Here's our summary of key economic events overnight that affect New Zealand with news the world is bracing for the US to start a US$1.4 tln trade war. Tomorrow. The US says it is ready to start hostilities, supposedly with 20% across-the-board levies. Other governments have their retaliation plans ready. Americans are rushing to buy cars they can afford.
But first, the overnight dairy auction came in better than the derivatives market had signaled, with an overall rose of +1.1% in USD terms, up +3.2% in NZD terms. WMP prices held steady and avoided the expected dip. SMP prices rose more than expected. But volumes were light, as expected in this part of the dairy season, but actually lower than this time last year. Keeping demand up was bidding from China, while the recent new interest from Europe basically held. Nothing today will change current farmgate milk price forecasts.
In the US, retail demand is softening, with their Redbook survey off its peaks and back to average levels since October 2023. That is a notable drop from the November expansion.
There were two American factory PMI surveys out overnight. The widely-watched ISM one contracted. This is a turn from an expansion and is not unexpected, but the size of the shift was. New order flows were weak, and the mood is turning even weaker.
The internationally benchmarked S&P Global/Markit one fell too, and quite sharply, but not yet into contraction territory. But this one reported a big jump - an outsized jump - in input prices, surely a sign of what is to come. Firms were only able to pass on some of that, but even so it was at a two-year high.
American job openings in February fell by -194,000 to 7.57 mln from an upwardly revised 7.76 mln in January and below market expectations of 7.63 mln. Quits fell too as Americans prioritised holding on to the jobs they have.
The Dallas Fed services survey reported a notable contraction, with perceptions of broader business conditions worsening in March.
And that downshift was also picked up in the RCM/TIPP economic optimism survey which was expected to rise, but in fact fell in April, and to a six month low.
In China, although still modest, the Caixin China General Manufacturing PMI rose in March from February’s small positive, with a result that was better than market expectations. This marked the highest reading since last November, with output growth accelerating on the back of a sustained rise in new orders amid better demand conditions.
The EU March CPI inflation rate eased slightly to 2.2%, to a marginally lower level than expected. Lower energy costs are restraining this indicator.
In Australia, February retail sales were ho-hum, up +0.2% from January. That puts them essentially unchanged from the same month in 2024. So after inflation, that means they are -2.4% lower on a volume basis.
And as expected, the RBA sat pat with its cash rate target at 4.1%. But once the Federal election is out of the way, markets expect them to cut the policy rate by -25 bps on May 20, 2025.
Global air cargo demand is now coming off the boil as trade uncertainties build. The dip at that point wasn't large and it is still ahead year-on-year but with both US and European demand now negative on the year-ago basis, and the Asia expansion slipping rather quickly, it won't be long before we are reporting air cargo activity shrinking.
Global air passenger demand held up in February, with the impetus slowed notably. International demand is holding up better than domestic, and the Asia/Pacific region is the best of these. The main weaknesses are in North American air travel.
The UST 10yr yield is now at 4.15%, down -10 bps from yesterday at this time. The key 2-10 yield curve is lower at +29 bps. Their 1-5 curve is now more inverted by -10 bps. And their 3 mth-10yr curve is also more inverted, now by -16 bps. The Australian 10 year bond yield starts today at 4.38% and down -8 bps from yesterday. The China 10 year bond rate is now at 1.87% and down -1 bp. The NZ Government 10 year bond rate is now at 4.57%, and down -2 bps from yesterday at this time.
Wall Street has started its Tuesday down -0.2% on the S&P500. Overnight, European markets rose between +0.6% (London) and +1.7% (Frankfurt). Yesterday, Tokyo ended its Tuesday session unchanged. Hong Kong was up +0.4% and Shanghai was up the same. Singapore fell -0.1%. The ASX200 ended its Tuesday session back up a full +1.0% but not quite making back its Monday drop. The NZX50 rose +0.3%.
The price of gold will start today at just on US$3106/oz and down a net -US$12 from yesterday and off its all-time high.
Oil prices are little-changed from yesterday at just under US$71.50/bbl in the US and the international Brent price is now just on US$74.50/bbl.
The Kiwi dollar is now at 56.9 USc and up +20 bps from this time yesterday. Against the Aussie we are unchanged at 90.8 AUc. Against the euro we are up +20 bps at just over 52.7 euro cents. That all means our TWI-5 starts today now just under 66.5 and up +20 bps.
The bitcoin price starts today at US$85,116 and up +2.1% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.
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13 Comments
Everyone wants a Bargain
This month's survey has shown the following main things.
- Stock levels are high, and buyers know this – feeling they can pick and choose and take their time.
- Prices overall appear static, and some concerns have appeared around prices falling.
- Townhouses are not in favour for many buyers according to written comments submitted by agents.
- FOMO is decreasing and while more people are looking to purchase an investment property more are also looking to sell what they already have.
For investors looking to make a purchase (recalling that a net 18% of agents report seeing more investor buyers), the key motivating factor is the hope of finding a bargain. This is perhaps where other buyers sit as well going by the comments submitted by agents regarding buyers picking and choosing and quickly walking away if anything dissatisfies them.
But we are in a different world now, and vendors continuing to hold out for high prices risk having their properties sit on the market for a long time or eventually biting the bullet and selling for 5% - 10% less than the first offer they received when their property was fresh on the market.
There will be some townhouse bargains, but they come with body corporates.
There is minimal evidence around the country that the upturn in the real estate market which started early in 2023 by some measures is producing sustained price rises. A net 3% of agents this month have reported that by their observations of what is happening in their area prices are falling. The graph here perhaps sums things up quite well. Since interest rates started falling prices have stopped falling. But they are not rising.
Going to be a difficult winter.
Inviting a doomster tag here but a lot of folk in Christchurch will not have forgotten the nightmarish tangle that the series of earthquakes created in sorting out attached and semi-detached properties, with or without body corporates, and the resultant arguments between insurers, for example where one said repair and another rebuild. Even standalone properties sharing ancient easements etc got into strife. From what our wider family encountered, best to avoid any dual feature on your title.
Mt Difficulty socialism alive and well in NZ.
"Those on the lowest-incomes were more likely to name parents as being the most responsible, while those with the highest were more likely to name the government."
https://www.rnz.co.nz/news/political/556852/new-poll-most-voters-think-…
At primary school in the 1950s there used to be bunny lunches. Cost about a shilling, came in a brown paper bag. Nice sandwiches , fruit can’t remember what else, simple but a good and sufficient lunch.
People are in denial of the responsibilities that go with having children. they know/demand the right to breed without understanding that to do so they must then be able to provide for and support those children. It should not be the state's responsibility. The standard of living that a child lives in is the choice and responsibility of the parents, no one else. It's been that way for millennia.
After millennia, we're now into the 3rd generation living the State dependency entitlement cycle.
And the consequences of that are increasingly obvious.
Tell it to the workers in those processing plants in the middle of the North Island that closed down due to high electricity prices last year. Not too many options for those people now to feed their kids.
The welfare state should be standing by ready to help people in need, and job seekers benefits seems a more appropriate tool than free lunches for all.
I'm not saying that welfare is adequate in all situations, just that philosophically it makes sense to support those who need it rather than blanket programs.
You are taking an isolated event to counter an entire argument. I never stated there isn't a place for the Welfare state to support people genuinely in need. My point, as you seemed not to be able to see it, is that people shouldn't be able to make a career choice on having children in the belief that the state will provide for them.
I also think that many of those who lost their jobs will find other work either locally or moving away. Neither are good options when forced on you.
In the course of history everyone has moved on to survive. Those who think they can stay put when there are opportunities somewhere else need to think of where their income is coming from. Fair enough if family can afford and want to provide. But if it is on the tax payer, time to move.
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