Here's our summary of key economic events overnight affect New Zealand with news that investors seem to be having second thoughts about Q3 earnings prospects in light of the supposedly close US election race. Wall Street is retreating and US Treasury yields are rising.
But first, the US Conference Board said its Leading Economic Index fell by -0.5% in September following a -0.3% decline in August. Over the six-month period between March and September 2024, this leading indicator fell by -2.6% which was more than its -2.2% decline over the previous six-month period. Weakness in factory new orders continued to be the major drag, along with the yield spread.
Canada is getting ready for a -50 bps rate cut on Thursday. Sentiment about where their economy is headed seems to be fractured there depending on age. Older Canadians are increasingly optimistic. Younger Canadians remain pessimistic.
Across the Pacific, Malaysia said its economy grew +5.3% in Q3-2024 which is at the upper end of its quarterly growth rates since the start of 2023. A year ago it was expanding at a +3.1% rate.
Taiwanese export orders rose to their highest level in two year in September, even though the pace of that growth slowed to +4.6%. All this is happening while it large neighbour is trying the squeeze it into submission.
That large neighbour's central bank has pushed through cuts to its Loan Prime Rates by its big state-owned banks and by more than expected, cutting the 1 year by -25 bps to 3.10% and the five year by the same amount to 3.60%. These are record lows. The one year rate is the benchmark for most corporate and household loans, the five year rate the benchmark for mortgages.
All this is part of its stimulus plan to prevent a dangerous slowdown from occurring in their economy.
At the same time Chinese banks cut -25 bps from their deposit rates to prevent deterioration in their margins. This will impact huge amounts of Chinese household savings. This may become a factor in some shift of savings into their equity markets.
The UST 10yr yield is now at just on 4.18% and up +10 bps from this time yesterday. The key 2-10 yield curve is more positive, and now +16 bps. Their 1-5 curve inversion is still inverted by -31 bps. And their 3 mth-10yr curve inversion is much shallower at -60 bps and a big move. The Australian 10 year bond yield starts today at 4.38% and up +6 bps. The China 10 year bond rate is at 2.12% and up +4 bps. The NZ Government 10 year bond rate is still just under 4.46%, unchanged from yesterday.
Wall Street has opened its week with the S&P500 down -0.4% in Monday trade. Overnight, European markets were -1.0% lower, except London that fell -0.5%. Tokyo ended yesterday down -0.1%. Hong Kong fell -1.6% and Shanghai rose +0.2%. Singapore fell -0.2%. The ASX200 ended its Monday session up +0.7% and the NZX50 bested that up +0.8% with a late-session push, which was the best of the equity markets we follow.
The price of gold will start today at US$2720/oz and unchanged from yesterday.
Oil prices are +US$1.50 higher at just on US$70.50/bbl in the US while the international Brent price is now just over US$74/bbl.
The Kiwi dollar starts today at 60.3 USc and down -40 bps from this time yesterday. Against the Aussie we are unchanged at 90.6 AUc. Against the euro we are down -20 bps at 55.7 euro cents. That all means our TWI-5 starts today at just on 69, down -20 bps from yesterday at this time.
The bitcoin price starts today at US$67,130 and down -2.1% from this time yesterday. Volatility over the past 24 hours has been moderate at under +/- 2.0%.
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80 Comments
Interesting article on the US entering a new economic supercycle underpinned by higher interest rates, geopolitical risks and industrial planning taking the centre stage.
we are entering an era of higher growth, creeping inflation, and geopolitical instability that will reroute the flow of money around the world
Over at Vanguard, Hirt and his colleagues predict that the neutral rate will stay higher for the foreseeable future, eventually settling at about 3.5%
The growth comes from immigration and supplying the world with weapons (amongst other things).
War is highly stimulating for an economy. The next govt would be very wise to tackle the out of control public debt.
1 trillion dollars in interest payments buy a lot of infrastructure, health, education and may help lower taxes.
"Young Canadians are pessimistic, whilst older Canadians are optimistic "... sound familiar? It's likely due to the older Canadians hording all the houses, and the younger Canadians being priced out of it. Now swap the word Canadians for Kiwis. You can feel the political pressure mounting on this issue..
Canadian media is also reporting a spike in the number of young families moving south to the US has hit historical highs in recent years.
Canadians make the move say the surge is being driven partly by a desire for a more affordable life and want to pursue the American dream. Link
Their government isn't bothered because migrants are flooding into Canada, mainly from South Asia, China and the Philippines.
The similarities are uncanny.
Left leaning governments? All governments are a amorphous blob of ideological sameness. Left, right. there's no difference. They all make a sales pitch every cycle about how the can make you rich and supply every service possible. The unsaid component? Paying for it by cramming more humans in. On a resource depleting planet this is the only game in town, for unimaginative/under educated, political drones and dumbed voters.
The rich and powerful in politics, business etc don't care because to them society is like a game of Age of Empires.
Each 'villager' is merely an interchangeable unit of labour and consumption potential.
As in AoE, where more villagers is always a good thing for the health of your society, to these people more real world human villagers is always good. Just as in the game, they may as well be faceless, utterly devoid of characteristics etc as long as they can consume and produce.
N+1 is always the aim of the game.
Until the villagers revolt, either at the ballot box, or through more direct and often violent action.
Most sims games tend to downplay that eventually. Games that are too close to the real world don't tend to sell that well as they don't leave their players feeling superior and all-powerful.
No. I believe you're pegging too much into anti-generational rhetoric, that fails to understand that after a lifetime of working older generations should have been able to develop and build a cache of wealth to live off in retirement, and perhaps pass on to children. Indeed there has recently been some research released recently that indicates Gen Z have an excessive sense of entitlement and do not make good employees fresh out of Uni.
The real problem I believe is the "free market" economic theory exported by the US in the 60s, 70s, and 80s which is just capitalist BS. Economies only work when people get paid a decent wage to have a reasonable standard of living with surplus income to spend. Business owners should not expect to get rich while paying staff minimum wages. That free market crap is an originating problem which has led to the current situation where housing is unaffordable for too many.
Do you dare to insinuate someone working for 40+ years might have considerably more than someone who's worked for 5?
Unfortunately the super doomey rhetoric is going to greatly exacerbate the negative financial outcomes of current younger generations.
Great opportunity for anyone young, half motivated and half disciplined though.
Great opportunity for anyone young, half motivated and half disciplined though
Perhaps the few good ones benefit in the short run. However, an entire economy cannot thrive longterm on just a small proportion of skilled, motivated workers.
European manufacturers have long reported staggering staff turnover among Millennial and Gen-Z. Japan, SK and Taiwan also face similar or worse demographic challenges as the West but not the same attitude challenges.
Because there is no incentive to stay with a company long term anymore.
There is barely any incentive to work, period.
Wages are low (relative to cost of living) with any increases neglible. Expectations are that you need to be available 24/7 and be giving your all 100% of the time (So working more for less). Development and training are non-existent, and promotions are often only titular.
Then to cap it off most "jobs" are meaningless "Bullshit" jobs, that add little value to wider humanity.
Anecdotally I've heard a few stories of people leaving because they asked for something but was refused. A small bump in pay, some flexibility in working arrangements, maybe some other perk. Plenty of times their requests are accepted as they're walking out the door.
Employees are expected to be grateful for having a job with the "best company there is to work for". Employers with high staff turnover need to engage in a bit of introspection. It's very easy these days for someone to dump their CV at a few recruitment firms, give them a clear cut list of their expectations, and just wait.
The youth unemployment in Europe tends to come down to two core factors, both of which are growing here and Australia
- Older generations not leaving the workforce as they do not have enough funds to retire.
- Immigration willing to accept lower (often illegal) working conditions.
Very hard to be a recent graduate fighting for a job against a person willing to accept the same minimum wage but with years more experience and/or additional qualifications earned over time.
The Living Years. Mike and the Mechanics.
So we open up a quarrel
Between the present and the past
We only sacrifice the future
It's the bitterness that lasts
So don't yield to the fortunes
You sometimes see as fate
It may have a new perspective
On a different day
And if you don't give up, and don't give in
You may just be okay
Perhaps the few good ones benefit in the short run. However, an entire economy cannot thrive longterm on just a small proportion of skilled, motivated workers.
Well, we replaced much motivated work with capital intensive production. So many are just pushing buttons within that, and are disposable.
It is not just specialised workers within the factory; modern manufacturing facilities rely on a network of businesses providing specialised inputs (goods and services) that all require specialised workers (skilled and motivated) for design, engineering, logistics, management, finance, legal, etc.
Manufacturing also thrives on enabling infrastructure (ports, cheap energy, power network, transportation, etc.), which once again requires a skilled and capable workforce to build and maintain the assets.
It is not just specialised workers within the factory; modern manufacturing facilities rely on a network of businesses providing specialised inputs (goods and services) that all require specialised workers (skilled and motivated) for design, engineering, logistics, management, finance, legal, etc.
So say we have a facility that runs for 50 years. What percentage of the total labour exerted over that period is done by highly skilled workers?
Depends on the facility, but much of the work you've described only takes up a very small amount of the total labour hours exerted, much of which occurs at the inception and construction stage. Those not in those skilled rolls, aren't getting paid much, and are relatively disposable.
What percentage of the total labour exerted over that period is done by highly skilled workers
Once again, the factory making the final products itself does require direct inputs from high-skilled workers, but you are incorrectly conflating that with manufacturing businesses being able to eliminate skilled workers completely.
You wouldn't be able to run a successful takeaway shop if you treat your workers as disposable and don't train them properly.
but you are incorrectly conflating that with manufacturing businesses being able to eliminate skilled workers completely.
I never said that, I said many of the workers are disposable.
This is the rub with highly advanced/productive industry, there are a handful of specialized workers to get it up and operating/maintained, and then the vast majority of workers involved are cannon fodder.
You wouldn't be able to run a successful takeaway shop if you treat your workers as disposable and don't train them properly.
You have to train them properly, but the value is in the marketing, systems and plant. The workers can be replaced and trained in weeks.
Pa1nter I think through the context of your arguments, that you're making a common mistake. First, what is your definition of a skilled worker?
People spending years working at a job are not unskilled. Indeed many of them could easily be considered highly skilled, even though they may not have formal qualifications. Those skills are learnt through experience. The university they attended is the real life of their job, and the time and experience they were exposed to and gained there.
Years ago I read a Harvard school of business study which identified that one of the highest costs any business faces is around staff turn over. Having to induct and train staff to do the job they are expected to do. The less turnover, the lower the cost. Staff retention saves money in the long term, lots of it.
The context of the site plonks skilled workers usually into the "skilled educated professional" camp. The sorts of people advisor has listed.
You are quite right though, that's not the only sort of skilled worker. Someone with years of knowledge and experience, is also skilled, and can be way more efficient than constantly rotating people.
The market doesn't compensate the latter very well, compared to the former.
"that fails to understand that after a lifetime of working older generations should have been able to develop and build a cache of wealth to live off .. perhaps pass on..."
Theres a Ponzi scheme of promises smacking you in the face if you care to look
Older generations didn't build a cache of wealth ... they got "rich" when we blew (leveraged) the prices of assets through the roof.
To pass on anything, you need to pass on viable jobs. Not leveraged Debt.
"Economies only work when people get paid a decent wage to have a reasonable standard of living with surplus income to spend."
This is correct. Wage disparity is collapsing demand. But the prerequisite is the economy needs to be generating a surplus first. Which requires all those easy resources we have already put on the fire
Bollocks. I got "rich enough" by working my arse off for 30 years, living simply and being sensible. Sensible covers things like investing, partner choice, and health maintenance.
I am now "rich" enough to pay a gardener. He is several decades younger, not NZ born, and tells me it is so easy to make money in NZ if you are prepared to work hard!
A few hundred a week
Just how ignorant are you? 30 years ago minimum wage was ~$4 an hour. My first job as a school leaver I talked the boss to $10/hr, but that was on the back of a trial period where I'd proven I added value to the team. My first salaried position was 29k - or less than 600 a week gross. The best I did back then was 70k - but that was because I worked 2 f/t jobs w/ overtime.
The average person over the last 30 years hasn't been able to "put a few hundy" aside per week - first because they didn't and don't earn enough (personally I blamed migrants undercutting local wages from mid-2000s on, then the oldies not retiring but holding onto jobs over the GFC as they couldn't afford their mortgages elsewise). And second, our economy has become a vampire sucking the life out of the young to feed the egos of the old.
Granted, my family is but one small microcosm, but even within that there is a very clear divide between those on each side of 40 - directly attributable to who held property when.
Not any more.
Employers were a lot more generous back in the day. It used to be common to see Corporate pension schemes paying 2:1 for every dollar invested by the employee. Some offered even more depending on service/seniority.
Most of those schemes were promptly shuttered when Kiwisaver came about, I mean the govt set a legal minimum, so the companies raced for the bottom.
"Older generations didn't build a cache of wealth ... they got "rich" when we blew (leveraged) the prices of assets through the roof." 'Rich' only if you want to stare at a valuation report. Money tied up in an asset is not really wealth unless that asset is generating a real income. Houses do not tend to do that, unless and until they are sold. So owning a house doesn't make one rich. After all the value of that house may collapse to a value much less than was paid for it.
The second part is the effect of the 'free market' policies of the government having them sit on their hands when they should have done their job and regulated the market. Now they're too scared to in case it collapses completely.
"To pass on anything, you need to pass on viable jobs. Not leveraged Debt." Government's role to manage and regulate the economy. But a bequest does put some money in heirs pockets to be squandered though.
Yes - its all about incomes!
Which arent asset prices. But in blowing them up we have given the asset holders some (unearned) income to blow to keep the Ponzi going
All Govt's have found real growth impossible ... because it comes back to more resources to pillage.
So they use debt as a resource token.
Money tied up in an asset is not really wealth unless that asset is generating a real income.
Not entirely correct, considering if you bought a house in the 90's it would likely have paid itself off in rent in around 10 years or so, then the rest of the income minus maintenance, and compulsories like rates and insurance, come as profit. Add in capital gain and there's regular income with a payoff when selling later on.
You're splitting hairs. I was thinking of the family home, not an investment property (context should have indicated that). An investment property is a business expense, and while generally you may be correct, but what if the house prices reduced over the period it was owned and the value became less than you paid for it?
Over the years I have known a number of people whose houses devalued over the time of their ownership. some were family homes and some investment properties. Even though this may not be in your experience, that doesn't mean it is impossible or even unlikely.
Even though this may not be in your experience, that doesn't mean it is impossible or even unlikely.
Of course murray, hence why I said not entirely correct so not to make a strong assertion against your post, only to give another angle in the mix. Splitting the hairs has to be done for a well rounded discussion :-)
Your posit works until it comes up against Limits. Murray. The bigger physics of it doesn't care who gets the proxy - already-rich, already-poor, old, young - it has a limit to the amount of growth possible.
That is the problem now. It is the problem for this government - who cannot pull enough levers to create another 'doubling'. It is the problem for aged rentier-ing; they are competing with the young on an ever-reducing playing-field.
This is the problem with Left politics, and the problem with half the UN SDGs; they just want a share of the cake for a different cohort than those currently munching - but they don't have a clue as to the size of the cake. Any more than the full-bellied Sneetches do (the kind of crass plonker who says: "I'm wealthy").
Passing proxy on to children, only works if it is still underwritten. Property maybe - provided the system is still intact enough to defend ownership-rights....
"They can't ALL be guilty of mismanagement, surely?"
They can actually. The voters elect a government. Voters act mainly on self-interest. Who votes most? And who do government court votes from the most? And, more recently, who owns all the media channels that feed those that do vote?
But taking a step back, those that benefit from the action of the governments that are voted in, almost certainly don't consider it mismanagement. Alas, the swing voters, usually 5% or less the total population, get a far outsized say on how we're mismanaged.
https://www.oneroof.co.nz/news/they-know-they-will-be-blowing-first-hom…
Seasoned investors up the stakes with unconditional cash offers.
Excerpt:
Harcourts agent David Ding, who sells on Auckland’s North Shore, said buyers had sensed the shift in the market. “They know they have to stand out to win the battle. They know the market will increase 10% next year so if they can pay only 5% more this year, they will grab it. A cash unconditional offer is definitely more attractive for the vendor.”
"Inflation is on the horizon again." (One indicator, Gold, another ATH of NZ$4,511.63 at the moment)
And with that comes much higher mortgage rates, and a lot sooner than we think. The RBNZ etc will have learned from the recent past that 'looking through' any increase in the CPI needs to be stamped on hard and fast. So if you are out there taking on more Debt, then perhaps bucking the present thinking of 'fix short!' and locking in for 5 years is the way to go. But will you?
(eg: "The UST 10yr yield is now at just on 4.18% and up +10 bps from this time yesterday")
Reverting from highly globalised to more cold war blocks will increase inflation (Higher neutral rate), will increase debt and reduce efficiency but in the near future will mean growth in the blocks as they become more self sufficient.
I can see industrial process and manufacturing growth in the USA or USA related evirons like Mexico.
I would not want to be exposed to China or Russia here. Gold is the hedge.
Forget the Cold War, it's about the cost of a haircut!
Just back from one, and it's up another 10% since last time; 25% from the beginning of the year.
Haven't we seen all this before? Higher Cost of Living items; unthinkably high interest (mortgage) rates, much higher unemployment and asset prices actually falling as people sell whatever they can to pay the bills.
"Once thought by economists to be impossible (the simultaneous appearance in an economy of slow growth, high unemployment, and rising prices.), Stagflation has occurred repeatedly in the developed world since the 1970s".
Barbers are like cafes now. Way too many barber shops in every town center. My local one has 10 competitors in a 500 meter radius. There are few barriers to entry. But they all have to charge more and cut less due to the competition. They are great for money laundering though.
A lot of new barber shops have popped up in Napier and especially Hastings CBDs in the last few years. And most of them are staffed by immigrants who I suspect - and certainly give the impression - have no training whatsoever. Made the mistake of going from my regular to one of these cheaper places which was $9 cheaper. NEVER AGAIN! It was a reminder yet again that it's worth paying a bit more for many goods or services and get what you really want.
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