and confidence hit a 3-month peak. All this was marginally better than the official factory PMI which recorded a slightly deeper contraction. The difference is that the Caixin survey is more about their private sector, the official PMUI more about their SOEs and the enterprises that dominate Chinese manufacturing.
But despite this stable factory activity, their firms have been buying raw materials at a high rate, so consequently there is a huge buildup in inventories across a wide range of sectors. If the world doesn't take the surge in exports that would be necessary to justify this buildup, then the resulting pullback will have large-scale international consequences. There are plenty of signs this imbalance may end badly for everyone involved.
And China's property woes are deepening, which is driving sharper equity market retreats. Falling prices aren't being stemmed, squeezing developers further and keeping house buyers away.
Taiwan's August PMI only registered a modest expansion in the island nation, about the same as for China.
Japan's August PMI showed neither an expansion nor contraction.
South Korea's August data pointed to sustained and stronger increases in both output and new orders for their manufacturing sector amid growing signs of client confidence.
India's August PMI registered softer increases in new business and output during August, albeit with rates of expansion remaining elevated by historic standards.
In Australia, their factory sector is deteriorating at a faster rate, but there are some signs things may improve later in the year. Although new orders and production continued to fall, export orders picked up and along with it, confidence in the future. But they also report that cost pressures are not easing, which will worry the RBA.
Australia is quite vulnerable to the Chinese economy's struggles.
So it will be no surprise that job ad levels continue to shrink in Australia. And that company profits seem to be diving.
Meanwhile on the Australian property front, building consents jumped in July, especially for multi-unit developments although to be fair that is off a very low base, so it may not be significant.
And CoreLogic said August house prices rose only modesty from July to be up +7% for the year. However all this rise was from Brisbane (+15%), Adelaide (+15%) and especially Perth (+24%). Without them, there would be no rises.
The UST 10yr yield is now at just on 3.93% and up +2 bps from yesterday. The key 2-10 yield curve inversion has now disappeared, replaced by a positive +1 bp. But their 1-5 curve inversion is still at -71 bps. And their 3 mth-10yr curve inversion is still inverted at -134 bps. The Australian 10 year bond yield starts today at 4.07% and up +10 bps. The China 10 year bond rate is at 2.16% and down -2 bps. The NZ Government 10 year bond rate is now just on 4.34% and up +4 bps from this time yesterday.
Wall Street is closed today for a public holiday. Overnight, European markets were all little-changed ranging between -0.2% and +0.2%. Similarly, Tokyo ended its Monday trade up just +0.1%. But Hong Kong dropped a sharp -1.7% and Shanghai fell -1.1%. Singapore rose +0.6% however. The ASX200 was up a minor +0.2% in its Monday trade. But the NZX50 gained a creditable +0.9% with a late burst and the best of the equity markets we follow.
The price of gold will start today down -US$4 from yesterday at US$2499/oz.
Oil prices are little-changed from yesterday again, still just under US$73.50/bbl in the US while the international Brent price is still just over US$77/bbl.
The Kiwi dollar starts today down -20 bps from yesterday at 62.3 USc. Against the Aussie we are sharply lower at 91.7 AUc. Against the euro we are also lower at 56.3 euro cents. That all means our TWI-5 starts today at 70.2 and down -30 bps from yesterday.
The bitcoin price starts today at US$58,472 and back up +0.8% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.4%.
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21 Comments
Australia’s per capita GDP has fallen for five consecutive quarters and six times in the last seven quarters - Link
Jobs are quickly vanishing in NZ and the time to cross the ditch for better prospects was yesterday apparently. May still be worthwhile for critical workers such as doctors and nurses but I don’t think it will be as rosy for professionals and tradies as some here make out to be.
Yup, apparently it's impossible to live in australia now according this little doco. Mostly due to housing due to the tax system.
To be fair you could replace Australia with NZ and it would all hold true, it's just missing the statement that all the young are leaving to Oz
Why Living In Australia Is Impossible
https://www.youtube.com/watch?v=_TUVXfM1nqo&t=637s
My read of the yield curve
https://www.worldgovernmentbonds.com/country/new-zealand/
The market prediction is for rates to drop fast in the next year, slower for the year after that, slower again over the next 3 years, then be flat for the forseeable (the uptick in longer rates simply being a term premium, rather than the expectation rates will rise again)
Essentially its saying the future sucks a fair bit, and ignores the fact that money (increasingly plentiful) will deflate against energy/resources.
Yes more cheap credit is needed to try and keep the show rolling ... which is inflationary
But the credit effect ultimately isnt widely distributed so we get deflation with (hyper?) inflation
Lack of widespread affordability will continue to try & drive PRICES down ... yet ever poorer economies to scale will continue to drive COSTS up
Not a good business model
"National's new roads a trade-off for safety, public transport, local roading - opposition parties"
https://www.rnz.co.nz/news/political/526861/national-s-new-roads-a-trad…
True indeed. Not easy to access the city either by car or then, park there. If you can’t bike or walk visiting the city centre is difficult. No wise elderly person would risk the bus given the accompanying hooliganism. Them that know best at the City Council must be eminently satisfied with this as a result.
It's a market however you slice it, just one that can swing between public and private sources.
The private market is just less interested in investing in something with a potential loss.
Germany is having an interesting time, large renewable generation rollout, with highly fluctuating energy prices, and the nature of much of their industry is incapable of capitalising from when it's cheap.
https://www.transpower.co.nz/system-operator/live-system-and-market-dat…
Coal yesterday too.
Meanwhile over the ditch 'Bluey Dollarbucks' demand has crashed the OZpost website....this follows on from the 'Bluey bandit' that flogged 600k worth of them from a warehouse..... Madness...lol
https://www.theguardian.com/australia-news/article/2024/sep/02/bluey-co…
https://www.theguardian.com/australia-news/article/2024/aug/07/bluey-li…
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