Here's our summary of key economic events over the weekend affect New Zealand with news that signs of economic under-achievement seem to be cropping up everywhere.
First though, at the end of this week we have the long weekend holiday, for Labour Day. But first, the week ahead will feature October 'flash' PMIs from all over and the third week of Wall Street Q3 earnings results. In the US they will release September durable goods order data. Canada will chime in with a central bank rate decision (probably a -50 bps cut), and there will be confidence survey results from all over. Finally South Korea will release its Q3-2024 GDP growth rate, expected to be a bit north of +2%.
Over the weekend there were no surprises in US housing start data for September, coming in just as expected and the general level it has been at for most of 2024.
And Wall Street's Q3 earnings season reporting is building with 14% of S&P500 companies reporting so far, and the results are quite positive, reinforcing investor risk appetites.
The US also reported its federal budget deficit for September over the weekend. It was a surplus of US$64 bln for the month. For the month, receipts jumped +13% from a year earlier, while outlays sank by -23%. But for the full fiscal year, it ended -US$1.8 tln in deficit (with interest costs exceeding US$1 tln for the first time). At that level the total deficit is equivalent to -6.3% of one year's economic activity in the country. This is up from -6.1% of GDP in 2023.
Across the Pacific, China’s new home prices in their 70 major cities fell -5.7% in September from a year ago, more than the -5.3% fall in the previous month. It was the 15th straight month of decrease and the steepest pace since May 2015. Second hand houses seem to have fallen by much more, by -10.7%. This sector won't be helping China's "wealth effect".
Meanwhile China said its Q3-2024 GDP expanded by +4.6%, marginally better than the +4.5% expected but less than Beijing's 5% target. They also said industrial production improved by +5.4% and retail sales were up +3.2%, on the same basis. Their jobless rate fell slightly, to 5.1%.
Later today, China is expected to cut its Loan Prime Rates by -20 bps, their tenth consecutive cut since the pandemic, and to a record low. The have never raised these rates since they introduced them in 2019 - only ever cuts.
And China's support of equity markets has almost hit ¥2 tln. With the Beijing 'put' in play, it is now not possible to read anything into Chinese equity market signals, especially when they rise. That may only indicate the size of the manipulation.
Japan said its inflation rate fell to 2.5% in September from 3.0% in August. This was its lowest level since April. (It was also 3.0% in September 2023.)
The regular ECB survey of professional forecasters shows that expectations are low for the bloc over the next two years to 2026. They see inflation staying under control, economic expansion rising to only modest levels, and their jobless rate staying little-changed.
And in Australia, suddenly their housing market seems quite fragile. This past weekend, they may have had only a 40% auction clearance rate in Sydney, a very sharp and fast fall from their 'usual' levels of about 70%.
The UST 10yr yield is now at just on 4.08% and unchanged from yesterday. And that is unchanged in a week. The key 2-10 yield curve is still positive, and now +13 bps and a bit more. Their 1-5 curve inversion is still inverted by -32 bps. And their 3 mth-10yr curve inversion is marginally shallower at -70 bps. The Australian 10 year bond yield starts today at 4.32% and down -2 bps. The China 10 year bond rate is at 2.08% and down -1 bp. But a week ago it was at 2.15%. The NZ Government 10 year bond rate is still just under 4.46%, unchanged from Saturday and up +7 bps from a week ago.
The price of gold will start today at US$2720/oz and up +US$3 from Saturday - and yet another new all-time high.
Oil prices are -50 USc lower at just over US$69/bbl in the US while the international Brent price is now just on US$73/bbl. These levels are -US$6/bbl lower than a week ago.
The Kiwi dollar starts today at 60.7 USc and little-changed from this time Saturday. Against the Aussie we are +10 bps firmer at 90.6 AUc. Against the euro we are unchanged to 55.9 euro cents. That all means our TWI-5 starts today still just under 69.2, unchanged from Saturday at this time and little-changed from a week ago.
The bitcoin price starts today at US$68,582 and down -0.4% from this time Saturday. Volatility over the past 24 hours has been low at under +/- 0.5%.
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22 Comments
People have a big boner for asset prices, without realizing the interplay between those, and general livelihood (not saying that's a good or bad interplay, just that's it's there).
The fall of the Chinese housing market will directly impact the fortunes of countries like NZ and Australia who have supplied some of the raw materials to build it.
A subsequent wider global asset price crash, is going to take many more jobs and livelihoods with it.
Be careful what you wish for.
'That may only indicate the size of the manipulation'
Not just China
'“Malinvestment” means putting capital into entities and projects destined to fail. Malinvestment is taking place at epic scale in the economy of today. Governments play a part in this every time they try to encourage, say, tourism or “tech”, when they should instead be prioritizing essential infrastructure. They have a tendency to act on the basis of a narrative which, perhaps unbeknownst to them, is already failing'
How long will our politicians keep ingratiating and aligning themselves to an epic fail?
How far will the social contract be pushed aside for them to continue doing it?
Citizens have some tough decisions to make about our future mode of operation, BAU is not an option.
"And China's support of equity markets has almost hit ¥2 tln."
From the link, that is 2 bn?
https://translate.google.com/?sl=auto&tl=en&text=%E5%85%AC%E5%8B%9F%E6%…
Economists in NZ can't help themselves but bring up their prediction on the housing market in a seemingly unrelated news post. This is ironic because if we weren't so obsessed with a single asset class, young folks wouldn't have to leave in droves.
Rising unemployment, growing brain drain in store for NZ - Infometrics (msn.com)
36,721 Kiwis have acquired Australian citizenship in the 15 months since Anzac Day 2023 when Hipkins and Albanese jointly announced a new clear pathway for Kiwis to gain Aussie citizenship.
And arrogance too. The reason why both sides of the political spectrum choose to ignore the net brain drain when in power is because they still believe NZ has strong appeal as a destination for global talent and it is just a matter of them getting the settings right. It is glaringly obvious in our data to those without vested interest in low-skilled mass migration that NZ has very little to offer to genuinely skilled migrants.
I bet if we actually cared enough to survey leavers, we might find many of them had only moved to NZ 5-7 years ago because that is what many of us have noted.
More jobs vaporised. "Rocket Lab is making innovative strides in space travel with the Neutron medium payload rocket – namely, it's the largest composite rocket ever made. Initially, hundreds of layers and thousands of square feet of carbon fiber were laid onto a mold by hand, taking a large team several weeks to complete. Now, with Rocket Lab's new Automated Fiber Placement (AFP) machine, it can be done in a single day.
Rocket Lab expects the usage of the AFP to save over 150,000 man-hours of construction of the world's largest composite reusable rockets by making them more affordable as well as faster and easier to produce."
https://newatlas.com/technology/rocket-lab-neutron-carbon-composite-afp/
Unfortunately, if RL doesn't install the machine, another competitor elsewhere will do it and eat their lunch offering lower prices or greater quality to the clients as a result.
Better to save the remaining jobs by retaining the existing clientele rather than losing everything. A bigger loss would be if the broader NZ manufacturing/engineering sector does not quickly snap up those hundreds of workers no longer required by RL.
You prefer to keep them trapped rather than realise their fullest potential?
Migration is a significant factor for market efficiency. It also means countries have to compete through good policies.
Our leaders need to stop the extreme Thatcherism & naive Labour ideologies and start doing pragmatic, cost efficient policy for the majority of people.
Then we'll actually see it's worth living and staying here, not only for third world migrants.
True. The point I was making is that the pathway has been touted by many as an important factor for many in their decision to jump across the ditch. The SCV only allows Kiwis the right to enter and work in Australia without the same benefits as a Permanent Resident or citizen.
It will also reduce the return of Kiwis to NZ during an economic downturn. Many Kiwis had no option other than returning to NZ during the global commodity bust of mid-2010s (Link) because they had no access to the welfare system across the ditch.
NZ bottom of the heap on infrastructure delivery:
https://www.nzherald.co.nz/business/new-zealand-ranks-last-for-infrastr…
The merits of this sad case notwithstanding, the actions of the Police in exercising the proceeds of crime act will send chills through the boardrooms.
“Police have no intent to use the CPRA routinely for offences against the Health and Safety at Work Act."
https://www.stuff.co.nz/nz-news/360458414/auckland-businessman-pay-4m-c…
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