Here's our summary of key economic events overnight that affect New Zealand with news the global bond selloff has eased, but the reasons for it don't seem to have changed.
First up today, the IMF has lowered its global growth forecast and warned of increasing risks ahead. The growth they see is from the stronger-than-expected performance in the US despite slowdowns in China and Japan. They still see 2024 expanding 3.2% this year in spite of all the supply-chain disruptions. Five years from now, global growth should reach 3.1%, a mediocre performance compared with the pre-pandemic average.
It sees zero growth in New Zealand in 2024, a +1.9% expansion in 2025 and only rising to +2.4% by 2029. Still, that would be better than it sees for most advanced economies - and slightly better than in Australia.
The US Treasury Secretary Yellen claimed that the US rejection of "Made in America" isolationism had made the world a better place than if it had continued, and was the basis of the current global expansion.
The decline in inflation worldwide is helping to keep growth momentum steady, with headline inflation projected to slow to 3.5% by the end of 2025, below the average of 3.6% between 2000 and 2019, they said. Australia is the laggard on progress in taming inflation, they observe.
The new threats they see relate to the rise and rise of trade wars.
Meanwhile, the US retail pulse as measured by the Redbook monitoring eased slightly last week to be +4.6% higher than a year ago. This is better than inflation but at the lower end of the gains since March.
The Richmond Fed's factory survey recorded a small improvement in October, a shift that was not expected. But it remains negative all the same. Their arguably more important services survey turned positive in October, and although also minor it was a shift that was also better than expected.
Although it had been positive since April, Canadian producer prices sank in September, resuming the trend that has started in March 2023.
Here is something we don't normally follow, but it helps explain why the EU manufacturing base remains in the doldrums. EU car registrations came in just over 810,000 in September, a bounce-back from August but well below the 1.1 mln June level. Since the pandemic, the average has been about +800,000 per month. But that is a long way down from the pre-pandemic average of about +1.4 mln per month. It a radical step lower.
The UST 10yr yield is now at just on 4.20% and up +2 bps from this time yesterday. The key 2-10 yield curve is positive, and still +16 bps. Their 1-5 curve inversion is less inverted by -26 bps. And their 3 mth-10yr curve inversion is again shallower at -55 bps. The Australian 10 year bond yield starts today at 4.46% and up +8 bps. The China 10 year bond rate is at 2.13% and up +1 bp. The NZ Government 10 year bond rate is still just under 4.51%, uup +5 bps from yesterday.
Wall Street is still soft today with the S&P500 up only +0.1% in Tuesday trade. Overnight, European markets were barely changed to marginally softer. Tokyo ended yesterday down -1.4%. Hong Kong was up a minor +0.1% and Shanghai rose +0.5%. Singapore fell -0.8%. The ASX200 ended its Tuesday session down -1.7% and the NZX50 was down a lesser -0.9%.
The price of gold will start today at US$2742/oz and up +US$22 from yesterday.
Oil prices are +US$2 higher at just under US$72/bbl in the US while the international Brent price is now just on US$76/bbl.
The Kiwi dollar starts today at 60.4 USc and up a minor +10 bps from this time yesterday. Against the Aussie we are down -10 bps at 90.5 AUc. Against the euro we are back up +20 bps at 55.9 euro cents. That all means our TWI-5 starts today at just on 69.1, up +10 bps from yesterday at this time.
The bitcoin price starts today at US$66,933 and down -0.3% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.0%.
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52 Comments
a +1.9% expansion in 2025 and only rising to +2.4% by 2029
We need high net migration, money pumping and fiscal stimulus at similar or higher rates to push up imports in order to achieve those growth figures. Productivity growth (GDP per worker) stalled shortly after the GFC and will likely remain stagnant with such a high outflow of local skills.
I agree. Net migration has only slowed because of a high net outflow of Kiwis, while non-Kiwi migration is still very high clocking 2% of population in year to Aug 24.
Lower interest rates will create even more crappy, low-paying jobs across the board as households resume discretionary spending bolstering net inward migration of foreigners. Sigh!
Those foreigners want to be Kiwis asap. Generally more patriotic than the born and bred Kiwi. Understandable since migrants want to come here and assimilate whereas native born Kiwis just want to get away. Not just Pakeha at current rates of outflow when will there be more Maori in Australia than NZ?
Why are major companies hiring those with minimal English skills with heavy accents for front-line trouble shooting roles?
Because they are positioning to have people who can talk the language of the new immigrants as English speakers flee the coalition's policies of economic vandalism.
Probably. As a born kiwi, I think it's a s*hole.
40 years of treating the young as ATMs for those who own houses.
30 years of preloading them with debt once they leave school.
20 years of undercutting their wages with immigrants, as well as providing no on the job training or significant career progression.
The few of my cohort who remain either had help early on and are comfortable, or can't afford to leave.
That depends on where the migrants are coming from. If people born here are being replaced with people from third world countries then that tells you more about the state of the country than the people leaving. I'd also say the migrants wanting to assimilate would be in the minority these days, what incentive is there?
"To help New Zealanders make the move (to Australia), we’re offering generous incentives and benefits including up to $5000 in relocation assistance, free accommodation, a $5000 sign-on bonus, salary packaging, novated leasing, immigration or visa support, and much more. “Your new job is a flight away.”
Hard to know how to price risk and shares/crypto atm. It's all tied to the fate of Trump. I get the feeling the lift we've seen lately is a reflection of the narrowing polling between Trump and Harris. It seems the Democrats are getting outflanked much as they were in 2016.
I really don't know. There's no doubt the polls of polls have Trump clawing back the advantage Harris got for simply not being Biden.
Momentum seems to be with him. It's like the Democrats decided once Harris was in instead of Biden that it was job done.
Trump's gimmicks are just that, but they're effective, and the Democrats sitting back and calling them gimmicks doesn't really do much for their own cause other than getting people who already agree with them to nod in agreement.
For a financial news site, you guys seem pretty uninformed on the subject. The election campaign is over, Trump will win. Democrat betting odd's are now in the mid 30% and Trump mid 60's. Forget the polls, follow the money.
Trumps latest kicker has been Harris telling Christians and Catholics they are at the wrong rally. Her campaign has been worse than when Crooked Hillary called working class Americans "deplorables". Add to that Obama accusing black men of being "sexist" for not supporting Harris, and it's been an unmitigated disaster.
I'm looking forward to Musk being let loose in the Whitehouse, RFK given the FDA, Gabbard and Vance as well. Hopefully Trump can keep his ego in check and leave them to drain the swamp. It' going to be a blast.
Now I haven't gone too deep into RFK and have probably only heard one side of the story, but what excites you about him getting stuck into the FDA? What little I have heard suggests he is fairly unscientific in his approach to medicine, particularly vaccines. What's the positive spin I've missed?
Agree domestically the bigger scheme of things will likely be self contained. Internationally though Trump who revels in and takes advantage of chaos is another matter. There chaotic has the potential to become catastrophic. The European NATO members may find the Ukrainian situation becomes entirely theirs to solve.
Heard an interesting perspective recently. Before the worldwide expectation that aggression against your neighbor wouldn't be tolerated, the average government spent about 50% of their income on maintaining their military as everyone had to protect themselves.
In that world, nice-to-haves like pension payments and public healthcare are gone.
This isn't from recent history - it's what was normal for human history before the last century or so. Quote was from Yuval Noah Harari in a recent podcast with Sam Harris, and from memory it was relating to governmental and city state budgets running back through renaissance city states, medieval and ancient governments.
His point is, this kind of spending is absolutely normal for humans in a situation where there isn't a bigger army offering explicit or implicit protection and upholding certain international norms like 'don't invade your neighbor'.
I'm not even going to look at the polls at this point.
It feels like the 'meme magic' that got Trump in in 2016 is back (perhaps not to the same extent, but it's back).
He's out there cosplaying as a McDonalds worker, dropping funny meme videos on social media, and seemingly having a good time again while Harris' campaign feels like all the initial hype job momentum has run out. She gets all the celebrity endorsements, but it seems like the average person cares less and less what celebrities think (as we realise more and more they are so detached from reality, or up to all sorts of appalling behaviour behind the scenes).
The Democrats should have waited a bit longer to push out Biden. It's feeling a bit like the boxer who tries to go for the knockout too early in the fight and is then gassing out by the championship rounds.
None of this is an endorsement of Trump. I don't like either of them for various reasons TBH, but denying the "vibes" is becoming increasingly difficult.
no doubt it has closed up a bit in the polls.
Turnout will be the key , and I think Trump is his own worst enemy here , goading dems into making sure they vote.
I also think some Republicans might be afraid to say they won't vote for Trump.
Still think Florida might swing , though the hurricanes have muddied things ( no pun intended).
What people tell their friends and pollsters they're going to do and what they actually do in the polling booths can be very different things.
I'm fairly certain this was a big driver in 2016 with Trump ending up being undercounted in the polls in the lead-up. I'd suggest he would be the biggest beneficiary of this, the number of people who would never admit they'd vote for him must be a decent chunk higher than those who are prepared to say they will and then vote for Harris.
"With two weeks to go until Election Day, Kamala Harris’ top advisers are staring down numbers that show a wide majority of Americans saying the country is on the wrong track." ( Arguably the pro Harris, CNN)
In the case of the US there doesn't seem to be much risk to the market, both candidates want to borrow and spend to infinity.
In the case of NZ, the market seems to favour National even though they will decrease spending, that is a pretty good example of favouring a team not an outcome.
the market seems to favour National even though they will decrease spending
To be fair, Labour increased spending in its second gov term and pumped most of it into consulting fees, welfare boosts and inflated wages for bloated back-office bureaucrats. Outsized increases in minimum wages over the last 6 years (44% over the 2 terms) aimed at reducing child poverty was stupid and lazy policymaking.
You don't instil a lot of investor confidence in your economy when the Finance Minister is publicly proud of the fact that 80% of its working-age population was on government benefits at the peak of Covid lockdowns. Also, much-needed meaningful reforms took years of consultation and planning under Labour but were never delivered while virtue signalling policy moves on social justice were put straight into law with the simple stroke of a pen.
The markets do not exactly favour National as much as they dislike Labour.
However I'd guess the average company has made more revenue and profit under Labour in the last few decades
Any data to back that up? How much of those high profits were made by banks, real estate agencies, supermarkets, insurance providers and gentailers vs the rest of the economy? How much profits were made by sectors not affected by minimum wage (construction, financial services, professional services, etc.)?
Even if that statement were true, supply in certain markets is controlled by oligopolies that have the power to pass on the entire labour cost to their customers when those in more competitive markets cannot, so higher minimum wages hit businesses disproportionately in distorted markets like ours.
Also, Labour doubled down on mass migration outside of the 2 lockdown years, which is widely understood to increase economic activity and lower wage growth, i.e., higher profits for businesses. (Link)
If I had the data I wouldn't have guessed. The unemployment rate has been much lower under Labour in the last few decades, that would imply businesses are doing well. A lot of that had more to do with the global economy than our choice of government, so it would be difficult to quantify properly.
The unemployment rate has been much lower under Labour in the last few decades, that would imply businesses are doing well.
The country's finances would indicate that we have a lot of jobs that can't fund themselves without running at a loss.
So full employment really just means everyone who wants a job has one. It doesn't necessarily mean profits are increasing because employment is increasing. Or if even revenue is increasing.
If you keep the people busy and feed them enough cheap goodies then they're less likely to engage in civil disorder.
The bigger picture stats indicate that the opposite may turn out to be true. USA likely to be the country with population growth driven by immigration and birth rate -so younger smarter freeer, more mobile etc etc c.f. with the others like China, all of Africa, most of South America except maybe Brazil and certainly Europe and central asia
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