Here's our summary of key economic events overnight that affect New Zealand with news of some all-time high benchmarks that are impressive.
The first estimate of US Q4-2024 GDP was out earlier today and it came in at a +2.3% growth rate, less than the +3.1% in Q3. It was also lower than most market analysts had anticipated. Consumption came in at the 3% level, the trade deficit had no material impact, but it was the -1.0% fall in investment activity that capped the result. For all of 2024, the US economy grew +2.8%. That all means that the US economy grew by a nominal +US$1.46 tln in 2024. (To put that in perspective, the NZ economy probably shrank to US$238 bln and that total economic activity here for the year represents just 15% of their growth, 1/125th of their total economic activity in one year.) No-one else comes close either. Per capita, nominal US GDP rose +4.1% in 2024. Across all these factors, 2024 was the best year ever for them.
That is the third year in a row that US growth has outstripped China's who is now falling behind in absolute terms. The EU is an also-ran with virtually no expansion. Japan and India are still in the game however.
US initial jobless claims fell back sharply on an actual basis because of seasonal effects, to 227,000, and that was a larger fall than those seasonal trends would have indicated. There are now 2.18 people on these benefits, almost exactly the same level as a year ago. No special labour market stress is showing in this data tracking.
But there was a sharp, and unexpected fall in pending home sales for December, down -5.0% from a year ago and down at a slightly faster rate from November. The still-high home loan rates are getting the blame from the industry, but they would say that wouldn't they?
As expected, the ECB cut its policy rates by -25 bps with the main one now 2.90%. It was its fifth consecutive cut.
The January update of the EU business sentiment survey reveals a pickup in confidence, a rise in inflation expectations, and an improvement - and a rather sharp one - in in their expected jobless rate.
And we should note that the South African Reserve Bank cut it policy rate by -25 bps too, to 7.50%.
Global container freight rates fell -2% last week as the pre-tariff rush faded. But they remain +137% higher that per-pandemic. The US adventure in Panama may now pose a new threat to shipping risks. Bulk cargo rates fell -18% and are now down near all-time lows.
Global passenger demand for air travel reached an all-time record high in December, leaving the pandemic hesitation behind it. Apparently we don't care about the climate implications enough to curb our wanderlust.
The UST 10yr yield is at 4.53%, down -2 bps from yesterday at this time. The key 2-10 yield curve is marginally flatter at +32 bps. Their 1-5 curve is much flatter at +16 bps. And their 3 mth-10yr curve is now at +20 bps. The Australian 10 year bond yield starts today over 4.44% and little-changed. The China 10 year bond rate is unchanged (while they are on holiday) at 1.64%. The NZ Government 10 year bond rate is now at 4.57%, up +2 bps.
Wall Street is holding higher today with the S&P500 up +0.3% in its Thursday trade after the US data. Overnight, European markets were all higher, up by almost +1%. Yesterday Tokyo rose +0.3%, Hong Kong, Shanghai and Singapore were all closed for CNY. Australia ended up +0.6% yesterday. And the NZX50 ended down -0.6%.
The price of gold will start today at US$2788/oz and up +US$7 from yesterday to bump up near its all-time high.
Oil prices are down -50 USc at just under US$73/bbl in the US and the international Brent price is now at US$77/bbl.
The Kiwi dollar is now at 56.5 USc and unchanged from this time yesterday. Against the Aussie we are down -10 bps at 90.7 AUc. Against the euro we are little-changed at just under 54.3 euro cents. That all means our TWI-5 starts today just on 67, and down -10 bps from yesterday.
The bitcoin price starts today at US$105,710 and up +3.6% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.5%.
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77 Comments
Weird to vote out your president when you’ve got really good growth. Especially when the new guy intends some radical changes which most economists would say reduce growth.
As I’ve posted before two median full time workers in the US earn about $210k NZD. And supposedly they are struggling and in poverty!
Agree, not sure why the Americans aren’t concerned about that. Trump sure won’t help that situation.
I reckon they could increase tax rates a few percent to prevent that debt and still be loaded and be growing.
If you’re the top of the heap, why gamble with crazy amounts of debt, tariffs, bitcoin, etc?
Exactly. It all depends on the state of one’s own back yard. Somewhat incongruous that such a massive nation geographically, economically and so populated could have a society at large, as being described as insular but largely that is so. That is why the isolationist views are so pronounced as in WWs 1 & 2 and resonating still today. Trump clearly is of the mind that the USA doesn’t need the world as much as the other way round.
Good point.
I found this interesting: https://www.stuff.co.nz/wellbeing/360547926/kiwi-author-lotta-dann-why-…
While it is normal to consider things like alcohol and cigarettes as both harmful and addictive, food addictions are being normalised:
Why do we think we have to be skinny to be healthy? Why do so many of us hate our bodies and why do we keep dieting even though there’s zero proof that diets work?
Isn't this the same as saying "Why do we think we need to give up smoking to be heathy? Most people why try and give up fail, so don't bother giving up and be happy"
Weird though that society does not condemn excessive eating like it does smoking / drugs / gambling / alcohol / etc. If I said to a fat person "You really should stop eating so much, its bad for you", that is not OK, but if they were smoking then its fair game. Are we being brainwashed by the food industry that consuming excessive food is OK? Or are we trying to convince ourselves?
It’s probably only ten years since you could criticise someone for being fat (not saying that I miss it). In between we’ve had redefinition of healthy body weight, fights against normally distributed measures of body type (IBW), fat people acting as advocates for the healthiness of extreme obesity (identity politics).
Smokers don’t have anyone to do that for them. The best they can be is victims of Big Tobacco, or of a “callous” Coalition Govt.
Everyone must serve as a tool for the Left.
Smoking and alcohol get looked down upon more, because the consequences are usually felt further than the individual. Smoke smells, and drunk people can be arsehats that run into you on the road or get into fights. Fatties aren't much of a problem to anyone than themselves.
Smokers die right around super entitlement age, and their health problems are self funding (potentially more so).
Alcohol is taxed but I'd say the costs of it's harms aren't fully recovered.
Fatties are more of a problem as not much extra is collected on bad foods to pay for obesity.
The actual worst economically is a healthy type who'll live till 90+.
Do not eat the free school lunch hamburgers ! Jan Tinnetti went on Facebook today with a tirade against a ghastly school lunch hamburger , a photo was included of this disgraceful item , not good enough for our children ...
.... then it emerged , the photo was from 2023 , when she was Minister of Education ... responsible for the hamburger in question !
Ahhhhhh haaaaa deeeee Haha ... wet me Gummy nappies over that ... sheeeeesh ... the ultimate in own goals ... as blunders go , that's a Whopper ...
... the clip was uploaded to her Instagram account , and to that of the Labour Party ... the photo was from 2022 ... when she was associate Minister of Education ...
It has been taken down .... teeeee heeeee ... ha ha haaaaa .... fries with that , Jan ... or just a double helping of embarrassment ?
Its a democracy so the average person does get a say to some extent.
If they voted in a party that promised to limit debt (like both our major parties), then wars would require tax increases and that party would be less likely to go to war. But neither party is promising to limit debt because American voters don't care, they are more concerned about woke / anti woke.
Jimbo - go and buy a copy of Dalio’s ‘Changing World Order’. You will then understand the role reserve currency plays in the world and how the nation with the reserve currency always creates too much debt/money as they overextended militarily and spend more than they earn. Ie the run excessive deficits thinking that the pile of debt isn’t a problem because there is always demand for their money/bonds until it’s too late and they gone too far. In my opinion (and Dalio’s) America is in that place now - it’s unless they change course dramatically they are waking the path every other reserve currency walked and then failed under (ie notice those nations are no longer the reserve currency eg only 400 years ago the Dutch were in he position the US are now - global power and reserve currency - but they over extended and crumbled - same can happen to the US - actually it’s probably baked in, in the next 50-100 years).
Most reserve currencies last about 100 years. Have a look back at the history:
'Apparently we don't care about the climate implications enough to curb our wanderlust.'
How much of the US 'growth' does NOT have climate implications?
While we're at it, what percentage was their public/private debt increase? And what climate demand does that represent?
Can't do exponential growth at this magnitude, without massive amounts of low-entropy energy.
The joke is that the target has already gone.
It's a bit like watching a group of horse-traders advocating de-regulation of blacksmithing, to kick-start growth thereof.
But the horses have bolted.
Bigger picture, the dissipation of minerals is of more concern, coupled with the reducing EROEI of the energy we apply to them. Compared to that, a bunch of small-minded back-to-the-futurists are hardly worth worrying about. And the no-more-real-growth implications for their accounting system, says it hasn't long to run.
Thank you for sharing! I agree with almost all commentator's comments about effective innovation which is completely absent in New Zealand. I have been asked to write an article about it but focussed on forestry and wood processing. For my article I have compared the 'innovation infrastructure' (How to get an idea from a lab, through a pilot scale manufacturing process to a full market implementation!) in New Zealand with the likes of Finland, South Korea and The Netherlands. Those countries have all a public/private funded innovation infrastructure in place which drives the effectiveness of it. In New Zealand it is only public but at a much lower level than is required. The government can't sit on the fence. It has to pull out it's checkbook to pay for their part. Without it New Zealand innovators/inventors will remain stuck in a technology readiness level (TRL) 3 and can't carry their idea to a TRL 8. (See: https://www.twi-global.com/technical-knowledge/faqs/technology-readines…)
Thank you for sharing Peter!
I have always been frustrated as to why, when we often see articles talking about one or another scientific innovation or discovery in one of our universities or research labs that there is no one in NZ to pick up the opportunity and run with it. All these innovations seem to get sold over seas to our loss (perhaps a short term gain for the inventors). I feel that this is a significant failing of our government and perhaps the private investment groups?
We have a tax system that discourages risk taking.
We have very limited R&D funding.
We have an RBNZ who encourages the banks (or mandates them) to be risk averse and not lend to businesses.
We have short term government cycles that mean infrastructure projects are constantly canned, reintroduced, canned, reintroduced etc (3 waters, ferries, etc). A continuous stalemate on making real changes or improvements.
We have a dumbed down population who elects populist leaders and who aren't even interested in policies from parties, who mostly don't read them or don't care.
For all of 2024, the US economy grew +2.8%.
Per capita, nominal US GDP rose +4.1% in 2024
That would have to mean that the US population reduced in 2024. Is that really so ?
Regular reminder that economic growth is basically a measure of the increase in money earned by onshore workers and companies.
Apparently, the US Govt can increase the money earned (GDP) by deficit spending at a rate of around 6% of GDP. Who would have thought it?
Tune in next week to hear how money invested in houses doesn't actually stay in houses - and how you can exploit this simple trick to power your economy with easy credit for decades.
Thanks and that last paragraph resonates, it really does. The pandemic provided a stark example. Crash dive interest rates, save the property market and simultaneously urge the folk to borrow to spend to save the economy. Except it didn’t. Instead it precipitated an unprecedented stampede into property investment and/or speculation and resultantly sky rocketing values for the same and today, overly large segments of the population burdened with thoughtless debt.
I said a while ago petrol prices will trend down. They will have no choice but to keep fuel at a competitive price or else everyone will move to an EV. The more EV's out there the better it is for ICE owners. There is now a market limit what can be charged for petrol.
Shane Jones just released the government's mining policy. An increase of 1.5b NZD until 2035. How impressive!! The exports as a proportion of GDP will raise from 24.0% to 24.8% in 2035. I am wondering how long it will take before they recognize it clashes with our tourism growth objectives?
Concerns now growing about our population turning negative.
https://www.rnz.co.nz/news/national/540471/nz-could-become-net-exporter…
New Zealand risks becoming a "net exporter" of population in the next few months if current trends continue, economists are warning.
In November, there were 12,800 migrant arrivals and 10,600 departures, for a net migration gain of 2200 people, compared to 7100 a year earlier.
For the year to November, arrivals were down 32 percent and departures up 28 percent.
The numbers could quickly reach a point where they started to cross and more people left New Zealand than arrived, Craig Renney, policy director at the Council of Trade Unions, said.
That would hit some parts of New Zealand particularly hard, he said.
"People come to Auckland, Christchurch and so on but they leave places like Palmerston North, Ashburton. So delivering economic growth in those locations become harder.
"If you want to - Mr Luxon's phrase - go for growth, it's relatively straightforward to have economic growth if your customer base is growing 2 percent a year. But if it's shrinking it makes it harder."
Post-Christmas was a time when more people thought about leaving, Renney said.
"It may well be that in the next couple of months we end up there. We have to think about what that means for the delivery of public services. There are some that depend upon migration - medical care, teaching."
It could also be a problem because some those who left could be the higher-skilled, higher-earning people who could help growth, he said.
Infometrics chief executive Brad Olsen agreed that it was possible net migration could go negative on a month-to-month basis this year.
And if you want to see a messed up housing market, check out Sth Korea.
There's really nothing to say incentivising exporting or productivity makes housing more affordable.
If you wanted to make housing more affordable, the first step would be to make them for cheaper.
Nope. Not when the top 10% pay half the income tax in New Zealand. And its not like skilled professionals are lining up around the block to move to New Zealand any more. We cant even attract tourists, despite "global air demand" being at record highs everywhere else.
Just a thought for Luxy if he really wants 'good growth' in NZ ...
I have concept plans for a 7 story apartment building. The architect (German) and engineer (kiwi) are experts in 'mass timber' construction. I.e. everything above ground level is built in wood laminates bolted / screwed together, including the entire structural frame. (The only concrete above ground level goes in floors layered over 100mm glue-luminated wooden floors to provide the mass required for sound insulation between floors. I'm hoping some other product arrives in time that I won't need to use concrete.) This makes for a much lighter building meaning less concrete below ground. And the entire building can be dis-assembled and re-assembled elsewhere when the land becomes too valuable for such a modest building.
All of this mass timber comes pre-cut - so the building goes up FAST !!!
At the time this concept was being put together, where do you think all this lovely pre-cut timber came from?
NZ? Nope! ... Australia. Is any business in NZ up to this job now? Red Stag?
Anyways, back to what Luxy could do. How about a tweak to building regs / costs so that we immediately start using way, way, way more mass timber and we use less steel & concrete in every building we can?
Recall some years back Bob Jones started talking about the same sort of construction for an office block in Wellington. That was followed by an outbreak of publicity in the media. Not long after the whole project was abandoned and I think because he agreed with advice received, that he would have no chance of overcoming the bureaucracy that would be involved.
bureaucracy ?!!!!?
Yup. My initial problem is/was planners but costs were mounting.
But that was just the beginning. Like Bob, I'd have to teach an entire Council bureaucracy - which is massively conservative at the best of times - how and why mass timber both works and makes sense.
Once again, Luxy could do something about this. He won't though. Far too many vested interests in NZ's concrete & steel industries for it to be easy. And Councils? They could co-fund a specialist unit with expertise in mass timber and give them a national remit so the 'requests for information' from Council were not just because Council didn't understand stuff. Again, not easy.
Luxy likes easy stuff. It's his raison d'être.
All of this mass timber comes pre-cut - so the building goes up FAST !!!
The structure goes up fast, but it also does that with pre-done framing, or tilt slabs. And with tilt slab you have the structure and the framing all together.
The erection of the structure is only a small portion of the time needed to complete a building.
You also need larger beams to support the spans.
The actual time and cost improvement is fairly marginal, hence why this technique hasn't achieved wide adoption. Won't stop people from thinking a massively cheaper method is placed outside their grasp via bureaucracy.
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