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For open banking to really grab people's attention the focus needs to be on the services it can enable, rather than the technology behind it, says Andrew Dentice.
In the latest episode of interest.co.nz's Of Interest podcast, Dentice, a technology lawyer and partner at HudsonGavinMartin, discusses the data sharing that enables open banking, what open banking actually is, why progress towards it has been slow in New Zealand, what's going on with open banking overseas, the threat and opportunity of open banking for banks, the benefits of it for consumers, and more.
One of the points he makes is consumers need to be put at the heart of it.
"If you're talking about APIs [application programming interfaces] and bank account information, it's not exactly the most sexy conversation to be having," Dentice says. "We have to put the consumer front and centre, have a look at some of these really amazing use cases that are starting to come out, and get people excited about it. And then that drives the [banking] industry to do more as well."
"I think you've almost got to separate the open banking technology itself from the stuff that it enables," says Dentice.
"That technology itself is actually not that exciting as a consumer. APIs have been around for years. As a consumer, I don't really see that. What I see is the cool new app, the Sharesies, the Monzo, the Wise in market, that when I go and use it gives me a really fantastic, brand new experience."
"We're never going to get people excited with the underlying tech around open banking. We're going to get them excited around the use cases that it's driving. So it's kind of an enablement layer rather than new technology in itself," Dentice says.
Asked what the banking experience might look like for consumers in five to 10 years time if open banking really takes off in NZ, Dentice says better, more competitive, more interesting product offerings would be a great outcome.
"I would hope that there's a range of new, great, innovative New Zealand fintechs that are able to drive their business models off the back of this. I'd also hope that the great companies from overseas see New Zealand as a market that they want to enter. There's some larger [overseas] fintechs like Revolut and others coming into the market. I think if we have that open banking framework all up and running, then it makes New Zealand a much more likely place [where] the big players will come in and offer more competition."
He also thinks service from incumbent banks could be better and more competitive.
"I saw recently HSBC basically launched a competitor to Wise in that FX [foreign exchange] space. So there's the fintechs kind of coming in cutting [banks'] lunch, and then the banks' trying to cut the lunch back."
"And then I think digital first financial services means that people just have a better understanding of their money, their financial position. Financial literacy is really important. There's some great fintechs who are doing things with kids in that space, like SquareOne and Banqer."
"So there's a societal benefit to it, as well as a pure kind of competition and innovation benefit as well," Dentice says.
*You can find all episodes of the Of Interest podcast here.
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Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news that while we weren't watching a few people are making financial bets so large they could hurt us all.
In its latest global financial stability report, the IMF says near-term risks have receded as disinflation (that is, the lowering of the positive inflation rate) is entering its "last mile" zone. But they warn that medium-term vulnerabilities are mounting. One of those comes from the hedge fund sector. The IMF says that a small group of very large firms in this sector has built up an enormous short bet on global stability, one so large that if (as seems likely) those bets are wrong that could be a problem for all of us. “Some of these funds may have become systemically important to the [US] Treasury and repo markets, and stresses they face could affect the broader financial system,” they warn (on page 37).
Meanwhile in the US, the number of new claims for jobless benefits in the US was was marginally less than in the prior week at 208,500 and this was less than analysts’ expectations. And that means continuing claims were broadly unchanged at 1.865 mln, also less than market expectations. Those waiting for early signs of US labour market stress are still waiting. It has now been a full 2½ years of weekly reports saying broadly the same thing and there are few signs this will change any time soon.
One reason the wait may be longer is that the powerhouse Pennsylvanian/New Jersey rust belt manufacturing region seems to be on an upswing. The Philly Fed factory survey for April delivered positive new order and activity activity levels, in fact the best from that region in two years.
But there is no sign that the American housing market is improving. US existing homes sales in March were -3.7% lower than a year ago at an annualised rate of 4.19 mln units. They actually fell at a faster -4.3% rate from February.
Later today, all eyes will be on the Japanese CPI inflation rate. You may recall it came in at 2.8% in February and it is expected to be at a similar level (2.7%) when the March data is released this afternoon. If that is the case, the Bank of Japan will likely be emboldened to widen its moves to get off its very long-running QE programs.
Australia's jobless rate ticked higher to 3.8% in March from February’s five-month low of 3.7% but below analysts’ expectations of 3.9%. The number of unemployed individuals increased by +20,600 to 569,900 while total employment fell -6,600 to 14.3 mln. There are now 9.9 mln people in full-time work, up +27,900, and 4.4 mln people in part-time work, down -34,500. Part-time roles make up 31.1% of their employed workforce. Their participation rate slipped to 66.6%. (The updated New Zealand jobless rate for March will be released on May 1. As at December it was 4.0%.)
Global container freight rates fell another -3% last week, making them +53% higher than year-ago levels. Outbound rate from China fell again, but there was some movement up in rates to China even though they remain at very low levels. Bulk cargo rates rose +10% in the past week although they are still only essentially at long-run levels.
The UST 10yr yield is now at 4.65% and up +6 bps from yesterday.
The price of gold will start today up by +US$11 from this time yesterday at US$2383/oz.
Despite continuing Middle East tensions and uncertainties, oil prices have stayed lower at just under US$82.50/bbl in the US while the international Brent price is down -50 USc at US$86.50/bbl.
The Kiwi dollar starts today at just on 59 USc and a minor -10 bps softer from yesterday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we are also marginally softer at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and actually little-changed.
The bitcoin price starts today back up at US$63,221 and a +3.1% gain from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.9%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again on Monday.
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Saknas det avsnitt?
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Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news our meat exports to China face tough conditions, and not just from competition from excess Aussie lamb supply.
But first, US mortgage applications rose +3.3% last week even as benchmark mortgage interest rates rose to 7.13% plus points and a four month high. (A month ago it was at 6.84%.) But to be fair, the recent shift higher in application levels is still -10% lower than the same weak week a year ago,so last week's rise is hardly significant.
Today's UST 20yr bond auction was another success with the usual excess demand. But just like the mortgage market, the median yield rose again to 4.77%, up from the prior equivalent event a month ago at 4.50%. It seems investors are prepared to accept a lesser rise than they want from home loan rates.
Despite these rising interest rate levels, the Fed's Beige Book survey paints a picture of a moderate and broad expansion in recent activity in the country, consistent with other recent data. They said overall economic activity expanded slightly since late February. Ten out of twelve Districts experienced either slight or modest economic growth, up from eight in the previous report, while the other two reported no changes in activity. They still found an expanding labour market, and the economic outlook among contacts was cautiously optimistic, they reported.
While most blue-chip professional economists think the US economy is expanding at about a +2% rate, the Atlanta Fed's GDPNow model ingesting current rate thinks it is much faster than that, near +3%. It is an expansion that is driving the global economy, including that of its rivals like China.
And Japan, which is on a roll, despite their currency issue angst (in USD terms). Their exports rose by +7.3% in March, following a +7.8% rise in February. It was the fourth straight month of increase for them.
In China, meat prices - especially pork prices - are in an extended slump. Pork accounts for almost two thirds of Chinese meat sales and you will recall prices hit a peak in October 2022. But it has been all downhill since, dropping -40% and putting producers at increased bankruptcy risk. It is a crisis that has national attention, even international attention because feed grain imports are falling. Soybean prices are down -23% from a year ago. It is tough for beef and sheepmeats to compete with pork in China at present.
The British released their March inflation rate overnight and it eased to 3.2% from 3.4% in February. But remained slightly above the market expectation of 3.1%. It was their lowest rate since September 2021, primarily driven by a slowdown in food prices.
The UST 10yr yield is now at 4.59% and down -7 bps from yesterday.
The price of gold will start today lower by -US$22 from this time yesterday at US$2372/oz.
Despite continuing Middle East tensions and uncertainties, oil prices have dropped a sharpish -US$2.50 to just on US$82.50/bbl in the US while the international Brent price is down at US$87/bbl. Rising US crude stocks as their economy gains energy efficiency is behind the shift lower for oil.
The Kiwi dollar starts today at just over 59.1 USc and back up +30 bps from yesterday. Against the Aussie we are firmish at 91.9 AUc. Against the euro we are also firmish at 55.5 euro cents. That all means our TWI-5 starts today just on 69 and back up +20 bps.
The bitcoin price starts today lower at US$61,348 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been very high at just under +/- 4.0%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news the US Fed is telling markets rate cuts from them are not coming soon.
First up today, the overnight dairy auction confirmed the recent rises, but didn't add to them in a subdued event. In USD terms overall prices were up +0.1 and in NZD terms up +1.5%. Volumes were seasonally small however. Perhaps of some concern in this data was that foodservice components like butter, cheddar, and mozzarella all fell, by -1.4%, -8.5%, and -3.8% respectively. However, given the overall 'hold', it is unlikely any farmgate payout forecasts will be changed by today's outcomes.
US housing starts and new building consents are in the doldrums as this sector continues to fade. March brought steep drops, almost -15% below February levels for new housing starts, -4.3% lower than year-ago levels. The situation isn't going to get much better because residential building consents also fell, down -4.3% from February although marginally up on March a year ago.
US retail sales rose +4.9% last week in their Redbook tracker, the tenth week in the past 13 that the rise has bested inflation. The retail expansion is embedded now.
US industrial production rose +0.4% from the previous month in March, in line with expectations and following an upwardly revised +0.4% increase in February. A rise in vehicle production was a notable component of the recent up-trend.
Meanwhile, Fed boss Powell was out speaking indicating their policy rate will stay elevated for some time yet. They see no pressing need to cut, or in fact make any changes.
Meanwhile there was some important Canadian data released overnight. They said consumer inflation rose 2.9% in the year to March with their core rate rising just 2.0%
And Canadian housing starts eased slightly in March from February although they were +13.5% higher than year-ago levels.
In China, electricity production rose just +2.8% on March from a year ago, a huge retreat from the +8.0% rise in December. This is an important background data that should be reflected in China's economic activity (GDP). But Beijing reported Q1-2024 GDP rose +5.3% (up from 5.2% in Q4-2023) and this was despite retail sales only rising +3.1% and national real estate investment falling -9.5% in official data. They say industry expanded +4.5% (and down from the +6.8% rate in December). While we have raised our eyebrows at how they can deliver a credible GDP result just 16 days after the quarter end (no-one else can), few of the major components show expansions at the level of the claimed overall growth, and readers can draw their own judgements on the credibility of the rising 5.3% growth in Q1. Certainly ex-Premier Li Keqiang did.
Meanwhile, China's new home prices dropped by -2.2% in the year to March, faster than the -1.4% fall in February. It was the ninth straight month of decline and the steepest pace since August 2015, despite multiple support measures. For second-hand dwellings none of the 70 largest cities reported any rises, and the average fall over this set is now -5.9% year-on-year.
China continues to struggle with youth unemployment. You will recall they withdrew data that reflected badly on them last year and replaced it with 'better data'. But now an official confirms that even this data, the next update yet to be released, shows a situation that "requires a high degree of attention".
In Europe, the ECB said that they will likely cut rates soon. She was speaking at the IMF's release of their 2024 growth forecast update, and those revealed that despite gloomy predictions, "the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose". They say: "growth this year and next will hold steady at 3.2%, with median headline inflation declining from 2.8% at the end of 2024 to 2.4% at the end of 2025. Most indicators continue to point to a soft landing."
Join us at 10:30am this morning to find out what New Zealand's CPI inflation level came in at in Q1-2024..
Ratings agency Moody's said overnight that New Zealand's sovereign credit rating stays at its current maximum Aaa grade. The outlook is Stable. They are the only ratings agency to assign a triple A to New Zealand.
The UST 10yr yield is now at 4.66% and up +3 bps from yesterday.
The price of gold will start today higher by +US$31 from this time yesterday at US$2394/oz.
Despite continuing Middle East tensions and uncertainties, oil prices have changed little at just under US$85/bbl in the US while the international Brent price is also unchanged at US$89.50/bbl.
The Kiwi dollar starts today at just over 58.8 USc and down -30 bps from yesterday and a new five month low. Against the Aussie we are firmish at 91.8 AUc. Against the euro we are down another -20 bps to 55.4 euro cents. That all means our TWI-5 starts today just over 68.8 and down -20 bps and a ten day low.
The bitcoin price starts today lower at US$62,368 and down -2.6% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.9%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news that bullish American consumers are likely pushing back the likelihood the US Fed will cut its policy rate any time soon.
Financial markets now price in only two cuts this year, one in September and one in December and far less than the four priced in at the start of the year. And the conviction for these scaled back indications is easing rather fast. The latest pricing suggest the September one might still happen but there in more of a chance the December one will be skipped.
And that is because American retail sales posted impressive results in March, and February's results were revised sharply higher. Those revisions means they were up +2.1% in February from a year ago, up 4.0% in March on the same basis. Consumer spending belies consumer sentiment. What they do is way more positive than what they say.
Meanwhile, overall February business inventories remain in good control, holding their relative level to sales. There is no buildup of tensions on this front.
On this data, the USD rose yet again, bond yields jumped - again - and equity prices packed a sad that they are unlikely to get the rate cuts they were banking on.
It is not all positive however. The New York Fed's local factory survey reported that both new orders and shipments fell significantly in March and unfilled orders continued to shrink. Optimism among these businesses is subdued.
And we should note that carmaker Tesla is cutting 10% of its global workforce, or -14,000 jobs, on stuttering sales and profitability issues. Its shar price fell another -5% in today's trading to be down -35% so far this year, down -59% from its peak on November 5, 2021.
Canada reported manufacturing gains in February from January, and even small gains from year-ago levels. Those gains, tiny as they are, also came out when inflation-adjusted.
In China, a new industry report from a corner of their economy details just how tough it has become to make deals there. Pay at China’s private equity and venture capital firms plunged as much as -40% year-on-year in 2023 as the industry’s downturn showed no signs of abating.
Just for the record, the People's Bank of China had its monthly review of its benchmark One-Year Medium-Term Lending Facility Rate, which is the main rate at which the central bank lends to big commercial banks, and it held it unchanged at 2.5%.
In Japan, machinery orders jumped +7.7% in February from January, reversing the -0.7% fall in January and far exceeding market expectations for just a +0.8% gain. That put them a healthy +9.4% higher than year-ago levels.
In the EU, industrial production rose again in February, making it the third rise in the past four months. Analysts were expecting this type of improvement. But despite this month-on-month rise, they still have some way to go to convert that into year-on-year gains.
We should also note that the rise and rise of the aluminium price over the past eight weeks too a sharp turn higher yesterday, taking it back to June 2022 levels. This shift is largely due to sanctions biting on Russian supplies.
In Australia, employers and unions are close to a national agreement that will allow workers to take double their holiday time off at half their pay. There are still details to be agreed, but the principle for this flexibility is being set.
The UST 10yr yield is now at 4.63% and up +11 bps from yesterday.
The price of gold will start today higher by +US$20 from this time yesterday at US$2363/oz.
Despite continuing Middle East tensions and uncertainties, oil prices have slipped -50 USc overnight to US$84.50/bbl in the US while the international Brent price is unchanged at US$89.50/bbl.
The Kiwi dollar starts today at just over 59.1 USc and down -20 bps from yesterday and a five month low. Against the Aussie we are also down -20 bps at 91.7 AUc. Against the euro we are down -20 bps too to 55.6 euro cents. That all means our TWI-5 starts today just under 69 and down its own -20 bps but that is only a ten day low.
The bitcoin price starts today marginally firmer at US$64,004 up +0.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news of an export setback in China that may signal a tougher path for them in the rest of 2024.
But first, this week will kick off the US earnings season which will run for a few weeks until the Q1-2024 results are all in. Bank profits will be early in this set, many key ones coming this week. The Americans will also release retail sales results, and some housing updates.
Retail sales updates will also come from China, along with their Q1-2024 GDP outcome, tomorrow. It is "impressive" they can report that, well before any other major economy. Eyes will be on their foreign direct investment data too, along with housing market activity results for March.
Australia will release its labour market data this week, and CPI inflation data will some from Japan, Canada, and of course New Zealand (on Wednesday).
Over the weekend, China reported its new bank lending levels and they picked up in March from February but the results still disappointed. March is usually a strong month for borrowing because banks tend to extend more credit at the end of each quarter to meet lending targets. But the ¥3.1 tln in new March lending was less than the ¥3.6 tln expected and the ¥3.9 tln in March 2023.
Meanwhile, China's exports tumbled in March. They dropped -7.5% from a year ago, reversing sharply from a +5.6% growth in the earlier month. This was very much worse than market forecasts, highlighting the Middle Kingdom's uneven recovery and perhaps suggesting global demand won't drive growth there. It may also be a sign that de-risking from China because of its terrible recent signals to investors is biting harder and earlier than anticipated.
It is not all difficult news in China. A survey shows that for the first time since the end of 2021, wage growth rates there are picking up again.
India's industrial production rose by +5.7% in February from a year ago, the latest data released over the weekend, but that missed analyst forecasts of +6% growth; however it was a faster expansion than in each of the prior three months. A year ago this expansion was running at 5.8%, so little change on that comparison.
It is only about 200 days until the November US presidential election and nervousness about that outcome is starting to show up in sentiment surveys. Consumers are apprehensive that the golden run could be crashed by the vote, or that things could destabilise ahead of it. The University of Michigan consumer sentiment poll is now reflecting some of that apprehension. However it is only off a 33 month high so we shouldn't make too much of this April dip and it remains more than +20% higher than year-ago levels. Still, the shift was noticed by financial markets. Wall Street dipped in their Friday session, bond yields slipped slightly, and the USD surged against all-comers on the risk-off mood.
The UST 10yr yield is now at 4.52% and unchanged from Saturday's close. A week ago this rate was 4.39%.
The price of gold will start today lower by -US$6 from this time Saturday at US$2343/oz. We should note that this price hit its all-time high of US$2432 at about 4am Saturday morning. But it has been sharply down after that.
Despite extreme Middle East tensions, oil prices have been surprisingly stable over the weekend and still just on US$85/bbl in the US while the international Brent price is -50 USc lower at US$89.50/bbl. Both levels are about -US$2 less than a week ago. Interestingly, the head of the IEA strongly criticised European energy policy for "two monumental mistakes" - relying on Russian energy, and shifting away from nuclear power.
The Kiwi dollar starts today at just over 59.3 USc and down -10 bps from Saturday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we are little-changed as well at 55.8 euro cents. That all means our TWI-5 starts today just on 69.2 and similar to Saturday and this time last week.
The bitcoin price starts today sharply lower at US$63,785 and down -5.6% from this time Saturday. At one point it got as low as US$60,908. Volatility over the past 24 hours has also been extreme at just on +/- 5.2%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Finance spokesperson Barbara Edmonds says a re-elected Labour Government would have been willing to expand its planned public sector cuts to protect key programmes.
The tax lawyer turned MP spoke on Interest.co.nz’s Of Interest podcast about the Coalition’s fiscal policy and her role in rebuilding the Labour Party after its election defeat.
Part of that project will be rehabilitating the party’s economic credibility after presiding over a massive cost of living crisis.
Ipsos’ February issues poll showed inflation, or the cost of living, was the number one issue facing New Zealand voters and only 23% saw Labour as being best able to deal with it.
Only 22% thought it was the best party at “managing the economy” down from 31% a year ago and well below the National Party which has climbed from 42% to 47%.
The parties which have formed the Coalition Government campaigned on bringing down spending and therefore inflation, as well as cutting taxes for some groups.
Edmonds agreed there was a need to consolidate spending—which had got ahead of revenue during the past three years—but tax cuts were a bad investment.
Labour’s fiscal plan asked for up to 2% reductions in public sector budgets, while the Coalition Government is asking for up to 7.5%.
She admits her party would have had to make further cuts, given new Treasury forecasts showing tax revenue falling below pre-election forecasts.
“If we had to make more cuts, or look at different savings, in order to ensure that lunches in schools kept going … we would have had to make those decisions,” she said.
“I wouldn't apologize for making those types of choices. But what I wouldn't have done is promised really unaffordable tax cuts”.
Edmonds said the limited money available was better invested in infrastructure, schools, healthcare, public and private transport, and climate action.
Which tax?
Edmonds said she was out meeting with key sector leaders and listening to new ideas she can carry back to Labour's policy council.
Her role was to guide her colleagues through the process of developing a manifesto for 2026 and informing them about the costs and tradeoffs involved.
“If I need to say no, I’ll say no. I’m a mum of eight, I know how to say no,” she said.
“Ultimately, if I believe that it's going to put Labour into a difficult fiscal position going into the next election, I will make those views very clearly known”.
Labour recently voted against a bill put forward by Te Pāti Māori, which would have removed the GST from all food, on the basis that it was too expensive.
But the big policy question is about tax. Political opposition to taxes on capital has been the unslayable dragon of New Zealand politics.
Tax reform is back on the table but Edmonds won’t be drawn on exactly what kind.
She said it was necessary to first ask what the party was trying to achieve and then design a tax model that supported those outcomes.
The country will be facing some serious fiscal challenges by 2060 when superannuation could cost 10% of GDP and healthcare could absorb another 7%.
“2060 looks like ages away, but that’s the next generation. That’s my kids. So, we need to ask, what is the society that we want to leave this generation and how does tax help us get there?”
The Treasury and the International Monetary Fund have both made recommendations about possible reforms, but Labour would be starting from scratch based on its long-term vision for New Zealand.
Edmonds said political parties don’t win elections based on tax policy, anyway.
“You win on committing to a better health system, better education, making sure the vulnerable are supported, and that our businesses are able to grow,” she said.
You can find all episodes of the Of Interest podcast here.
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Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news today's data releases in the shadow of yesterday's highish US CPI release, and there is some talk of rate cuts elsewhere.
First up in the US, the number of new jobless claims fell last week, consigning the prior week's jump to the 'anomaly' basket. There are now 1.9 mln people still on these benefits, virtually unchanged from the prior week level.
The rise in American producer prices was also less than expected in March, coming in just +2.1% higher than a year ago. A year ago they were rising at a +2.7% rate. Producer price rises are not a major factor in their consumer price inflation.
The USDA lowered its price estimates for most key agricultural commodities, especially grains, as good harvests worldwide more than cover global food demand. Global food prices were already running at 3 year lows. Specifically, the Americans are expected to import more beef and produce less milk.
China's consumer prices edged up a mere +0.1% in March from a year ago and much less that the market forecasts of +0.4%, and after an annual +0.7% rise in February. The extended flirting with deflation is dangerous and highlights the economic challenges they face. Demand is actually quite weak - and this data all comes from the officially approved series.
Meanwhile, China's producer prices shrank by -2.8% in March from the same month a year ago. This was the expected drop and compares to February's drop of -2.7%. It was the 18th straight month of contraction in factory gate prices and the steepest decrease since last November, highlighting the persistence of deflationary forces in their economy.
In Japan, a lack of intervention in support of the yen after it weakened beyond 152 to the US dollar for the first time since 1990 has financial markets wondering when or even if the Japanese authorities will step in as has been widely expected. There are many market bets that this would have happened by now. But perhaps Tokyo senses that it is more about the rising USD rather than a weak yen. It certainly isn't that weak against most other currencies.
The ECB held its policy interest rates at record-high levels for a fifth consecutive time during its April meeting overnight, at 4.5% (and their deposit rate at 4%), both at 22 year highs. However they did signal that a rate cut could come there soon, perhaps in June.
Last week global container shipping rates eased only marginally, staying +64% higher than year-ago levels. Bulk cargo rates fell -7.5% in the week however and are now back at long run averages.
The UST 10yr yield is now at 4.57% and up a minor +1 bp from yesterday as things settle in at the new higher level.
The price of gold will start today higher by +US$20 from this time yesterday at US$2355/oz and off its all-time high.
Oil prices have fallen -US$1 to just on US$84.50/bbl in the US while the international Brent price is down a bit less to just on US$89/bbl.
The Kiwi dollar starts today at just over 59.9 USc and little-changed from yesterday. Against the Aussie we are softer at 91.7 AUc. Against the euro we are firmer at 55.9 euro cents. That all means our TWI-5 starts today just on 69.4 and up a minor net +10 bps.
The bitcoin price starts today firmer at US$70,258 and up +1.3% from this time yesterday. Volatility over the past 24 hours has also been modest at just on +/- 1.6%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again on Monday.
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Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news it is all about American inflation today, and the consequences of missing expectations.
The American annual inflation rate picked up slightly for a second straight month, to 3.5% in March, its highest rate highest six months, and well above the 3.2% rate in February. And also higher than the analyst forecasts of a 3.4% rate. Of some concern is that the month-on-month rate stayed up at +0.4% (and almost a 5% annualised rate). Their core rate (sans food and energy) however, stayed down at 3.8% and unchanged, but a dip was expected here.
All up, this shows American inflation is far from beaten. Perhaps the Fed was expecting this because the minutes of its March meeting released today shows them wanting to see progress on the inflation front before they reduce their 5.25% policy rate. They are clearly not there yet as they suspected.
The USD rose sharply on the news, as did benchmark bond yields. The S&P500 fell as rate cut hopes for 2024 fade.
It may be all about the inflation miss today but there were other indicators out as well.
US mortgage applications were barely changed last week from the week prior, holding low to be -23% lower than the year-ago level. No rebound in the American housing markets. Their benchmark fixed 30 year home loan rate moved back up over 7% plus points, a one month high.
There was a rise in American wholesale inventories in February, but to be fair these overall levels in relation to sales activity are entirely 'normal' from an historic perspective.
As expected, the Bank of Canada rate left its policy rate unchanged at 5% in its overnight review. It says it is confident inflation's trend is easing there.
Japanese producer prices rose +0.8% in the year to March, in line with forecasts and marginally higher than in February.
Taiwanese exports surged in March, more than making up for the February hesitation. In fact they delivered their best month since July 2022 and their second best March month ever.
In the South Korean parliamentary elections, the conservative alliance is suffering a big defeat with the Democratic Party alliance heading for a parliamentary majority.
In China, ratings agency Fitch has affirmed their sovereign credit rating as A+, but has shifted its Outlook from Stable to Negative. It cited the growing risks of China's public finance situation as fiscal buffers have eroded, especially from overstretched Local Government Financing Vehicles while Beijing deals with its stuttering property development sector. (Fitch rates New Zealand AA+, Stable. You can see how the various ratings agency codes compare here.)
And staying in China, vehicle sales rose a very impressive +9.9% in March from year-ago levels to almost 2.7 mln units in the month, following a -19.9% slump the month before. Consumption recovered following the Lunar New Year holidays and many carmakers slashed prices which has been effective from a sales perspective. China's EV exports, particularly to Europe, continue apace, but there are growing questions about whether these shipments will find buyers. The flood to there is overwhelming local manufacturers and they are not happy.
The UST 10yr yield is now at 4.56% and up a sharp +19 bps from yesterday on the US CPI result.
The price of gold will start today lower by -US$13 from this time yesterday at US$2335/oz and off its all-time high.
Oil prices have risen +US$1 to just on US$85.50/bbl in the US while the international Brent price is up a bit less to just on US$89.50/bbl.
The Kiwi dollar starts today at just under 59.8 USc and down -¾c from yesterday all on the USD moves. Against the Aussie we are also +½c firmer at 91.9 AUc. Against the euro we are little-changed at 55.6 euro cents. That all means our TWI-5 starts today just on 69.3 and down -20 bps.
The bitcoin price starts today softer at US$69,348 and up almost +1% from this time yesterday. Volatility over the past 24 hours has been modest however at just on +/- 1.8%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news business owners are having difficulty matching their sentiment with the conditions around them.
And financial markets are in a bit of a pre-dawn shadow as they await the US CPI data tomorrow. Headline CPI is expected to tick up, core inflation tick lower. Both levels will be well above the US Fed's target.
American retail sales, as measured by the weekly Redbook index for bricks & mortar stores, rose +5.4% last week from the same week a year ago, far better than inflation. Despite that, SMEs reported slipping sentiment and interestingly, labour shortages were still a key concern. So despite record job creation and high migration, small business still can't get enough people for the roles they need to fill. Twenty-five percent of owners reported few qualified applicants for their open positions and 26% reported none.
Investors on the other hand stayed much more optimistic and above average levels over the past 2+ years.
There was a US$59 bln UST 3yr bond auction earlier today and that brought slightly higher yields. Today's median yield was 4.49% and that was up from 4.21% a month ago at the last equivalent event. Investors support for this fund-raising remains very strong with offers 2½ times availability. Today almost US$87 bln in bids were unsatisfied.
Japan is said to be pondering where-to for their inflation. Wage gains have been strong this year. Since their central bank raised rates for the first time in 17 years last month and ended its massive monetary easing program, market players have been focusing on hints for the timing of the next rate hikes. They may get 2.4% inflation this year, 2% next year. These are much higher levels than they have had for the long period since the GFC.
One country making progress on inflation reduction (but not battling deflation) is Taiwan. Their CPI inflation slowed to 2.1% in March from 3.1% in the previous month and coming less than market forecasts of 2.5%.
It is election day in South Korea and the main issues are domestic ones. It is hard to predict the outcome because the electorate is split 30/40/30 conservative/moderate/liberal and few know how the moderate voters will swing this time. Anything's possible.
In Australia, business confident was little-changed in March according to the widely-respected NAB survey. Both business conditions and confidence were little changed in the month, continuing the trend of above-average activity indicators alongside below-average confidence that has defined this survey for much of the past year.
The Westpac-Melbourne Institute Consumer Sentiment index in Australia fell -2.4% to 82.4 points in April, sliding for the second consecutive month as persistent inflation and high interest rates continued to weigh on Australian households. The index has also held below 100 for over two years, the longest since the early-1990s recession.
The overnight GDT Pulse dairy auction results for both WMP and SMP basically confirmed the uptick in prices that we first saw in the full GDT event a week ago.
The UST 10yr yield is now at 4.37% and down -5 bps from yesterday.
The price of gold will start today a little higher by +US$13 from this time yesterday at US$2348/oz and yet another all-time high.
Oil prices have slipped another -US$1 to just on US$84.50/bbl in the US while the international Brent price is now down to just on US$89/bbl.
The Kiwi dollar starts today at just over 60.5 USc and up another +20 bps from yesterday. Against the Aussie we are also a bit firmer at 91.4 AUc. Against the euro we are firmer too at 55.8 euro cents. That all means our TWI-5 starts today just on 69.5 and up +20 bps.
The bitcoin price starts today softer at US$68,790 and down -4.1% from this time yesterday. Volatility over the past 24 hours has been moderate however at just on +/- 2.8%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
And join us at 2pm today when we will have full coverage of the RBNZ’s monetary policy review.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news the IMF reckons the way the Aussie home loan market is structured accentuates mortgage rate pain.
But first in the US, consumer inflation expectations for the year ahead remained steady at 3% for a third consecutive month in March, holding at three-year lows. For three years ahead they rose marginally to 2.9% whereas for five years ahead they slipped to 2.6%. None of these are 'bad' levels but they are not quite where the US Fed would like them to be.
The actual current March US CPI inflation level will be revealed on Thursday, NZT
Noticeable improvements recently in German industrial production, the US ISM PMI, and the Caixin factory PMI have combined to shift the expectations for the copper price sharply higher. It is now back to levels we last saw in May 2022, and first saw in November 2010. It is an upswing that has been unexpected.
But the same is not true for steel prices. Excess Chinese production and export dumping has driven the cost of rebar down to 2017 levels. Their stuttering domestic construction industry is having world-wide impacts in this important corner of the steel industry. Iron ore prices are now at yearly lows too.
In Hong Kong, a winding up order is being sought by its major lender for Shimao Group Holdings, just another Chinese property developer that has hit the debt wall. What is interesting about this is that the lender is China Construction Bank, one of China's four pillar banks and state-owned of course. Shimano has projects across much of China, but only one in Hong Kong. When Beijing turns against you, you are toast.
In Australia, February new lending data shows that the number of loans issued for the purchase or construction of a new home over the past year is holding at its lowest level in more than 20 years. Values are up of course, but the number isn't.
The IMF has released an analysis that shows Australian households are more sensitive to changes in interest rates than virtually any other consumers globally because of the combination of the dominance of variable-rate mortgages, high levels of household debt and lax lending rules. New Zealand is up there too, but not because of high variable-rate lending
The UST 10yr yield is now at 4.42% and up +2 bps from yesterday.
The price of gold will start today a little higher by +US$6 from this time yesterday at US$2335/oz and yet another all-time high.
Oil prices have slipped -US$1 to just on US$85.50/bbl in the US while the international Brent price is now down a bit less at just under US$90/bbl.
The Kiwi dollar starts today at just over 60.3 USc and up +20 bps from yesterday. Against the Aussie we are softer at 91.3 AUc. Against the euro we are fractionally firmer at 55.6 euro cents. That all means our TWI-5 starts today just on 69.3 and up slightly.
The bitcoin price starts today firmer at US$71,715 and up +2.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.7%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news investors are much less sure rate cuts will come in 2024.
This week, given that American jobs growth remained strong in March, all eyes will now turn to their inflation data with CPI due out on Thursday. That is expected to show inflation rising there slightly to 3.5%, but core inflation easing slightly to 3.7%. And variations will likely colour market responses. The Americans will also release PPI data this week, along with consumer sentiment survey results for April.
Of course this week our own RBNZ reviews its OCR. And they will be joined by Canada and the EU. Australia will release its NAB business sentiment survey results, along with the Westpac consumer sentiments survey results, both tomorrow (Tuesday).
China will release its CPI and PPI data along with new lending data for March, also both on Thursday.
Over the weekend China released its March FX reserves level and it was little-changed as it has been over the prior three months.
In the US, their economy added many more jobs than expected. Analysts were thinking the expansion would be +200,000 in March from February, but in the end the headline seasonally adjusted gain was +303,000. On an actual, unadjusted basis the gain on employer payrolls was +659,000. The wider household survey saw an even larger rise of more than +1.04 mln in the month to 161.4 mln people employed both on employer payrolls and the self-employed. Adding more than +1 mln paid jobs in a month is very expansionary. Guessing here, but strong immigration (both legal and illegal) is helping fuel the expansion.
Average weekly pay rose +4.1%, bolstering this strength although that was slightly lower than the +4.3% rise to February. In any case it is more than inflation and it shows that even after absorbing the migrant flow it remains 'real'.
Today investors are looking past the fact that the Fed may delay rate cuts, realising the American economy is in much better shape than they have assumed, and equity prices are rising, even though bond yields are rising too.
The US$5 tln US consumer debt market has been expanding marginally recently although it did show a faster than usual rise in January. The February data out today shows a slower rise and one less than expected. This market indebtedness level runs at 17.8% of US GDP, very much higher than the New Zealand equivalent which is only 3.7% of our GDP.
Unfortunately, Canada's labour market isn't showing the same robust expansion in March as the US has, essentially marking time with little change after February's good gains.
Australian retail sales are rising but slower than their inflation rate. They were up +1.6% in February from a year ago. But in that same time their inflation indicator rose 3.4%. Any way you look at it, that is a volume drop.
The Australian goods trade surplus halved in February from the same month a year ago. It came in at a +AU$6.5 bln surplus, down from +AU$12.9 bln in February 2023. The reasons is the combination of falling exports (-2.4%), and import growth staying high (+17.1%). Of particular note is that both rural and non-rural exports fell more than -3%, but that gold exports were up +25% on that basis.
An updated KPMG/University of Sydney report shows that China is sharply reducing its investments in Australia in favour of other Belt & Road states - in fact investing in B&R partners so it can wind down exposure to Australia. A prime example is in nickel mining where China has invested in cheaper (and 'dirtier') nickel mining and processing. Overall in 2023 Chinese investment in Australia fell to AU$1.4 bln, and its lowest level in seventeen years (pandemic excepted).
The UST 10yr yield is now at 4.40% and up +1 bps from Saturday, up +20 bps in a week. This is its highest since late November, so a strong bond market signal.
The price of gold will start today a little higher by +US$3 from this time Saturday at US$2329/oz and yet another all-time high.
Oil prices have slipped a minor -50 USc to just on US$86.50/bbl in the US while the international Brent price is now down a bit more at just over US$90.50/bbl.
The Kiwi dollar starts today at just on 60.1 USc and unchanged from Saturday. Against the Aussie we are firmer at 91.5 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today just on 69.2 and unchanged.
The bitcoin price starts today firmer at US$69,783 and up +2.9% from this time Saturday. Volatility over the past 24 hours has been modest at just on +/- 1.5%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news markets don't seem to be worrying about coming 'bad news' ahead of tomorrow's US March labour markets report.
US initial jobless claims recorded a minor +2000 rise last week from the week before taking the total to 1.94 mln. But that was a big -74,000 decrease as more benefits expired than new ones were added. A year ago there was almost the same number of initial claims as last week.
Updated American job cut data remains incredibly low even if it is rising. US-based employers announced plans to cut 90,300 jobs in March, the most since January 2023, compared to 84,600 in February.
Tomorrow we get the March non-farm payrolls data and markets expect employer payroll jobs growth to rise +200,000. You will recall they rose +275,000 in February.
Meanwhile US exports of both goods and services were +2.1% higher in February than in January. Imports were +2.2% higher on the same basis so the overall trade balance grew fractionally in the month, although year-to-date, the goods and services deficit decreased -2.8% and remains about -2.7% of US GDP. (New Zealand's current account deficit is -6.9% of GDP.)
Canada also reported trade data for February but only for goods trade and their exports rose +5.8% to a new all-time high. Imports rose +4.6%, so their merchandise trade surplus rose to +C$1.4 bln in February.
It is a public holiday in China, Ching Ming Festival, although Hong Kong financial markets will reopen today.
Global container freight rates continued their retreat from their late January peak. They are now down -28% since then, down -3% in the past week alone. But that leaves them still +65% higher than year-ago levels. The slowness of the recent easing points out that the twin problems in both the Panama Canal (drought) and Suez Canal (security) are not going away; the decreases are because the global logistics system is adapting. Bulk cargo rates eased -7% in the past week, and are in fact now back to long-run average levels.
Steel and iron ore prices are back falling, both near their lowest in the past year, probably an early signal markets don't believe Chinese demand will recover any time soon.
And speaking of commodities, a new report says the world's population is shifting in very significant ways in an historical turning point. Also, it is not simply a matter of a static or a declining world population – the nature of that population will also change. It will be much older. The report estimates there will be twice as many people over 80 as under five – nearly 900 million over-80s worldwide by 2100. A period of unprecedented demographic and economic adaption awaits our grandchildren. There seems little doubt that small countries will have many more options than large ones, but that the pressures from 'outside' will be enormous.
And speaking of natural stresses, keep an eye on Sydney weather this weekend. They seem to be facing a rather extreme meeting of two wild and wet weather fronts.
The UST 10yr yield is now at 4.35% and little-changed from this time yesterday.
The price of gold will start today softer by -US$5 from this time yesterday at US$2288/oz. But in between it hit a new all-time high of US$2305/oz.
Oil prices have fallen -US$1 to just under US$84.50/bbl in the US while the international Brent price is now up at just under US$89/bbl.
The Kiwi dollar starts today at just on 60.4 USc and +¼c firmer than this time yesterday. Against the Aussie we are softer at 91.3 AUc. Against the euro we are firmer at 55.6 euro cents. That all means our TWI-5 starts today just on 69.4 and up +20 bps from this time yesterday.
The bitcoin price starts today firmer at US$68,048 and up +2.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.3%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again on Monday.
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The departing Chief Executive of the Insurance Council of New Zealand says if Wellington is hit with an earthquake on a similar scale to the Canterbury quakes, it would “raise some questions” on whether NZ insurers would be able to continue to purchase reinsurance at an affordable cost.
“I think reinsurers would still be there. But the ability to purchase reinsurance at a good rate and the degree of capacity that would be available, particularly for property in Wellington, could be really challenging,” he says in a new episode of interest.co.nz’s Of Interest podcast.
“Ensuring how we manage that risk is really critical because we're very dependent on offshore capital and reinsurance to help support our insurance programs in New Zealand.”
The Insurance Council says to date, private insurers have incurred over $21 billion in expenses due to the Canterbury Earthquakes.
Toka Tū Ake EQC has contributed an additional $10 billion, resulting in a total insured cost surpassing $31 billion for the event.
The Insurance Council estimates the overall economic losses for the entire sequence are estimated to exceed $40 billion.
This week marks the conclusion of Grafton's nearly 12-year tenure as CEO of the Insurance Council and he reflected on his time in the role on the podcast.
He says lessons were learnt from the 2010 and 2011 Canterbury Earthquakes, which were then applied to responses to the Kaikōura earthquake in 2016 and the Auckland floods and Cyclone Gabrielle last year as well.
“When that [Kaikōura] earthquake struck, which was just a little bit after midnight, I think, on the 14th November, a lot of people were thrown out of bed almost by the earthquake in Wellington. And after the shaking stopped, I rang my counterpart at EQC Ian Simpson [EQC’s Chief Executive at the time] and said, ‘we’ve got to do better than Canterbury and can we meet in a few hours and work out where we go from here’,” he says.
“So, within four weeks, we had the foundations of an agreement which enabled insurers to manage and settle claims on behalf of EQC. And that meant that for the customer, there was one point of accountability and responsibility for their claims, their insurer. And so it didn't matter whether it was an EQC claim or an insurer claim, they didn't get bounced around between the two.”
“So from that, we then developed a more formal and longer lasting agreement with EQC to be their agents. And I think also the experience of those events from Canterbury through to Kaikōura, meant that when the Auckland anniversary floods and Cyclone Gabrielle came along, we were well seasoned in dealing with these kinds of situations.”
Kris Faafoi will be the Insurance Council’s new Chief Executive from next week. Faafoi held a number of portfolios during the Sixth Labour Government before he quit politics in 2022, including Commerce and Consumer Affairs, Broadcasting and Media, Immigration and Civil Defence.
You can find all episodes of the Of Interest podcast here.
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Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news progress toward lower inflation is underway but the road is bumpy.
But first up today we should note that American mortgage application levels decreased again last week. Their mortgage rates moved lower last week, but that did little to ignite overall mortgage application activity which is now -13% lower that the weak year-ago levels. Their overall economy may be in a broad-based and resilient expansion but this does not include their housing market.
American employments levels are rising. Private businesses in the US hired an extra +184,000 workers in March following an upwardly revised +155,000 in February, and beating forecasts of +148,000. This is the biggest increase in hiring in eight months, with employment especially strong in services. In this survey, pay was up +5.1%. The US non-farm payrolls are out on Saturday NZ time for March and they are expected to show a +200,000 increase.
So it might have been a surprise to see that the ISM services PMI for March ease off a little (even if new order levels expanded strongly). Then again, that was not reflected in the S&P Global (ex-Markit) US services PMI which noted further rises in output and new orders, but rates of growth did ease. They found the pace of job creation moderated and selling price inflation rose to an eight-month high. Nothing here signals imminent recession, but clearly inflation is not beaten.
Fed boss Powell spoke earlier today, but kept to his recent script saying a rate cut may come later this year, but they are watching the recent firmer inflation data even if they expect it will ease back soon. A colleague suggested the first cut there won't come until Q4.
American vehicle sales were expected to rise in March but they disappointed, coming in at an annualised pace of 15.5 mln. Still, this is about the same pace we have seen since April 2023 so it is holding its rise from the depressed period two years earlier than that.
In China, new order levels boosted its Caixin services PMI in March. The expansion isn't swift but it is better than a contraction. It was the 15th straight month of growth in services activity, with new business rising to the fastest pace in the year so far.
The Qingming Festival 3 day holiday in China will mean data releases there will be light until next week. Equity markets will be closed. They may be glad of the break; a survey of local economists cast growing doubt that the "about 5%" growth target will be reached this year, and it will be progressively harder in years to come.
In Europe, inflation levels fell more than expected, getting closer to the ECB target. It declined to 2.4% in March 2024, matching November's 28-month low and that was lower that market expectations of 2.6%.
The UST 10yr yield is now at 4.36% and unchanged from this time yesterday.
The price of gold will start today firmer by +US$34 from yesterday at US$2293/oz, and a new all-time high.
Oil prices have risen +US$1 to just under US$85.50/bbl in the US while the international Brent price is now up at just under US$89.50/bbl. These are new five month highs.
The Kiwi dollar starts today at just on 60.1 USc and +½c firmer than this time yesterday. Against the Aussie we are little-changed at 91.5 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69.2 and up +20 bps from this time yesterday.
The bitcoin price starts today firmer at US$66,285 and up +1.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news yields are climbing as markets recognise the Fed is serious about wanting to see sustained inflation at 2%, and the US economy just keeps on powering ahead. And that is hurting equity valuations.
But first, the overnight dairy auction brought higher prices. In USD terms they were up +2.75% and nearly making back the drop at the prior event. However in NZD terms the gain was +4.2%, so risks to farm gate payout forecasts have faded for now. The rises were pretty much across the board and were led by cheddar cheese, WMP and butter.
In the US, the February JOLTS report delivered a little-changed set of results, far better than the expected labour market retreats. Job openings actually rose slightly.
Meanwhile US factory orders came in higher than expected. New orders rose by +1.4% from the previous month in February. This was above market expectations of a +1% increase to point to further resilience of the US economy. Year-on-year they rose +3.6%.
Adding to the bullish theme, the US Redbook index of retail sales rose +5.2% last week compared to year-ago levels.
There's more. The Logistics Manager’s Index rose to its highest reading in four months in March amid broad-based expansions in all metrics and continued progress in the transportation sector and a build-up of inventories upstream at the manufacturing and wholesale levels.
But it is not all good news; Tesla missed its delivery targets in Q1-2024 by almost -15%, their least since 2022. Their stock dived -4.8% today.. But to be fair it has been on a slide since its peak in July 2023 and has since shed more than -40%.
In China, all the news is about Country Garden's current sales failures. But we have heard that all before.
German inflation has eased to 2.2% in March from 2.5% the previous month. This was their lowest rate since May 2021, moving closer to the ECB's target of 2.0%.
In March, Australian house prices barely moved in both Sydney and Melbourne from the prior month according to CoreLogic analysis. But they zoomed higher in most other major centers. Brisbane, Adelaide and Perth all booked big gains, and year-on-year, Perth is up almost +20%.
The UST 10yr yield is now at 4.36% and up another +3 bps from this time yesterday.
The price of gold will start today firmer by +US$19 from yesterday at US$2259/oz, and only -US$7 below its new all-time high reached intra-day yesterday.
Oil prices have risen +50 USc to just on US$84.50/bbl in the US while the international Brent price is now up at US$88.50/bbl. These are five month highs.
The Kiwi dollar starts today at just on 59.6 USc and +20 bps firmer than this time yesterday. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and actually unchanged from this time yesterday.
The bitcoin price starts today softer at US$65,516 and down another sharpish -4.6% from this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.1%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news that global manufacturing indicators have turned quite positive.
First in China, their official March PMIs have set a bullish tone to start the week. Their official factory PMI rose to 50.8 from 49.1 a month earlier and export orders also recovered. The official services PMI rose to its highest since June. These were followed by the private Caixin factory PMI and that broadly confirmed to improved outlook and new expansion, actually a 13 month high.
This apparent recovery energised the Shanghai stock exchange yesterday.
In Japan, industrial production fell and their jobless rate rose, both not expected. But that data was for February. For March, their central bank sentiment survey of mostly large businesses remained broadly positive.
And in South Korea, industrial production rose and by more than expected.
Back in China, the slow motion real estate sector crash rolls on with more troubles at both Vanke and Country Garden. It is more than them of course. And banks that responded earlier to Beijing's call for them to support the sector are trapped in growing bad loans. Asset quality pressure is "immense" said one major bank.
In India, we should note a new ILO report that shows the jobless rate for Indian graduates at home was a massive 29%, almost nine times higher than the 3.4% for those who can’t read or write. The unemployment rate for young people with secondary or higher education was six times higher at 18.4%. This data reinforces David Hargreaves point that even if New Zealand's local labour market struggles, it will still look attractive to Indian immigrants. It isn't our attractiveness that draws them, it is the job pressure at home that pushes them out.
In the US, the widely-watched ISM factory PMI has been shifted into expansion mode on the strength of new order levels. It joins the internationally-benchmarked S&P Global (ex-Markit) one which already moved to expansion the previous month. But it was the size of the ISM shift that got market attention, enough that the view formed it will keep the Fed from cutting any time soon. Both showed prices are no longer falling.
It is not all good news in the US. 'Extend & Pretend' is back, especially in US commercial office markets and particularly for office buildings. The US Fed is on watch for financial stability risks although they claim it is an issue for small and mid-sized banks, not the systemically important big banks.
And staying in the US, Fed Chair Powell said that PCE inflation data for February was along the lines of what the Fed wants to see and broadly expected. However, the latest readings aren’t as good as what policymakers saw last year and the Fed can wait to become more confident before cutting interest rates. In fact, he said policymakers don't need to be in a hurry to reduce borrowing costs. The Fed's base case is for inflation to come down but if the base case doesn't happen the Fed would hold rates where they are for longer, he said. Today's PMI's reinforce that position.
But he was responding to PCE inflation data for February which rose +2.5% and that was following a January 2.4% rate and a December 2.6% rate. Core PCE inflation rose 2.8% after being 2.9% in the prior two months. Powell and his colleagues won't be unhappy with these levels but they aren't seeing downward progress either.
Meanwhile American personal incomes were +1.7% higher than a year ago and personal consumption is +2.4% higher on the same basis. This is the first time income growth trailed spending growth in a long time. It is too soon to know whether this is a turning point, or just a data blip.
So perhaps it will be a surprise to know that the University of Michigan sentiment index rose more than expected to its highest level since July 2021.
In Australia, inflation expectations, which had been suck at 4.5% since December, actually slipped in March to 4.3%. While this may be its lowest since October 2021, it does emphasise just how sticky Aussie CPI inflation has become.
Meanwhile, China has dropped its tariffs on Australian wine after years of sanctions that crippled the billion-dollar export industry.
The UST 10yr yield is now at 4.33% and up +14 bps from the end of trading last week.
The price of gold will start today firmer by +US$7 from yesterday at US$2240/oz, but -US$26 below its new all-time high reached over the past 24 hours.
Oil prices have risen +US$1 to just on US$84/bbl in the US while the international Brent price is now just over US$87.50/bbl.
The Kiwi dollar starts today at just on 59.4 USc and -35 bps lower than this time yesterday. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and down -20 bps from this time yesterday.
The bitcoin price starts today softer at US$68,671 and down a sharpish -3.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.4%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news natural events will likely have an increasing say in how the international economy operates.
But first in the US, mortgage applications were lower last week again, and the good rises in the first two weeks of the month are fading. Even essentially unchanged mortgage interest rates isn't stimulating new loan applications. The talk of an American housing market recovery might be a mirage.
There was another UST 7yr bond auction earlier today and that brought rising demand. Today's event delivered a median yield of 4.14% which was lower than the 4.27% at the prior equivalent event a month ago. It is only marginal, but the interest rate load on the US Federal government borrowing is easing.
China's industrial profits bounced-back in February, rising by +10.2% from the same month a year ago. They are cheering the 'strong rise'. But we must recall they were especially weak last year. Compared with 2022, the February 2024 result is down -21.2%. And it is -17.7% lower than 2021's result. So they shouldn't be too satisfied. There was almost no recovery in State-owned enterprises - all the current 'recovery' came from the private sector.
The central bank of Sweden likes what it sees locally in the track of inflation. It is currently running at 4.5% and has been sticky. But they expect it will fall soon to near 2%. That view encouraged them to signal that their current policy interest rate of 4% will be trimmed soon, starting in May or June.
In Australia, their Monthly Inflation Indicator was at 3.4% in February. This is the same rate they reported in December and January. Their core rate fell to 3.9% in February, down from 4.1% in January. Like everyone, they are finding it hard to wring out the last elements of excessive inflation. New Zealand's March quarter CPI rate will be released on Wednesday, April 17, 2024. In Q4-2023 it ran at 4.7%.
You know about the West African crisis hitting cocoa production and prices. Now you should know that a cyclone in Madagascar will roil the market for vanilla beans. Vanilla is a main source of foreign currency for the country.
And back in the US, warnings are starting to appear that their hurricane season this year could be their biggest and most damaging.
Further, we should note that a giant of psychology and a huge contributor to behavioural economics, Daniel Kahneman has died earlier today. He was a Nobel Laureate, and if you haven't read his hugely influential book Thinking, Fast and Slow, which summarises much of his research, you should take the time to do so.
The UST 10yr yield will today at 4.19% and down -5 bps from this time yesterday.
The price of gold will start today firmer by +US$14 from yesterday at US$2191/oz.
Oil prices have fallen -US$1 to just under US$81/bbl in the US while the international Brent price is now at US$85/bbl. American crude oil stocks are running much higher than anticipated.
The Kiwi dollar starts today at just on 60 USc and marginally softer than this time yesterday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we have softened slightly to 55.4 euro cents. That all means our TWI-5 starts today just under 69.3 and again little-changed.
The bitcoin price starts today softer at US$68,998 and a full -1.0% dip since this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.4%.
Over the Easter holiday break, we will have normal weekend service, and will return with these daily briefings on Tuesday, April 2, 2024.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again on Tuesday.
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Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news that is increasingly positive in the world's largest economy.
First up today, the retail signals in the US are quite positive. Their Redbook survey of bricks-and-mortar store shows sales rose +3.9% last week from the same week a year ago, handily besting inflation again.
A bounce back in orders for transport equipment, including aircraft, gave a more-than-expected push to their February durable goods order levels. They came in +8.9% higher than year-ago levels. The capital goods orders came in +11.8% higher on the same basis. Certainly board rooms are giving bullish signals about the future.
Meanwhile, February house sales volumes rose in February. They were up a strong +9.5% from January on a seasonally-adjusted basis, but that still left these transaction volumes -3.3% lower than year ago levels. House prices rose marginally, ending a long string of month-on-month retreats that started in July 2023. It's a shift higher that others have noted too.
Given this set of positives, it maybe a surprise that consumer sentiment didn't improve in the March Conference Board survey. But it didn't slip either, holding its recent levels. The current mood improved but anxiety about the future did too.
The latest US Treasury 5yr note auction was very well supported, delivering a median yield of 4.19% and slightly lower than the 4.25% at the prior equivalent event a month ago. These public debt auctions are not showing any of the expected stress the doomsters anticipated by now. The lower yields are probably driven by normal market expectations of upcoming rate cuts by the Fed. Of course that doesn't mean the outlook is any better - it isn't if no action is taken by Congress to address the deficits.
In Canada a measure of their wholesale trade activity rose more than expected in February.
In Singapore, they reported a better-than-expected rise in manufacturing production. It grew +3.8% in February from a year ago, easily beating market expectations of a +0.5% rise. The upturn was mainly boosted by a sharp rebound in biomedical manufacturing.
The UST 10yr yield will today at 4.24% and down -2 bps from this time yesterday.
The price of gold will start today marginally firmer by +US$2 from yesterday at US$2177/oz.
Oil prices have risen +50 USc to just under US$82/bbl in the US while the international Brent price is unchanged at US$86/bbl.
The Kiwi dollar starts today at just on 60.1 USc and marginally firmer than this time yesterday. Against the Aussie we are also marginally firmer at just over at 91.9 AUc. Against the euro we have firmed slightly to 55.5 euro cents. That all means our TWI-5 starts today over 69.3 and again little-changed.
The bitcoin price starts today softer at US$69,695 and a -0.8% slip since this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 0.8%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
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Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news the American economic juggernaut rolls on, dominating global markets.
American new home sales levels in February missed estimates, but ~7% mortgage interest rates basically explain that. They eased by a minor -0.3% from January to an annualised rate of 662,000, and below market expectations of a 675,000 rate.
Although the Dallas Fed factory survey eased back a bit in March, it is still at levels better than for most of the past two years. A contracting oil patch doesn't really qualify as 'news' any more.
Nationally, the US Chicago Fed's National Activity Index expanded in February and pushing past the January retreat. But to be fair it is in a bit of a yo-yo pattern and has been since the end of the pandemic.
Recent estimates of American economic activity generally agree its economy is expanding at about a +2% (real) clip in Q1-2024. For an economy as large as their, this represents the bulk of the global economic expansion, adding more than +US$1 tln in nominal economic activity at an annualised pace. Nowhere else comes close.
Interestingly, today's UST 2yr bond auction has brought slightly lower yields. It ended with a median 4.54% yield today, compared with the equivalent event a month ago at 4.64%. Investors are not demanding higher yields from these benchmark bonds despite the rise in issuance. The doomsters are still waiting for their moment – it’s been a very long time for them.
In China, the IMF has noted that China needs to take a different path to recovery. It's "fork in the road" comments challenge China's standard paybook to stimulus. Presently they are using their considerable reserves to support the yuan against market challenges.
In Taiwan, retail sales grew an eye-catching +9.3% in February from the same month a year ago, a sharp rise from January on the same basis. This was their sharpest growth in retail activity since June 2023. Clothing and food drove the expansion.
But things aren't so bullish for Taiwanese industrial production which fell -1% from year-ago levels in February darta released overnight.
We have noted the rise and rise in cocoa prices before, but they reached new extreme levels overnight, based on recent poor harvest results in West Africa. US$10,000/tonne (NZ$17/kg) beckons.
The UST 10yr yield will today at 4.26% and up +6 bps from this time yesterday.
The price of gold will start today firmer by +US$10 from yesterday at US$2175/oz.
Oil prices have risen +US$1 to US$81.50/bbl in the US while the international Brent price is now up at US$86/bbl.
The Kiwi dollar starts today at just on 60 USc and marginally firmer that this time yesterday. Against the Aussie we are -¼c lower at just over at 91.8 AUc. Against the euro we are still just on 55.4 euro cents. That all means our TWI-5 starts today under 69.3 and little-changed.
The bitcoin price starts today up strongly at US$70,247 and a +7.4% rise since this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.3%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.
- Visa fler
