Here's our summary of key economic events overnight that affect New Zealand with news with a special eye on unpredictable American policy instability. The Trump win unhinges many things, including the path for central bank rate cuts. The ones announced today may be the last until after the direction of US fiscal policy is revealed for certain.
In the shadow of the Trump election win, a range of billionaires are lining up key roles in his administration to extract payback for their support. It is all very unseemly, but should be no surprise. The current estimate is that just six of them have gained more than +US60 bln in the first day. And that will be just the start.
The US Fed is about to release the results of its November meetings. A -25 bps rate cut is anticipated (Update: confirmed), to 4.75%. It may be too soon to expect them to have assessed how they need to prepare for Trump 2.0 policies that are expected to swell the US Federal deficit in a significant way, and re-ignite serious inflation. Their options may be discussed more at their December 19 (NZT) meeting. And that will all be clouded by Trump's expectations of subservience, although he has few options to fire Powell who is safe in the role until mid-2026, and as a governor until 2028.
Meanwhile US initial jobless claims came in at 212,300 (actual) last week, almost exactly as expected. There are now 1.65 mln people on these benefits, almost exactly as it was in the same week a year ago and back to pre-pandemic levels even though the employed labour force is now +7.5 mln people larger than pre-pandemic. The US labour market remains unchanged, and stays strong .
China is getting an export boost from orders that are anticipating a clampdown on trade with the Middle Kingdom - from both the US and the EU. Exports surged in October by +12.7% from the same month a year ago to a 27-month high, much faster than the forecasted +5% and up from a five-month low of +2.4% growth in September.
More reflective of the state of their economy, imports fell -2.3% in October from a year ago to a four month low. Imports fell from ASEAN countries, the EU, and even best-bud Russia, but grew from the US as China hoarded soybean and other grains. Imports from Australia are down -8.7% and from New Zealand -11.1% so far in 2024. Both of us are being weaned from the Chinese economy quite quickly now.
Since June, European retail sales have been rising, which you may find counter-intuitive given most of their data is dull and unimpressive. The rise in retail sales is more impressive when you realise that it is volume based, after inflation is accounted for. It was up +2.8% in September from a year ago on that volume basis. There is life left yet in the EU economy.
With CPI inflation back down to 1.7% pa, the Bank of England trimmed its policy rate by -25 bps to 4.75% overnight, its second cut since August, and exactly as expected.
Both exports and imports fell in Australia in September, something of a surprise. Their export levels fell back to December 2021 levels, and their import levels retreated when September is usually when they peak. The China trade is at the heart of that undershoot.
Container freight rates rose +7% last week from the week earlier to be +240% higher than a year ago and +140% higher than pre-pandemic levels. Demand from China to Europe drove these rises, but as we have noted before, this is probably just in anticipation of trade clampdown. Bulk cargo rates were up +2.0% over the past week to be -6.6% lower than the same week a year ago.
The UST 10yr yield is now at just on 4.35% and down -7 bps from this time yesterday. The key 2-10 yield curve is now less positive, by +14 bps. Their 1-5 curve inversion is more inverted, now by -9 bps. And their 3 mth-10yr curve inversion is also more inverted, now by -21 bps. The Australian 10 year bond yield starts today at 4.68% and down -2 bps. The China 10 year bond rate is unchanged at 2.13%. The NZ Government 10 year bond rate is up another +6 bps to 4.72%.
Wall Street has opened its Thursday with the S&P500 up +0.6% to a new record high. Overnight, European markets were sharply varied with London down another -0.3%. but Paris up +0.8% and Frankfurt up a strong +1.7%. Yesterday, Tokyo ended its Thursday session down -0.3%. Hong Kong was recovered +2.0% and Shanghai rose +2.6%. Singapore surged +2.0% as well. The ASX200 ended its Thursday session +0.3% higher, but the NZX50 fell -0.5% in volatile trade, although that did involve a late-session recovery.
The price of gold will start today at US$2693/oz and back up +US$26 from this time yesterday.
Oil prices are unchanged at US$72/bbl in the US while the international Brent price is now just under US$75.50/bbl.
The Kiwi dollar starts today at 60.2 USc and up +80 bps from this time yesterday. Against the Aussie we are down -20 bps at 90.3 AUc. Against the euro we are up another +40 bps at 55.8 euro cents. That all means our TWI-5 starts today at just on 69, and up +30 bps from yesterday at this time.
The bitcoin price starts today at US$75,858 and up +2.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.5%.
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55 Comments
The USA is proof that no matter how much people have they always want more. A country with so much wealth is borrowing to extremes and just elected the class clown to ramp up borrowing even more. On their incomes and lower cost of living they should be able to live a decent life without all that debt, they should have elected an economically conservative boring president whose main goal was government surplus.
A big problem is distribution of that wealth, not volume.
Left leaning politics needs a good shake up, if this is to be overcome. Identify the primary concerns of the majority, and focus on that. There's no point trying to elevate one worker demographic over the other, if most workers are getting screwed.
Because the Left aren't providing a clear alternative the public values. Or the constituency has priorities and values that overlook those consequences you have mentioned. Likely a bit of both.
Do I vote for the successful rich guy who's a nationalist and claims to put my country first, or do I vote for these noisy Karens who claim to know what's best for me, but who's current regime has only seen my lot worsen the last 4 years?
I predict the US economy is going to rocket. Massive supply side reform, lower taxes and onshoring jobs again. Ukraine war will end, Israel conflict will end. The US isn't an export focused economy (around 10% of GDP) so tariffs make perfect sense for them. Trump will cease most of the Net Zero aid as well and they will eviscerate bloated Govt. bureaucracy.
It might not be so good for the rest of the world but tough, maybe we all need to put the focus back on ourselves and the economy?
Do you vote for someone who won’t bankrupt the country, or someone who might? Why would such a wealthy country take that risk? It’s not poverty; 50% of the country voted trump and a fair chunk of them must earn more than their very nice median wage of almost 100k NZ. It’s just greed and spite.
I just hate this concept of “I’m doing really well, but I’m not happy because someone else is doing better”.
If you look at voter breakdowns, Trump crushed in in those without college education, and earning 30-50k USD p.a. This is not people who are caring about 'bankrupting the country'. They probably don't think it's possible, and don't have enough buy-in anyway to care.
Tbh, losing low income voters is a serious issue for the left, both in USA and here. It's a symptom (IMO) of the left being obsessed of late with identity politics which plays to middle class socialists, but grates on working people. It leaves that low income voter base that in the past could be taken for granted vulnerable to sway by populists.
"Do you vote for someone who won’t bankrupt the country, or someone who might?" - I don't understand this comment, hasn't US debt been growing exponentially regardless of which party has been in power? Or are you claiming the Harris administration had a rock solid plan to get them out of that?
Occasional Aucklander Branko Marcetic:
'Maybe most egregious, Harris seemingly refused to run on the broadly popular $15 minimum wage hike that had been a big part of Biden’s winning 2020 platform.
'For weeks, she wouldn’t say how much she would raise the wage by, she never brought it up in the debate and other major televised appearances, and she only officially adopted the now outdated $15-an-hour figure three weeks before voting. In thirty-five public events between the day she officially took up the position, October 22, and November 4, Harris mentioned the policy exactly twice: both times in Nevada and without mentioning a dollar figure. It didn’t feature as a top message in her Facebook advertising, it wasn’t in her final ad blitz, and it certainly didn’t appear in any of the ads I personally saw while in the battleground state of North Carolina over the weekend.
'This decision likely cost her. Voters in Trump-voting Missouri and Alaska have approved or are on the way to approving ballot measures raising the minimum wage to $15 an hour and instituting paid sick leave (another popular measure Harris declined to run on).
'Rather than the bread-and-butter matters that voters have consistently said are their biggest concern, Harris and the Democrats were determined to turn this into an election about abortion, democracy, and Trump’s character....
'Given a second chance by the friendly Stephen Colbert to answer the question of how her presidency would be different from Biden’s, Harris fumbled for an answer before reminding the TV host that “I’m not Donald Trump.”
'It may as well have been the campaign’s slogan.'
https://jacobin.com/2024/11/election-harris-trump-democrats-strategy
US poverty levels are up 60% since 2021! Workers get paid, struggle to make ends meet, and watch their wages getting handed straight over to rich folks and billionaires via corporations. They know they're getting screwed over. The democrats completely failed to speak to that - they thought they could 'centrist' their way to power. They got found out. See also Hipkins (and Starmer in a few years time).
I think that is median Household income, not individual income.
https://www.stuff.co.nz/nz-news/360478536/over-100000-nz-households-cro…
That’s what I don’t understand. A wealthy country was given the choice between a fairly sensible and safe centre party that represented the average person as much as possible, or a nutter that only represents himself. And they said “I’m one of the richest people on the planet (which most people in the US are), but that’s not good enough, I’ll vote for that absolute clown who is promising to borrow up large for rich people’s tax cuts”.
Don’t get me wrong, I really don’t care that Trump won, I just don’t understand the psychology of it.
The electorate was unhappy with their lot. In part they blamed the incumbent and thought the predecessor had benefitted them better. On offer again they went for him despite the hardly slight moral and legal shortcomings. Where it gets interesting is if that segment of the electorate is not benefited in return, remains unhappy and gets that betrayal mood going. The mid terms in two years time will be telling in that regard but if there is reason for discontent it may well have boiled up by then.
I wrote this comment yesterday that I suggests explains a big part of it;
"I suggest Trump is the result of the wealth gap. He lies, cheats, commits fraud, treats women like sex objects etc. All basic human traits. Unfortunately to many people he looks just like them, despite being wealthy. He represents to many people they can be as ugly as they want and still come on top. They can fight back at the 'establishment' that they perceive has held them back unfairly. Best of all they don't have to look into a mirror to recognise their own faults. Trump has given them licence to be bigoted, biased, misogynist, anti-government and any other negative trait they want. They won't like what they get in the end, but they asked for it. "
There are many flaws and complexities in their society and largely they can be easily manipulated. For example my sales manager twenty years or so ago over there, nice, honest and solid guy. Asked him once while having a drink who out of all America he would like to be. First Hugh Hefner. Second Donald Trump.
Perhaps the perception of the left losing the plot was well illustrated here in 2020, by the suspected strategic voting whereby usual National voters switched to Labour to stymie the Greens from being formally in government. Strangely there, the mechanics of MMP were used to defeat the principles of MMP and return a virtual FPP government.
"US poverty levels are up 60% since 2021!"
That appears to be a huge increase above trend....what source? Not saying it isnt so , indeed it could well be expected and will keep the pressure on interest rates to the downside.
As to Hipkins , Starmer et al we will see a revolving door of leadership in all western democracies until such time as the system is radically changed/collapses.....unless war is considered the 'solution' first.
Sometimes being a small, remote economy in a temperate zone has its advantages.
Shifting into an era of repair: US infrastructure spending
That is the US problem, as it is with every western (developed) country.
'As the country enters an age where infrastructure maintenance needs are growing, and spending has largely risen to meet those maintenance demands (especially at a state and local level), there has been a significant drop in capital spending. Not all places, clearly, have the capacity to pursue new projects or major upgrades. And the federal government, with the exception of a major stimulus package like ARRA from nearly a decade ago, has generally not filled this gap either.'
Entropy is Trump's biggest enemy. And he will lose.
Edit - JJ above, refuses to address the physical (which underwrites all 'money'). Printed proxy does not parry entropy.
I feel like we’ve had this debate before! The only reason infrastructure isn’t being built is because a big block of voters are too old to get the benefits of it and are voting for tiny tax cuts instead. National could have spent an extra $3 billion a year on infrastructure, but voters wanted an extra $20 a week instead. Trump will also give tax cuts and then claim there is no money for infrastructure.
We can’t build anything until the boomers die off, it’s nothing to do with resources.
a big block of voters are too old to get the benefits
The utility is there but the economics are questionable. Big infra spend is viable, if you're undertaking strong economic growth, or if you're relatively under developed, and infra spend will help you industrialize. Spending a fortune just to retain or marginally improve on the status quo is unlikely to provide an economic net return.
I think this is your best one in this thread. You nail it well bringing PDKs points into it and pointing to our own problems too.
The Boomer generation is an irrelevancy. their voter block has long been taken over by younger generations. People are concerned about where the wealth is going, and tend to take infrastructure for granted. They've forgotten what it took to build it. But now PDK's point about limits to growth, the physical limits to resources means the returns from one aspect of infrastructure investment are much less than they used to be. Another aspect though is that infrastructure requires maintenance and/or replacement at great cost today, and if that is not done, then the bones of the economy decay and will ultimately collapse.
I also think Jimbo is making a common mistake; he is attributing too much ability to think and expecting it from ordinary voters. Unfortunately history teaches that mostly they just don't.
Jimbo Jones - Bollocks, bollocks, and thrice bollocks.
Only by studiously avoiding, can you continue to spout your posits.
https://static.financialsense.com/documents/2024-06/industrial-transfor…
So I ask a simple question Why do you avoid learning?
Not that you're the only one...
They're inextricably intertwined.
If we'd stayed at the 1 billion we were at pre tapping into the store of fossil energy, we would still be on a depletion course, but hardly started down it. Our options would be many and much. We could have designed for ease of maintenance, simplicity rather than complexity, and with a longer view (50-100 years, say).
Despite the panic of the Musks of this world - who need more, always - it seems humanity is choosing not to procreate for even replacement. The lag-time is going to be too slow to offset the damage (from an 8-billion starting-point) though. The sums/projections should always be done ex fossil energy (can we maintain this projected item, ex FF?). All levels in NZ, back-cast-to-forward-project population growth (Dunedin is typical). But de-growth - unless migration - is the more likely trend. Who, of the remaining, maintain what?
Which is why I've been saying we need to triage. Coastal retreat should be part of that discussion. A reducing population says there will be houses to spare...
And still there is no coordinated strategy between central and local government on what infrastructure to maintain or abandon. Throw in insurance companies that are actually giving some signals (look to councils now trying to save costs by chancing their arm with not insuring some assets)
Great comment.
If you saw Paddy Gower's Ice series (let alone the other limits to growth) and you are in local governance - you have to choose cognitive dissonance as a lifestyle. Dunedin City Council is a classic example of this; one sand-dune away from losing South Dunedin, it is building a civic centre there. Just nuts. A total waste - not because it's a library etc, but because it is doomed. And while they're doing it, they're not addressing the implications for a lot of other coastal build, either.
And 3Waters, in whatever format, is un-affordable vis-a-vis rising maintenance (Wellington being a classic - and no, it's not because left/right).
Yes, insurance will walk first, banks by association; the poor will be the losers (the retreating rich will apply political pressure for reimbursement)
Seemly that more billionaires and more money didn't sway it. "This year, high-earners swayed both ways, but more veered left: Forbes counted 83 billionaires backing Vice President Kamala Harris and 52 in former President Donald Trump’s corner."
https://www.morningbrew.com/daily/stories/2024/11/05/2024-election-mone…
You (and DC) miss the point. They are Elite, and that isn't a club, it's dog-eat-dog. Each manoeuvres to advantage, and both major Parties for a long time, have had their Elite with their snouts firmly in the (often military-industrial) trough.
They might have gotten 'paper richer' in an artificial game in the last few hours, but the US as a whole, is a decaying hegemony. We get 'jobs' reported, but not that it's a part-time shelf-loading or burger-flipping one 20 kilometres from home, no bus (not to fit the hours, anyway) so using a probably-uninsured jalopy costing half the pay...
The joke is that the US dollar hegemony is in trouble - and they're ALL on that ship.
My first thoughts would be that following such protectionist policy with the need to fund it via external debt ( of which China buys plenty) would be USD negative. Also the fact that US prices are under this upward tariff pressure may be inflationary for them but it would be closer to a zero sum gain than markets are predicting and their inflation would impact the ROW negatively as demand from the US declines. So prices rises globally aren’t necessarily the base case. It’s more a delamination of the “everything follows the US” trade.
Failure of basic marketing 'best practice' to spend too much time dissing your competition as opposed to pitching your own value proposition. Definitely wouldn't have helped. I watched a few of her interviews etc where she'd just start blabbering about 'Donald Trump' in response no matter what question was asked.
I also think there were some other fundamental flaws with her platform and/or campaign (too much focus on a specific social issue that wound up putting off male voters particularly in more religious demographics, insufficient promotion of the positive economic data her/Biden's administration could point to, and the typical Democrat obsession with worshipping illegal immigrants as the source of all of society's good) but rambling endlessly about Trump didn't help.
Trump's campaign also played some blinders e.g. reaching out to Gen Z males through the likes of podcast appearances ... if I understand correctly he won the majority of the Gen Z male vote. These kids get all their info from Joe Rogan, Twitch streamers etc. I guess is it any worse than getting it from Stuff or NZ Herald!!
Interesting watching Maccy B’s latest video last night.
If I could sum it up:
- US economy hot in ‘25, but could struggle beyond that
- inflation to rise again in the USA
- much lower inflation / deflation elsewhere
- beyond a very short term sugar rush from stimulus, China to struggle big time
- Europe very weak, but the need for greater military spend may eventually provide some stimulus
Trumps administration will slash government spending and energy costs. That reduces inflation. Ending the Ukraine war will reduce energy costs in Europe, will help revive Germanys economy. Tariffs will be targeted and won’t impact our trade with USA. NZ’s exposure is being too reliant on China.
They can't slash energy costs.
Because energy underwrites money. And fracking is already subsidised, for the simple reason that it cannot pay its way without (reflected in the greater US society going deeper and deeper into debt - it's the same thin in a different form). They have fudged things by debt, and by maintenance-deferral (and individually, by dropping insurance etc).
China has more modern infrastructure, so less entropy - yet. But it too, blew the RE bubble (proving that growth, QE blown, shows up somewhere) as did we all. How demand from that country goes, may hang on how RE reconciles (how much discretionary spend is left).
It's all well and good stating that because Trump is in this is going to happen or not. But the media really need to have a look at themselves before making statements just 72 hours ago the media were predicting a Harris win and or a very close election. Didn't happen. Also remeber when Trump was in before the media were stating look at the nuclear clock we are at the closest to WW3 yet no wars. How did Biden do notice the media don't say how close we are to a WW now. How about again the last time Trump was in the media running around interviewing all these Americans who were going to leave the US and INZ noticed all these initial requests to immigrate here. But later stated most came to nothing yet again the media were quiet about that. So again want ever the media says I take with a big grain of salt
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