Here's our summary of key economic events overnight that affect New Zealand with news markets are starting to worry about the 'bust' that will come after the initial sugar-hit Trump boom for the elite billionaires inside the Trump circle. Equities are falling on that concern, and benchmark interest rates are rising on it too. The new Administration is inheriting a well-functioning economy but navigating the upcoming inevitable distortions is going to be tricky.
In the US, it seems the Fed is in no hurry to cut interest rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said yesterday in Dallas. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” And NY Fed boss Williams said essentially the same thing.
Retail sales in the US rose +4.6% (actual) in October from year-ago levels, following a +0.2% rise in September. Reported seasonally adjusted levels were less that these. Rising car sales (+6.6% actual) were ar large part of this gain.
But US industrial production actually decreased -0.3% in the same year to October. This is a volume-based survey. The Boeing strike got most of the blame for this, but was expected in the data.
In the New York region, the Empire State factory survey surprised analysts with strong new order flows, and rising optimism, far greater than expected. Factory activity rose sharply too.
In Canada they also released factory data but it was for September and the Boeing strike squished its data too. But Canadian car sales rose +2.6% in volume and +5.7% in value in the same period
The Canadian loan officer survey for Q4-2024 sees things in rough balance between expansion and contraction.
In an economy that faces slowly rising central bank interest rates, Japan reported Q3-2024 GDP growth of +0.9% and down from a +2.2% annualised rate in the previous quarter, which was itself revised down from the previous +2.9%.
On average, Chinese house prices for new homes fell -5.9% in the year to October. That's this official data's largest drop in nine years. But for the first time in a while there were a few cities where they actually rose. For used house sale transactions the October price change was -12% from a year ago. Construction of housing is still deeply negative, even if marginally less so in October.
China reported slightly lower industrial production growth for October, but it was still good at +5.3% even if it was less than the expected improvement from September. Electricity production only rose +2.1% in October from a year ago, undercutting the veracity of the industrial production data. They reported better than expected retail sales growth at +4.8% from a year ago, and suggesting some of their stimulus moves are working. But much of this is the previously noted rise in car sales (which involved incentives).
Aluminium prices surged on Friday after China said it would cancel export tax rebates on this and other commodities, raising the prospect that their heavy flow of subsidised export shipments abroad may quickly fade.
The UST 10yr yield is now at just on 4.45% and up +5 bps from yesterday, up +15 bps for the week. The key 2-10 yield curve is still positive by +13 bps. Their 1-5 curve inversion is now inverted by only -4 bps. And their 3 mth-10yr curve inversion is also little-changed, still by -15 bps. The Australian 10 year bond yield starts today at 4.66% and down -6 bps. The China 10 year bond rate is unchanged at 2.10%. The NZ Government 10 year bond rate is down -1 bp from yesterday at 4.78%. A week ago it was at 4.67% so an +11 bps rise since then
Wall Street has started its Friday with the S&P500 down -1.5% heading for a -2.5% weekly drop. Overnight European markets were all lower with London down -0.1% and Paris down -0.6% to bookend these markets. Yesterday Tokyo ended its Friday session up +0.3% to limit the weekly drop to -2.0%. Hong Kong was little-changed on the day but wended its week down -4.1%. Shanghai fell another -1.5% for a -3.0% weekly retreat. Singapore was however up +0.2%. The ASX200 ended its Friday session up +0.7% to end the week down a mere -0.1%. And the NZX50 fell a minor -0.1% for a -0.7% weekly fall.
The Fear & Greed Index ends the week having moved back to the 'neutral' zone which also reflects the rising uncertainty of the new US Administration.
The price of gold will start today at US$2566/oz and down another -US$8 from this time yesterday. But that is down -US$119 or -4.4% from a week ago.
Oil prices are -US$1 lower at US$67.50/bbl in the US while the international Brent price is now just under US$71.50/bbl. These levels are about -US$2 lower than week-ago levels.
The Kiwi dollar starts today at 58.7 USc and down -10 bps from yesterday. A week ago it was at 59.7 USc so a full -1c drop since then. Against the Aussie we are +10 bps firmer at 90.8 AUc. Against the euro we unchanged at 55.6 euro cents. That all means our TWI-5 starts today at just under 68.5, and little-changed from yesterday, but down -30 bps in a week.
The bitcoin price starts today at US$89,631 and up +0.9% from this time yesterday. A week ago it was at US$76,099, so a sharp +18% rise since then. Volatility over the past 24 hours has been moderate at +/- 2.3%.
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51 Comments
It’s funny to see people on the Nz Property Investors page gloating that we are still net positive for immigration. There is still demand for rental properties and new buyers coming into the market to buy that shitty 3 bedroom townhouse they claim. This new report shows only 1.38% of recent resident visas have been issued for skilled workers. 1.38%?!
https://www.newstalkzb.co.nz/on-air/mike-hosking-breakfast/audio/lucy-m…
keep our average age down
The median age in NZ is 37.5 years.
Migrants who flocked into NZ in recent years aren't superannuation age but aren't "young" either. The largest age cohorts were in the 30-39 year range. Some bring young children along, so yes there is a somewhat net downward effect on median age from the large influx.
The bigger migration play is to keep consumption up, wages down and taxes coming in. Without migration, the government will have had to come up with hard policy reforms to grow GDP, which is looking inevitable by the day now that the migration goose has stopped laying golden eggs.
The bigger migration play is to keep consumption up, wages down and taxes coming in. Without migration, the government will have had to come up with hard policy reforms to grow GDP
Debt is one of only few ways they'll be able to do that.
More likely, an aging out population spells economic decline.
which is looking inevitable by the day now that the migration goose has stopped laying golden eggs.
So NZ won't continue importing people for decades to come?
The back is against the wall. We'll only be "saved" from further immigration by a populist xenophobic leader.
Just saying importing people in droves has failed to deliver any positive effects on GDP in recent years despite being fired up at record levels.
And this is by no means a unique problem for NZ, much of the West (Canada, Aus, UK, Northern Europe, etc) have witnessed very high levels of migration-led population growth in the last decade or so with seemingly no tangible benefits to their broader economies.
Our issue though is we started further behind than most of those countries I mentioned on economic productivity and prosperity.
Just saying importing people in droves has failed to deliver any positive effects on GDP in recent years despite being fired up at record levels.
What we don't have though, is a clear scenario of having much less, or negative population growth over the same period.
If we cast our eyes to aging nations that haven't managed the same level of immigration, the results look mostly worse.
Thank you for sharing this stat on there being virtually no skilled migrants! I'm surprised this hasn't been picked up by mainstream media or the politicians talking about improving this.
It used to be you had to be a skilled migrant to get into NZ so how have we got into this situation?
Come on NZ, lets back ourselves, act like winners and attract the skills we need
We used to take in convicts even.
The specific nature of immigrants is kind of a weird argument, the average migrant is better educated and better behaved than the average indigenous Kiwi.
And if we only bought in super skilled migrants of the absolute highest standing, wouldn't us locals just end up being their house keepers?
This is going to get very tricky for NZ if we have to cut much faster than the Fed.
Orr needed to start cutting at the start of this year; the economy wouldn’t be in such a bad state and we would have a much lower OCR already. He doesn’t seem to learn that he needs to react quicker, he’s always tackling the last problem he caused and not looking at the future. For someone who ran the super fund so well, he’s made a mess of the reserve bank.
Indeed, but most of the main banks are already offering a 5.69% 2 year fix, that's a great rate. And very very low historically for NZ.
Most businesses in NZ have been built on rates like this, house prices however are a different story and are very vulnerable, there are simply not enough buyers for all the multi million dollar listings, some will get lucky, most will need to drop there price to attract the few buyers.
Unless you already own one most houses are out of your financial reach, and the next step on the ladder is financially ruinous.
I think he cuts 50bps but the banks will not move there rates by that amount, then all bets are off .
The problem is we aren’t getting any stability from the RBNZ who are tasked with stability. One minute they tell us to borrow up large because 0.25% OCR is here to stay, nek minnit the OCR is 5.5%. And who knows where it is going from here; certainly not Adrian Orr. I agree we may not see much lower interest rates than 5.5%, that will be a disaster for the NZ economy and for the building industry. The OCR affects much more than just house prices.
The RBNZ is doing a very good job of providing the public with over-reactive short term misguidance based on about a third of the information it should be considering.
Its efforts to achieve stability in our time, have come at the expense of monetary policy wandering like a drunken sailor, so much to that it's now so stuffed it sporadically aligns with and then opposes fiscal policy.
While monetary policy should of course be independent these wild swings are anathema to stability in a small export oriented economy like us.
listen to Leighton Smith's latest podcast, there could be secondary issues.
https://www.newstalkzb.co.nz/podcasts/the-leighton-smith-podcast/
"It's really just Covid and the aftermath." No "just" about it, there have been other global financial shocks in say the last half century eg 1987, 1998, 2008...we pay the RBNZ governor $800k pa to know what he's doing.
"Economists will look back in horror at the sheer insanity of monetary and fiscal policy through this period." Absolutely, as did many / most people on this website irrespective of their political alignment.
Most businesses can fund and survive at an OCR of 5%, the problem is that consumers have been using their houses as ATMs for Surtees, Jet skis, ranger rangers, etc etc, so the business is correctly funded but the punters have run out of spending runway.
IMHO this is massive, Cam Baggrie called this the spending multiplier on the way up, now its like a spending de-multiplier, and base life costs like insurance costs are going up.
My Brother in law is back from the Med, super yacht skipper, keeps showing me how cheap Europe is, food wine and housing, its been eye opening.
NZ is simply too expensive now.
I don’t recall saying that! I did say that our food prices are about 15% higher than elsewhere because we have GST on food and most other countries don’t. My small set of price checks found the duopoly were pretty competitive with AU and UK otherwise.
We will always be expensive as we are a small island in the middle of nowhere.
Our houses are expensive but many comparable countries are catching up or overtaking us.
My Brother in law is back from the Med, super yacht skipper, keeps showing me how cheap Europe is, food wine and housing, its been eye opening.
I was in the Med this year.
Groceries: the same except for deli items, piss and ciggies (the latter two have much less tax on them)
Restaurants: the same, leaning to more expensive
Houses: more expensive - unless you want to live in a dying town
And wages were lower in most of those places. "Everything's gotten so expensive and the kids can't afford houses" was the most common complaint of most locals.
The model is global, so the effect will be the same wherever....with local variations, of course. The monetary expansion is supported by asset values....which would be fine if incomes were also expanding at the same rate....unfortunately the proportion of that monetary expansion that is going to workers continues to decline.....cost of living crisis, and ultimately unsustainable.
It will be a toss up which brings it all down in a screaming heap first....inequality or resource depletion.
Orr put his foot hard down on the accelerator when Covid hit. He was not looking at the road ahead, made the economy run way too fast, and then decided to jam his foot down on the brake. Then he forgot to take his foot off the brake, and slowed the economy down too far. But now Donald Trump has siphoned his gas so he can’t accelerate again. He drives like my mum.
Of note is that global bond yields are back on the rise (not falling) - it would appear they are signalling that this central bank rate cutting period is over and that further hikes could be on the cards, not cuts.
US 10 year is approaching a 100bps rise after the last Fed cut! The market isn’t buying into the Fed narrative of further rate cuts.
I never believed we’d get stagflation (not for a long period at least) because I was confident rates would come down after the economy cooled. But it’s not looking too good all of a sudden; we have a very cool economy yet it may be hard for the RBNZ to drop rates if the Fed don’t.
Why would anyone invest in the NZ economy / NZ dollar when we have low interest rates, austerity, and a recession, while the US has higher rates and a government spending up large?
This does make that big infrastructure build funding cost higher then probably initially thought.
It still needs to be done to stimulate us, but the RBNZ is going to be praying it can hold 2.99% inflation.
I think he needs to do 50 this month, but I am really unsure about any more next year now.
RBNZ can also, like the FED hold down the short end, but little funding will get done if the 2/5/10 year is way steeper.
Also the market was probably thinking that rates where going to fall, I suspect that the 10y in US has gone up so much so fast is unwind and people caught wrong side of the trade.
For me the closure of the refinery was a very bad move re balance of payments, and energy security.
I am personally starting to do numbers on solar with a small battery to cope with essentials like freezers and pumps etc. I seriously believe we are going to have a power crunch some point in the next decade with blackouts necessary. We where only days away this year, and it rained.
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