Here's our summary of key economic events overnight that affect New Zealand with news chaos has consequences, but they seem to be coming faster than many thought. The giant US economy is resilient, but not immune to the consequences of misguided policy decisions.
Regular readers will know we regularly track the Atlanta Fed's GDPNow signals. Today that has suddenly sifted from expecting a +3.0% Q1-2025 expansion with the data on hand at the start of February, to a sharp -2.8% contraction as the latest data comes in for the US economy.
We have been noting the slide in the granular data over the past week or so in these reports. Today there was another from the ISM PMI for February. Specifically, new orders in their factory sector took a sharp turn into contraction as they report demand is weakening fast. The overall PMI rose in this report, but due to production and inventories. Shrinking new order levels are not going to sustained that however.
It was a different story for the internationally benchmarked S&P/Markit US factory PMI which is still reporting an expansion, and a good one. But this one isn't supported by the wider series of data over the past few weeks of weak new order levels (other than for aircraft) and rising inventories. Nor the imbalance between household spending and disposable incomes. The Atlanta Fed is signaling these are turning the US growth into reverse.
We won't actually know for some weeks yet of course, but it seems the Biden prosperity is being turned into a Trump/Musk contraction.
And more uncertainty is on the way. Congress has less than two weeks to extend a federal funding deadline, but lawmakers are arguing over whether the Whitehouse will really spend the money they approve.
The February Canadian PMI turned suddenly negative too in response to the tariff war outlook. Later today, the US is expected to impose the threatened tariffs, even though they earlier promised to delay them to the start of April. Consistency and promises are loose ideas in today's Whitehouse.
There were a wide set of early factory PMIs for a number of Asian economies and they all showed very little change (and only minor variations around the expansion/contraction fulcrum). This includes reports for Japan (49.0), Malaysia (49.7), Thailand (50.6), Vietnam (49.2) and Taiwan (51.5). The tariff war impact are yet to hit. In fact, Indonesia was a bit of an outlier, recording a very good rise (53.6), but it enabled the overall ASEAN group to record a good rise.
India's PMI's signaled a mild slowdown from their fast expansion rate.
Singapore's SIPMM PMI recorded a minor expansion in February.
The official China factory PMI came in at 50.2, an improvement for February from January's contraction. This was backed up by the independent Caixin factory PMI which came in with a slightly faster expansion (50.8) in its survey. This is consistent with the US import data for January and suggests the US import data will be very high again in February.
In Europe, their inflation rate eased to 2.4% in February, down from a six-month high of 2.5% in January but slightly above market expectations of 2.3%. But there is a wide range, from 1.4% in democratic Denmark to 5.7% in autocratic Hungary. For the EU overall it was running at 2.8%, for the euro area 2.4%.
Europe's overall PMI is still contracting, but the drivers of their contraction eased somewhat in February.
In something of a surprise, the TD-Melbourne Institute tracking of inflation and cost of living in Australia reported a -0.2% drop in February from the prior month, after a +0.1% rise in January. Most thought a rise was on the cards. But on an annual basis inflation is still running in the 2-3% range.
Also turning negative in February from January was the job ad series from ANZ/Indeed. It was down -1.4% from January, but at least it wasn't down the -6.9% it was in February 2024 from January 2024.
CoreLogic is reporting that the Aussie housing market stabilised in February, with small but consistent house price rises in the month in almost all main centers, rolling back some of the quarterly and annual falls in some of their larger cities. The one RBA rate cut is getting the credit for the sentiment improvement.
By the way, it seems the expectation for an Australian election is narrowing to an early event, maybe on April 12.
In the face of US mis-steps, policymakers from Canada to China are readying plans for a global downturn. And high on their agendas are looser fiscal and monetary policies to insulate their people from the worst effects. The US is also moving to much looser fiscal policies with large tax cuts for the wealthy, and likely ballooning deficits. We are entering the era of huge distortions, and it is unlikely to be pretty.
Today the UST 10yr yield is at 4.18%, down -2 bps from yesterday. The key 2-10 yield curve is flatter at +20 bps. Their 1-5 curve is now inverted by -10 bps. And their 3 mth-10yr curve is little-changed, now by -12 bps. The Australian 10 year bond yield starts today at 4.36% and up +5 bps from yesterday. The China 10 year bond rate is now at 1.78% and up +1 bp. The NZ Government 10 year bond rate is now at 4.54%, up +4 bps.
Wall Street has opened its Monday trading with the S&P500 down -0.7%. Overnight European markets were up strongly, bookended by London's +0.7% and Frankfurt's +2.6%. Yesterday Tokyo closed a strong +1.7%. Hong Kong was up a minor +0.3%, and Shanghai fell slightly, -0.1%. Singapore matched Ho9ng Kong's rise. The ASX200 ended its Monday session up +0.9%. But the NZX50 fell -0.4%.
The price of gold will start today at just under US$2892/oz and up +US$35 from yesterday.
Oil prices are down -50 USc just on US$69.50/bbl in the US and the international Brent price is just over US$72.50/bbl. Lower expected demand is why this price is soft.
The Kiwi dollar is now at 56.3 USc and up +40 bps from yesterday as the USD comes under pressure. Against the Aussie however we are still little-changed at 90.2 AUc. Against the euro we are down -30 bps at 53.6 euro cents. That all means our TWI-5 starts today just on 66.2, essentially unchanged from yesterday.
The bitcoin price started today at US$90,059 and down a net -1.5% from this time yesterday. Volatility over the past 24 hours has remained high at +/- 3.0%.
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38 Comments
Feels like USA is going to turn quicker then expected , current isolationist mentality will not help.
China will be blocked by trump economically, buckle up.
Trump cannot dictate to the rest of the world, no matter his ego. What the US may be starting to see is the economic impacts of the world turning their back on the US. A world without the US will still trade. Any measures by Trump to pull it to heel will only result in the world working together to create alternatives. The reserve currency is a case in point. Trump made threats a little over a week ago over what would happen if the US$ ceased to be the reserve currency, but what can he really do?
I would suggest it would be possible for the World Bank, or some other truly (not American, perhaps the IMF?) international bank to create an artificial currency which it alone would control to use as the reserve currency. The currency would have a set, majority agreed exchange rate. How would that impact the power of the US in the world?
Murray, I concur very much with most of your posts on Trump. I fully agree that, in the medium to long term, all his policies will achieve, is to isolate the USA and incentivise the rest of the word to unite against them. In the long term, I think Trump will be remembered as the worst president of all time for the USA.
'We won't actually know for some weeks yet of course, but it seems the Biden prosperity is being turned into a Trump/Musk contraction'
DC, this is becoming a little obsessive. Trump is a symptom, not a cause. And it is simplistic to laud one person, as if they had any control/say over direction. How much debt was involved, for starters?
Nobody, of any political hue, can stem the tide of human overshoot (overconsumption of a finite planet, the US being 1/4 of that) and the inflection-points were always forecast to be about now.
Edit - IT Guy- I reckon we are watching a new world order about to be formed, and I would be unsurprised to see Europe and China in the same tent, by the end of that process. The US will be left with Israel, and the worry is that the two attack Iran, with knock-on effects. It's ALL about who gets what portion of what's left, now. The problem is that those who don't accept the Limits to Growth, are having to peddle other 'explanations'...
PDK I suggest you're overselling it. Trump is a consequence of endemic US corruption. They don't see an end to growth per se. What they do see is a small bunch of people getting richer while they just tread water. This is about power and control at the moment and not so much about resources. True, Trump wants Ukraine REs, but they've always had to import most of those, and most of that from China. Their titanium mostly came from Russia. Trump doesn't want to have to deal with his competitors. He wants, and has shown, that he just wants to dictate to everyone.
I'd warrant one of his secret dreams would be to be able to just pull out a pistol and summarily execute someone who has really pissed him off. Putin territory. That's the person he seems to admire the most.
But that endemic corruption is a consequence of?
The US has spent decades - and countless coups and invasions - screwing others out of what is theirs. Of course, those at the 'top' of such an enterprise, were representative of it. What else?
There have always been Trumps - and Hitlers, and Farages, and and and... The point is that for half of the US to vote for one, means that half the US is hurting. That is at odds with DC's claim. Hugely at odds. And with your above comment, but not so much your first... The US is decaying faster than it is growing - entropy is the cause -and GDP doesn't measure that. The trend graphs are exponential, too, which most brains seem not to be wired for (or people wouldn't put up with mortgages).
More US voters were pi--ed in 2024, than in 2016 - it's a simple as that. A Trump was inevitable, unless they were told why? Which they weren't (DC's line is the standard peddle). Forget him and his dreams - I'd suggest the possibility of Vance inheriting the Presidency is even scarier. Understand that this is a fight-to-the-death re the remaining resources of the planet - the worst half, the best having been mined/extracted/commandeered first.
Beyond the fossil-energy pulse, no society of the complexity of the US - or NZ, as we are beginning to see in many spheres; water, health, education, degradation - can be maintained. Not only that, but, as you mention, most nations are dependent on resources from others. And on processing ditto. The US cannot go to war with China, without using Chinese componentry. The old world order (US plus satellites, sucking from the rest) is coming to an end. Trump is accelerating that but not causing it. How nations re-group, will largely depend on how they appraise their optimal access to resources. Place your bets...
"But that endemic corruption is a consequence of? " Lust for power and control of people however it can be manifested, and sometimes that requires control of resources. History tells us however that who has the most gold has control, more or less. This is no different. It is about money in the end to secure power and control.
Americans don't seem to understand the end of resources. I tend to agree with you synopsis on American politics but they don't see it as resources. Over time politics has just got dirty and more extreme. We see it to a lesser degree here in NZ too. Its the lengths people will go to for control.
The war over resources is getting closer but that's really not going to happen until trade starts to collapse big time and countries need to provide for themselves and they realise just how little they have for their own people and what it takes to get and make it. Trump has pushed that a lot closer, but he hasn't got there yet. he's going to face some push back from his own people and that's going to be interesting.
What do you think the two Iraq's were about? Atruism?
They were about what was under the sand....
The language Bush Sr used before the first gulf war is like night and day to Trump talking about Ukraine.
"Our objectives are clear: Saddam Hussein’s forces will leave Kuwait. The legitimate government of Kuwait will be restored to its rightful place, and Kuwait will once again be free."
"Some may ask: Why act now? Why not wait? The answer is clear: The world could wait no longer. Sanctions, though having some effect, showed no signs of accomplishing their objective. Sanctions were tried for well over 5 months, and we and our allies concluded that sanctions alone would not force Saddam from Kuwait.
While the world waited, Saddam Hussein systematically raped, pillaged, and plundered a tiny nation, no threat to his own. He subjected the people of Kuwait to unspeakable atrocities--and among those maimed and murdered, innocent children."
We used to have a world order that, for all its problems, meant that one nation state invading another was heavily discouraged, and even stopped with force. We're heading back to an every nation for itself situation where the strong can take whatever they want. Whatever peace dividend gave the West a decent welfare state is going to be unwound.
yes Saddam wanted their oil, but it wasn't about oil being in short supply because it wasn't then. It was about power and money. Saddam made no secret that he wanted to rule the Arab world, but to do so he had to be the richest, most powerful and meanest SOB in that part of the world. Kuwait was the first step, the second actually because he failed dismally against Iran.
To give you an idea about the oil, whilst in the Airforce I worked with a Rolls Royce rep (the Strikemasters and Macchis both had RR Viper engines). He has been the rep to the Kuwaiti Airforce when Saddam's force rolled into Kuwait. Luckily he was home on leave when it happened. He told us that much of the footage of pools of oil in the desert were not the result of Iraqi forces destroying well heads, but that there was so much oil underground there that it literally bubbled to the surface under its own pressure.
Yes America wanted to preserve the supply of oil to the west, but that was about keeping the price down and not being vulnerable to blackmail by some despot. Plus the Saudis asked them to do it. They didn't want an inter-Arab war at any cost.
The second war was W finishing off what daddy failed to do. He was a pratt and it mad little sense, but then Trump doesn't either.
What they do see is a small bunch of people getting richer while they just tread water.
Yes, that is obvious to any rational observer. But during the election, Trump promoted his cozying up to billionaires for all to see. And the other side pointed to that time and time again - yet he still won the election.
Makes no sense.
What I don't get is why Biden didn't cancel the Trump tax cuts for billionaires during his term - should have kept trying in my opinion;
https://www.businessinsider.com/trump-tax-law-biden-dem-pledges-sinema-…
I'm a bit with Bernie Sanders on this - Biden squandered many an opportunity to make a dent on closing that gap between rich and poor. I could never figure out why Elizabeth Warren's legislation wasn't progressed under Biden;
https://www.warren.senate.gov/newsroom/press-releases/warren-introduces…
Biden is to blame for the Democratic loss - and Kamala made the mistake of not accepting his failures - picking up on what the next steps needed to be. Funny, her campaign slogan was "not going back" but ultimately most struggling Americans did not want to go back to Joe Biden's administration. He was good for infrastructure initiatives, but that doesn't change the financial pain and the loss of the comfortable middle class in the US. She needed to seize the day, so to speak - that is, capitalize on his unpopularity - point out what he didn't accomplish and what she would do.
All water under the bridge, I know but so frustrating - and as we are now seeing - so destructive.
Likely the Dems controlled what she could say Kate, irrespective of what she wanted to do.
I'd hate to think that was the case but indeed her short runway likely didn't allow her to put together her own unique platform, for sure.
Again, blame Biden - he never should have run again.
True, Trump wants Ukraine REs, but they've always had to import most of those, and most of that from China.
The USA does have its own rare earth deposits and used to mine them until (this will sound familiar) they found it was cheaper to buy them from China.
Link to a google search: rare earth mine in usa - Google Search
In fact, they do still mine their own deposits and then send them to China for refining (here's a link: China Dominates the Rare Earths Market. This U.S. Mine Is Trying to Change That. - POLITICO)
So does the PUSA not realise this - or is he wanting to take that which is in Ukraine before having to dig up the reserves in the USA?
Or is he using the RE deposits in Ukraine as an opportunity to influence the ending of the war - or even just because he fancies himself as the greatest deal maker in the world ever?
Starting to understand that President Trump cares as little about research as he does about facts. That is a distinct quality attributable to those that know they are infallible. As such any presentation requires no preparation as it simply can be left to the mood of the day to decide what’s on and what’s off.
What is certain is that uncertainty globally has compounded since Trump’s return. Lest we forget it is not all that long since the onslaught of the covid pandemic which decimated economies worldwide. How many nations are still getting out from under that shadow. Europe, the EU part at least, should be a lot stronger and if to view the West as a sort of alliance, they are little more than a weak link. All the fine ideals and ambitions of first the EEC then the EU, of self reliance and internal prosperity have out turned as dependency on Russian energy, Chinese manufacturing and the USA military. A quagmire of squabbling, in fighting bureaucracy on a par with a barrel load of snakes. That overall weakness is offering little less instability than Trump himself.
the Atlanta Fed's GDPNow signals has suddenly shifted from expecting a +3.0% Q1-2025 expansion with the data on hand at the start of February, to a sharp -2.8% contraction as the latest data comes in for the US economy.
A revision down of -5.8% for the quarter is abysmal, is it not ?
its ugly
https://www.atlantafed.org/cqer/research/gdpnow
they where -1.5% in feb, so not so sudden or shocking, still a quick change.
They were -1.5% on the 28th Feb, so at the end of last week. On the 19th Feb they were reading +2.3%.
How does history compare.....?
Reading news this morning, I started thinking about how does the current rhetoric and posturing compare with the period before the outbreak of world war 2?
I'm with PDK on resource over shoot and recognise that to sustain the human species in a degree of equilibrium with planet earth capacity, needs a fundamental shift in resource extraction and distribution. Will that shift be driven by world war 3?
I'm a bit alarmed by the balances turning on a dime with the re-election of Trump.
The doomers fantasy predictions are not being borne out by demographic and resource production data. Record production of hydrocarbons last year and woeful demographics in complete contrast to Erhlich population bomb predictions. There simply aren't being enough babies borne to prop up welfare systems, nurse elderly or fight wars.
"Has Europe already reached its demographic tipping point?
...Last year, Eurostat forecast that the population would peak at 453mn in 2026. But the 2023 numbers came in below expectations as EU births fell to levels Eurostat had not forecast for another two decades, suggesting the peak may come before 2026. What is becoming clear is that the EU’s long-predicted demographic inversion appears to be coming sooner than many experts predicted.
...“The EU is on the brink of a demographic revolution,” she says, one that demands a “profound rethinking of our institutional, political, economic, and cultural frameworks”."
https://www.ft.com/content/71a515d9-e473-48b6-a6a0-bf839d1bb41e
"The 720,998 babies born in Japan in 2024 was a drop of 5% on the previous year, according to the Health and Welfare Ministry. It was the lowest number of births since Japan started taking the statistics in 1899."
https://apnews.com/article/japan-births-children-population-decline-mar…
https://www.forbes.com/sites/rrapier/2024/12/22/us-energy-dominance-con…
Babies are of no use at propping up the welfare state. It takes two decades to get them working. Meanwhile robots are likely to be doing general work in about five years and they will be cheaper and work 24/7 unlike nurses.
The dramatic drop in birth rates is fantastic good news for humanity.
I don't see "America First" as much a big deal. Life will go on.
TDS reigns still. Trump said "Stop this stupid war". The world said "meh".
Trump told Zelensky off. There was such an epidemic of pearl cluching I am surprised more didn't strangle themselves.
The young men of Russia and the Ukraine, crouching in trenches, would vote for Trump if they could. I think of them.
'America First' would be one thing, what is confusing is why the founding principles of this attempt at a peace deal is 'Russia First'.
Giving in to Russian demands before negotiations have even begun, speaking very kindly about Putin, while hauling Zelensky in front of the cameras and asking him if he's even said thank you...which of course he has, many times.
Truly bizarre behaviour.
Not if you'd been following Victoria Nuland and the Kagans, and Hunter Biden... Oh, of course, they were in Ukraine for totally altruistic reasons.
Zelensky was their implant - to a certain extent we are witnessing elite cabal vs elite cabal, atop the nation vs nation churn. The trend to global corporates being bigger than nations, has obscured that (nation vs nation) commonly-held picture, too.
And that the Russian press made it into the Oval Office "by mistake"?
Yeah right.
https://www.politico.com/news/2025/02/28/tass-oval-office-trump-zelensk…
"The EU paid EUR 21.9 bn for Russian fossil fuel imports in the third year of the invasion, a mere 1% year-on-year reduction in volume. The EU’s Russian imports in the third year of the invasion surpassed the EUR 18.7 bn of financial aid sent to Ukraine in 2024."
https://energyandcleanair.org/publication/eu-imports-of-russian-fossil-…
There is probably only one way to significantly reduce Europe's dependency on Russian energy, a return to producing power via nuclear plants...
I did not think that the S&P500 would retest 5850 today but here we are.
Models selling targeting 200day MA
A very interesting world at the moment, a few weeks ago I predicted interest rates would start to slowly increase as inflation took hold again
Now we are seeing interest rates starting to decline even in the face of war threats and high taffifs
Very difficult to decide how to invest any surplus cash at the moment, short term ,long term?
Are we now predicting a period of very loose monetary conditions, I am so glad I am retired and not having to make too many financial decisions
The world is a mess everywhere you look,
I think the answer is the same as always - diversify. Predicting the future is hard enough at the best of times.
Money is a proxy. It expects to be cash-in-able for stuff in the future. Translated; for future energy and future resources. If those are to become scarcer, then buy what you know you will want, now. I have PV panels stored dry and dark - it's stored fossil energy, it's money in the bank.
Perishables aside, of course....
:)
Is it just the bumpy, generally up, US stock movements.....or a topsy wobble of the start of GFC/ Great Depression proportions?
When they wheel out the current FED guy, to say the "Banking system in sound" and the "US economy is resilient"....get the hell out of Speculation Dodge.
Following on from Trotter's thread about Luxon's true nature, here you have it in black and white, the aim has always been to kill school lunches, they were just being dishonest about it.
Luxon said he would rather the state not have the responsibility of feeding students.
Luxon's dishonesty and hidden agendas reinforces why he is the worse National leader in living memory (yes, worse than Shipley).
https://www.nzherald.co.nz/nz/go-make-a-marmite-sandwich-luxon-responds…
Those who need to believe, are not what you want in power.
Trotter mentioned Shearer - same thing. A person who has worked on behalf of the third world, isn't going to believe that our species is overshot (and therefore that those he helps, cannot get to here from there). So Shearer will be a believer in economic growth forever. Luxon is clearly ditto - but Trotter did a better-than-usual job of pointing out the pitfalls.
Neither are what we need going forward.
Does anyone think an apple and a Marmite sandwich would be enough energy to sustain a teenager for the full school day? It does make me wonder what Luxon's mum made for him in his school years. Some reporter should ask.
But that said, I'm not sure why sandwiches or salads, fruit, a sweet and a small carton of milk wouldn't do. Perhaps the issue is that hot lunches make no sense.
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