CHINA PRESS: China Should Not Consider Zero Tariffs

ANZ is forecasting a 0.2pp rise in the Q1 unemployment rate to 5.3%, which would be the highest since Q4 2016, as growth in labour supply exceeds labour demand. It doesn’t think the data or the upcoming budget on May 22 will change the monetary policy outlook and that the updated forecasts for the May 28 meeting will be more important, especially given the global environment. 

• ANZ highlights “that a positive surprise on the day (eg a tighter labour market than expected) may be more than offset by a more pessimistic growth outlook, while a negative surprise could instil a greater sense of urgency to lean against US-induced economic headwinds.”
• It believes that there is a gradual NZ economic recovery but that this will take time to be seen in job statistics given the usual lags.
• ANZ “pencilled in a modest 0.1% q/q rise in employment. After two consecutive quarters of contraction, that would signify that labour demand is rounding the corner. That said, the volatile global economic backdrop could cause employment growth to waver a little in the near term.”
• “Looking through the noise, wage growth is expected to continue to ease – consistent with loose labour market conditions and the RBNZ’s objective of bringing down domestic inflation pressures.”
• “On the one hand, loose labour market conditions are likely to continue to drive some discouraged worker effects across households. But on the other hand, the rapid drop in interest rates over the past few months could bolster expectations that job opportunities are about to become a little more abundant, meaning it’s time to dust off the CV. Weighing it up, we’re pencilling in no change in the participation rate at 71.0%.”

• April’s PMI services unexpectedly dipped in April in signs that the US tariff war is hurting.
• The CAIXIN PMI services had printed above 51 for six successive months and market expectations were for a continuation of this theme and a print of +51.8.
• April’s result of +50.7 is the lowest since September and could be an early warning sign that the economy is slowing quicker than first thought.
• The government’s official GDP growth forecast of 5% may be under threat and could bring about further policy intervention to support what looks like softening growth.
• The details within today’s release show  a modest uptick in employment from +48.6 to +49.2; yet still in contraction and prices charged relative to last month rose. 

Ben Hunt of Epsilon Theory wrote a thread on X : “It's not the tariffs. It's not the recession. It's not the tax cuts. These are just the catalysts, the vehicles through which the true enemy shows himself.” 

• “I feel as strongly today as I did in 2008 that our true enemy has not yet revealed himself.”
• “I feel as strongly today as I did in 2008 that the ‘normal’ market discourse around recession and jobs and inventories acts as a distraction from the systemic risk that is manifesting itself.”
• “I feel as strongly today as I did in 2008 that to the degree systemic risk is being discussed, it is described as ‘well-contained’ by the US government even though we can all see with our own eyes that it is not contained at all.”
• “In 2008 the true enemy was the over-financialization of the US residential mortgage market, and the catalyst for the true enemy to wreak havoc in the global financial system was a sharp, universal decline in US home prices.”
• “In 2025 the true enemy is the over-financialization of the US Treasury market, and the catalyst for the true enemy to wreak havoc in the global financial system is a sharp, universal decline in the full faith and credit of the United States.”
• “The true enemy is uncompensated risk in the risk-free securities that have been financialized and levered across every substrate of the global system, uncompensated risk that comes from a diminishment of the full faith and credit of the United States.”
• https://x.com/EpsilonTheory/status/1919474733508178055