New Zealand Interest Rate
During its August meeting, the Reserve Bank of New Zealand chose to maintain the official cash rate (OCR) at 5.5%, aligning with market expectations and continuing the rate pause that began in the previous month. The central bank acknowledged that monetary conditions have acted to curtail spending and alleviate cost pressures, following a series of rate hikes totaling 525 basis points since October 2021. Despite these efforts, inflation remains elevated. To bring inflation within the target range of 1% to 3% annually by the second half of 2024, the OCR will need to be maintained at a restrictive level.
The Reserve Bank of New Zealand's projection maintains the OCR at its current rate of 5.5%, with a potential upward risk of further tightening. However, any potential cuts are not anticipated until the first half of 2025. While the central bank views the risks around inflation projections as balanced, there exists a possibility that economic activity and inflation measures may not decelerate to the extent anticipated. Looking ahead, a potential slowdown in overseas demand, particularly from China, could exert greater pressure on New Zealand's exports.
New Zealand Inflation Rate
In the second quarter of 2023, New Zealand's annual inflation rate registered a 6% increase compared to the same period in the previous year. This marked the second consecutive quarter of deceleration from the 6.7% growth observed in the first quarter. Despite the moderation, these inflation levels remain notably high and represent a trend not seen since the 1990s. Notably, the influence of food prices persisted as the primary driver of inflation, with escalating costs of vegetables, ready-to-eat foods, and dairy products such as milk, cheese, and eggs.
Housing and household utilities emerged as the second-largest contributor to inflation, propelled by ascending prices in both construction and rental sectors. Additionally, inflation received a boost from the recreation and culture category, driven by elevated prices for pets and related products. On a quarterly basis, the consumer price index reflected a 1.1% uptick in the second quarter, a slowdown compared to the 1.2% increase witnessed in the previous quarter.
New Zealand GDP Growth Rate
During the first quarter of 2023, New Zealand's economy contracted by 0.1% compared to the previous quarter, aligning with expectations and marking the second period of contraction since the beginning of 2022. This downturn follows a revised 0.7% contraction in the preceding quarter. The primary industries were the most affected, experiencing a 0.5% decrease primarily driven by declines in agriculture, forestry, and fishing, which contracted by 0.6%. In the goods-production sector, a 0.4% decline was observed, largely attributed to a reduction in manufacturing activity, which fell by 1.19%.
Furthermore, the services industry also faced a slight dip of 0.6%, driven by contractions in several segments. Notably, the professional, scientific, technical, administrative, and support sectors registered a notable 3.5% contraction, while the transport, postal, and warehousing industry saw a decline of 2.2%. Despite this quarter's contraction, the Gross Domestic Product (GDP) managed to grow by 2.3% compared to the same period a year earlier, albeit at a slower pace than the 2.2% rise witnessed in the preceding quarter.
New Zealand Unemployment Rate
In the second quarter of 2023, New Zealand's unemployment rate climbed to 3.6%, reaching its highest level since the June quarter of 2021. This marked an increase from the previous quarter's rate of 3.4%, and it surpassed market expectations of 3.5%. Concurrently, the underutilization rate, a broader gauge of available labor resources, also experienced an uptick to 9.3% from the first quarter's 9%.
On a more positive note, the labor force participation rate achieved a noteworthy milestone, reaching 72.4%. This rate represents the highest recorded level since 1986 and follows the 72% mark attained in the March quarter. In terms of employment, the rate registered at 69.8%, up from the revised 69.6% observed in the prior quarter.
New Zealand Current Account
New Zealand's current account deficit displayed a notable improvement, narrowing to NZD 5.2 billion in the first quarter of 2023 from NZD 6.6 billion recorded during the same period the previous year. This outcome surpassed the NZD 6.3 billion forecast. The latest figure marks the smallest deficit observed since the second quarter of 2021.
Contributing to this positive trend, the services account transitioned into a surplus of NZD 0.2 billion, marking a significant shift from the NZD 2.1 billion deficit registered in Q1 2022. Moreover, the secondary income segment recorded a surplus of NZD 0.05 billion, contrasting with the NZD 0.1 billion deficit observed a year earlier. Conversely, the primary income deficit remained relatively stable at NZD 2.7 billion.
However, the goods deficit expanded to NZD 2.7 billion, compared to NZD 1.6 billion in the corresponding quarter of the previous year.
New Zealand Money Supply M1
In New Zealand, the Money Supply M1 demonstrated an increase, reaching 120,711 NZD Million in June, up from 120,150 NZD Million recorded in May 2023.
United States Fed Funds Rate
In July of 2023, the Federal Reserve implemented an anticipated move by raising the target range for the federal funds rate by 25 basis points, reaching the bracket of 5.25% to 5.5%. This decision, aligning with market projections, propelled borrowing costs to their loftiest point since January 2001.
Amidst this decision, policymakers reiterated their commitment to vigilant monitoring of incoming data's implications on the economic outlook. This proactive approach would enable them to make necessary adjustments to the monetary policy stance in case emerging risks could potentially hinder the achievement of both inflation and employment goals. Policymakers emphasized their consideration of a broad spectrum of factors, encompassing labor market conditions, inflationary pressures, inflation expectations, as well as global financial dynamics.
The release of meeting minutes on August 16th revealed that a majority of participants maintained their perspective on considerable upward risks to inflation. This perception suggested a potential requirement for additional tightening of monetary policy.
United States Inflation Rate
In July 2023, the annual inflation rate in the United States picked up momentum, reaching 3.2%, a rise from June's 3%, albeit slightly below the forecasted 3.3%. This shift marked an interruption in the twelve consecutive months of decrease, largely attributed to base effects. Notably, a year prior, inflation had initiated a descent from its peak of 9.1%.
During July 2023, the energy sector saw a decrease of 12.5% in costs, a less pronounced drop compared to June's 16.7%. This decline was less severe for fuel oil (-26.5% compared to -36.6%), gasoline (-19.9% compared to -26.5%), and utility gas service (-13.7% compared to -18.6%). Conversely, the cost of apparel increased by 3.2% (up from 3.1%), along with a larger uptick in transportation services costs, which rose to 9% (compared to 8.2%).
On the other hand, electricity prices experienced a more modest increase of 3%, a decrease from June's 5.4%. Inflation rates decelerated for food (4.9% compared to 5.7%), shelter (7.7% compared to 7.8%), and new vehicles (3.5% compared to 4.1%). Medical services witnessed a decline in cost by 1.5% (as opposed to the previous -0.8%), and prices for used cars and trucks dropped by 5.6% (compared to the previous -5.2%).
Meanwhile, core inflation, which excludes food and energy, eased to 4.7% in July from June's 4.8%, slightly below the projected 4.8%.
United States GDP Growth Rate
In the second quarter of 2023, the U.S. economy exhibited a robust annualized growth of 2.4% quarter-on-quarter, surpassing the 2% expansion of the previous period and exceeding market predictions of 1.8%. This revelation emerged from the advance estimate.
A notable driver of this growth was the sharp acceleration in nonresidential fixed investment, which soared by 7.7% (compared to the earlier 0.6%). This surge was led by a notable recovery in equipment investment, which posted a remarkable 10.8% growth (rebounding from the previous -8.9%), and intellectual property products, which increased by 3.9% (up from 3.1%). Additionally, private inventories contributed positively to growth, adding 0.14 percentage points, a notable reversal from the negative contribution of -2.14 in Q1.
In contrast, consumer spending experienced a significant slowdown, registering at 1.6% growth (in contrast to the previous 4.2%). This deceleration, despite surpassing market expectations, reflected a moderation in inflation and continued tightness in the labor market. While spending on goods witnessed a sharp deceleration (0.7% compared to the earlier 6%), expenditure on services remained robust, growing at 2.1% (compared to 3.2%).
Public expenditure increased at a much softer pace, posting a growth of 2.6% (compared to 5%). However, net trade exerted a negative impact on growth, subtracting 0.12 percentage points, primarily due to a 10.8% drop in exports and a comparatively smaller decline of 7.8% in imports. Notably, residential investment continued its downward trajectory, declining by 4.2% (compared to the previous -4%).
United States Unemployment Rate
In July 2023, the unemployment rate in the United States experienced a marginal decline, settling at 3.5%, compared to June's 3.6%. This figure notably surpassed market expectations, which had anticipated a rate of 3.6%. The ranks of the unemployed saw a reduction of 116,000 individuals, bringing the total to 5.841 million. In tandem, employment levels displayed a positive trajectory, rising by 268,000, culminating in a total of 161.262 million employed individuals.
The broader measure of unemployment, encompassing those who desire employment but have ceased searching, as well as those working part-time due to the inability to secure full-time positions, was indicated by the U-6 unemployment rate. This gauge fell to 6.7% in July, a decrease from June's 6.9%.
The labor force participation rate, a key indicator of workforce engagement, remained stable at 62.6%. Importantly, this rate held its ground at the highest level recorded since March 2020.
United States Current Account
In the first quarter of 2023, the United States registered a current account deficit amounting to $219.3 billion. This figure stood higher than the upwardly revised deficit of $216.2 billion noted in the preceding quarter, as well as surpassing expectations of a $217.5 billion deficit. This deficit, equivalent to 3.3% of the current-dollar Gross Domestic Product (GDP), reflects the balance of trade and financial flows.
Examining the components, the secondary income gap expanded to $49.6 billion from the prior $40.7 billion. This shift was propelled by a decrease in receipts attributed to general government transfers, particularly fines and penalties, while payments increased due to a surge in private transfers, primarily insurance-related transfers.
Meanwhile, the primary income surplus narrowed to $31.3 billion, a decrease from the previous $38.1 billion. This shift resulted from a scenario where payments outpaced receipts. The surge in payments was mainly attributed to interest on loans and deposits, owing to elevated short-term interest rates.
In contrast, the goods and services gap contracted to $201 billion from the previous $213.5 billion. This was influenced by a surge in exports, notably of medicinal, dental, and pharmaceutical products, along with goods transferred through the Presidential Drawdown Authority. Imports, on the other hand, experienced a reduction, largely due to a decrease in petroleum and related products, as well as chemicals.
United States Money Supply M2
In the United States, the Money Supply M2 experienced an uptick, rising to 20,889.50 USD Billion in June, compared to the figure of 20,841.70 USD Billion recorded in May 2023.
📈 The scenario I am playing out assumes continue of increases in current week. I do not exclude changing the scenario in case of a sudden change in the market situation. I am aware of the possibility of a correction at any time, this should be taken into account, In case of a change of outlook I will publish an update in the next post
🚀 If you appreciate my work and effort put into this post, I encourage you to leave a like and follow on my profile 🚀
During its August meeting, the Reserve Bank of New Zealand chose to maintain the official cash rate (OCR) at 5.5%, aligning with market expectations and continuing the rate pause that began in the previous month. The central bank acknowledged that monetary conditions have acted to curtail spending and alleviate cost pressures, following a series of rate hikes totaling 525 basis points since October 2021. Despite these efforts, inflation remains elevated. To bring inflation within the target range of 1% to 3% annually by the second half of 2024, the OCR will need to be maintained at a restrictive level.
The Reserve Bank of New Zealand's projection maintains the OCR at its current rate of 5.5%, with a potential upward risk of further tightening. However, any potential cuts are not anticipated until the first half of 2025. While the central bank views the risks around inflation projections as balanced, there exists a possibility that economic activity and inflation measures may not decelerate to the extent anticipated. Looking ahead, a potential slowdown in overseas demand, particularly from China, could exert greater pressure on New Zealand's exports.
New Zealand Inflation Rate
In the second quarter of 2023, New Zealand's annual inflation rate registered a 6% increase compared to the same period in the previous year. This marked the second consecutive quarter of deceleration from the 6.7% growth observed in the first quarter. Despite the moderation, these inflation levels remain notably high and represent a trend not seen since the 1990s. Notably, the influence of food prices persisted as the primary driver of inflation, with escalating costs of vegetables, ready-to-eat foods, and dairy products such as milk, cheese, and eggs.
Housing and household utilities emerged as the second-largest contributor to inflation, propelled by ascending prices in both construction and rental sectors. Additionally, inflation received a boost from the recreation and culture category, driven by elevated prices for pets and related products. On a quarterly basis, the consumer price index reflected a 1.1% uptick in the second quarter, a slowdown compared to the 1.2% increase witnessed in the previous quarter.
New Zealand GDP Growth Rate
During the first quarter of 2023, New Zealand's economy contracted by 0.1% compared to the previous quarter, aligning with expectations and marking the second period of contraction since the beginning of 2022. This downturn follows a revised 0.7% contraction in the preceding quarter. The primary industries were the most affected, experiencing a 0.5% decrease primarily driven by declines in agriculture, forestry, and fishing, which contracted by 0.6%. In the goods-production sector, a 0.4% decline was observed, largely attributed to a reduction in manufacturing activity, which fell by 1.19%.
Furthermore, the services industry also faced a slight dip of 0.6%, driven by contractions in several segments. Notably, the professional, scientific, technical, administrative, and support sectors registered a notable 3.5% contraction, while the transport, postal, and warehousing industry saw a decline of 2.2%. Despite this quarter's contraction, the Gross Domestic Product (GDP) managed to grow by 2.3% compared to the same period a year earlier, albeit at a slower pace than the 2.2% rise witnessed in the preceding quarter.
New Zealand Unemployment Rate
In the second quarter of 2023, New Zealand's unemployment rate climbed to 3.6%, reaching its highest level since the June quarter of 2021. This marked an increase from the previous quarter's rate of 3.4%, and it surpassed market expectations of 3.5%. Concurrently, the underutilization rate, a broader gauge of available labor resources, also experienced an uptick to 9.3% from the first quarter's 9%.
On a more positive note, the labor force participation rate achieved a noteworthy milestone, reaching 72.4%. This rate represents the highest recorded level since 1986 and follows the 72% mark attained in the March quarter. In terms of employment, the rate registered at 69.8%, up from the revised 69.6% observed in the prior quarter.
New Zealand Current Account
New Zealand's current account deficit displayed a notable improvement, narrowing to NZD 5.2 billion in the first quarter of 2023 from NZD 6.6 billion recorded during the same period the previous year. This outcome surpassed the NZD 6.3 billion forecast. The latest figure marks the smallest deficit observed since the second quarter of 2021.
Contributing to this positive trend, the services account transitioned into a surplus of NZD 0.2 billion, marking a significant shift from the NZD 2.1 billion deficit registered in Q1 2022. Moreover, the secondary income segment recorded a surplus of NZD 0.05 billion, contrasting with the NZD 0.1 billion deficit observed a year earlier. Conversely, the primary income deficit remained relatively stable at NZD 2.7 billion.
However, the goods deficit expanded to NZD 2.7 billion, compared to NZD 1.6 billion in the corresponding quarter of the previous year.
New Zealand Money Supply M1
In New Zealand, the Money Supply M1 demonstrated an increase, reaching 120,711 NZD Million in June, up from 120,150 NZD Million recorded in May 2023.
United States Fed Funds Rate
In July of 2023, the Federal Reserve implemented an anticipated move by raising the target range for the federal funds rate by 25 basis points, reaching the bracket of 5.25% to 5.5%. This decision, aligning with market projections, propelled borrowing costs to their loftiest point since January 2001.
Amidst this decision, policymakers reiterated their commitment to vigilant monitoring of incoming data's implications on the economic outlook. This proactive approach would enable them to make necessary adjustments to the monetary policy stance in case emerging risks could potentially hinder the achievement of both inflation and employment goals. Policymakers emphasized their consideration of a broad spectrum of factors, encompassing labor market conditions, inflationary pressures, inflation expectations, as well as global financial dynamics.
The release of meeting minutes on August 16th revealed that a majority of participants maintained their perspective on considerable upward risks to inflation. This perception suggested a potential requirement for additional tightening of monetary policy.
United States Inflation Rate
In July 2023, the annual inflation rate in the United States picked up momentum, reaching 3.2%, a rise from June's 3%, albeit slightly below the forecasted 3.3%. This shift marked an interruption in the twelve consecutive months of decrease, largely attributed to base effects. Notably, a year prior, inflation had initiated a descent from its peak of 9.1%.
During July 2023, the energy sector saw a decrease of 12.5% in costs, a less pronounced drop compared to June's 16.7%. This decline was less severe for fuel oil (-26.5% compared to -36.6%), gasoline (-19.9% compared to -26.5%), and utility gas service (-13.7% compared to -18.6%). Conversely, the cost of apparel increased by 3.2% (up from 3.1%), along with a larger uptick in transportation services costs, which rose to 9% (compared to 8.2%).
On the other hand, electricity prices experienced a more modest increase of 3%, a decrease from June's 5.4%. Inflation rates decelerated for food (4.9% compared to 5.7%), shelter (7.7% compared to 7.8%), and new vehicles (3.5% compared to 4.1%). Medical services witnessed a decline in cost by 1.5% (as opposed to the previous -0.8%), and prices for used cars and trucks dropped by 5.6% (compared to the previous -5.2%).
Meanwhile, core inflation, which excludes food and energy, eased to 4.7% in July from June's 4.8%, slightly below the projected 4.8%.
United States GDP Growth Rate
In the second quarter of 2023, the U.S. economy exhibited a robust annualized growth of 2.4% quarter-on-quarter, surpassing the 2% expansion of the previous period and exceeding market predictions of 1.8%. This revelation emerged from the advance estimate.
A notable driver of this growth was the sharp acceleration in nonresidential fixed investment, which soared by 7.7% (compared to the earlier 0.6%). This surge was led by a notable recovery in equipment investment, which posted a remarkable 10.8% growth (rebounding from the previous -8.9%), and intellectual property products, which increased by 3.9% (up from 3.1%). Additionally, private inventories contributed positively to growth, adding 0.14 percentage points, a notable reversal from the negative contribution of -2.14 in Q1.
In contrast, consumer spending experienced a significant slowdown, registering at 1.6% growth (in contrast to the previous 4.2%). This deceleration, despite surpassing market expectations, reflected a moderation in inflation and continued tightness in the labor market. While spending on goods witnessed a sharp deceleration (0.7% compared to the earlier 6%), expenditure on services remained robust, growing at 2.1% (compared to 3.2%).
Public expenditure increased at a much softer pace, posting a growth of 2.6% (compared to 5%). However, net trade exerted a negative impact on growth, subtracting 0.12 percentage points, primarily due to a 10.8% drop in exports and a comparatively smaller decline of 7.8% in imports. Notably, residential investment continued its downward trajectory, declining by 4.2% (compared to the previous -4%).
United States Unemployment Rate
In July 2023, the unemployment rate in the United States experienced a marginal decline, settling at 3.5%, compared to June's 3.6%. This figure notably surpassed market expectations, which had anticipated a rate of 3.6%. The ranks of the unemployed saw a reduction of 116,000 individuals, bringing the total to 5.841 million. In tandem, employment levels displayed a positive trajectory, rising by 268,000, culminating in a total of 161.262 million employed individuals.
The broader measure of unemployment, encompassing those who desire employment but have ceased searching, as well as those working part-time due to the inability to secure full-time positions, was indicated by the U-6 unemployment rate. This gauge fell to 6.7% in July, a decrease from June's 6.9%.
The labor force participation rate, a key indicator of workforce engagement, remained stable at 62.6%. Importantly, this rate held its ground at the highest level recorded since March 2020.
United States Current Account
In the first quarter of 2023, the United States registered a current account deficit amounting to $219.3 billion. This figure stood higher than the upwardly revised deficit of $216.2 billion noted in the preceding quarter, as well as surpassing expectations of a $217.5 billion deficit. This deficit, equivalent to 3.3% of the current-dollar Gross Domestic Product (GDP), reflects the balance of trade and financial flows.
Examining the components, the secondary income gap expanded to $49.6 billion from the prior $40.7 billion. This shift was propelled by a decrease in receipts attributed to general government transfers, particularly fines and penalties, while payments increased due to a surge in private transfers, primarily insurance-related transfers.
Meanwhile, the primary income surplus narrowed to $31.3 billion, a decrease from the previous $38.1 billion. This shift resulted from a scenario where payments outpaced receipts. The surge in payments was mainly attributed to interest on loans and deposits, owing to elevated short-term interest rates.
In contrast, the goods and services gap contracted to $201 billion from the previous $213.5 billion. This was influenced by a surge in exports, notably of medicinal, dental, and pharmaceutical products, along with goods transferred through the Presidential Drawdown Authority. Imports, on the other hand, experienced a reduction, largely due to a decrease in petroleum and related products, as well as chemicals.
United States Money Supply M2
In the United States, the Money Supply M2 experienced an uptick, rising to 20,889.50 USD Billion in June, compared to the figure of 20,841.70 USD Billion recorded in May 2023.
📈 The scenario I am playing out assumes continue of increases in current week. I do not exclude changing the scenario in case of a sudden change in the market situation. I am aware of the possibility of a correction at any time, this should be taken into account, In case of a change of outlook I will publish an update in the next post
🚀 If you appreciate my work and effort put into this post, I encourage you to leave a like and follow on my profile 🚀
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💲 To keep up to date with all my activities I invite you to visit my Telegram 💲
💲 www.t.me/Investmatez 💲
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