Here's our summary of key economic events overnight with news that bond yields continue to push higher.
But first, US retail activity is still expanding at a good clip even though the year-on-year base was weakish. But those base effects are falling away and the reported gains are lower now.
However American households are just not taking on new debt like they used to. Consumer debt rose by just +US$19 bln in December, and that was much less than the downwardly revised +US$39 bln gain in the previous month. It was also below market expectations of a +US$22 bln rise. They ended the year with household debt levels up just +5.9% and barely holding CPI. From pre-pandemic, household debt is up at just a +2.9% annual rate. (In 2019, it rose +4.6%.)
But even if they are falling away at the end of the year, at those growth rates, over the whole year, the increase is still material. Total household debt grew +US$1 tln in 2021 when US GDP grew +US$2.5 tln in the same period. US household debt is now 64.9% of US economic activity (GDP). But that is down from 67.8% at the end of 2020 and 65.2% at the end of 2019.
The US trade gap in both goods and services rose 27% to hit -US$859 bln in 2021, an annual record as imports grew faster than exports. The imports surged +20.5% while exports rose +18.5% from the prior year. That deficit is -3.6% of US GDP. For reference, the NZ 2021 trade deficit on the same basis was -1.8% of NZ GDP.
The latest US Treasury bond tender, for their 3 year Note, reveals that median yields are up sharply. They were 1.54% in today's tender, up from 1.19% at the equivalent tender a month ago. Bidding levels remained strong.
In Canada, they also reported a trade deficit in December, an unexpected outcome for them and their first since May. Imports rose +3.7% while exports fell -0.9%.
Household spending in Japan unexpectedly fell -0.2% in real terms from the prior year in December 2021, after a -1.3% fall in November and missing market forecasts of a +0.3% rise.
In China, we should note that their housing market remained sluggish during the Spring Festival this year and new home sales were significantly lower than a year earlier, with smaller cities under great pressure. New home transactions slid by almost half from a year earlier and falling by -8% from the same period in 2019. No word on how prices have fared in this retrenchment.
We should also note that the price of carbon is racing higher, roiling basic food markets and prices. In the EU, their carbon price rose to €96.70/tonne overnight (NZ$167/tonne). This is up +20% in the first six weeks of 2022. Meanwhile, the New Zealand carbon price is now NZ$78.30/NZU and up +13% in the same time period. The Australian equivalent is now up over AU$55/tonne (NZ$59). So long as New Zealand only supplies food for 'the rich', we should be ok.
In Australia, the widely watched NAB business confidence survey for January was out late yesterday. That shows business conditions deteriorated in January as Omicron caused infections to reach unprecedented levels, triggering consumer caution and staff shortages. Profitability, trading conditions, and employment all fell, with the impact felt across almost all states and industries. But, businesses are looking past all that and confidence rebounded in January with firms optimistic that the outbreak would be short-lived, and consistent with this, forward orders remained steady.
In NSW, there has been a drop to 9,690 new community cases reported yesterday, now with 76,465 active locally-acquired cases, and another 18 daily deaths. There are now 2,068 in hospital there, off their high. In Victoria they reported 9,785 more new infections yesterday. There are now 58,449 active cases in that state - and there were 20 more deaths there. Queensland is reporting 5,178 new cases and 12 more deaths. In South Australia, new cases have slipped to 1296 yesterday and four deaths. The ACT has 323 new cases and no deaths, and Tasmania 601 new cases and no deaths. Overall in Australia, about 26,700 new cases have been reported so far although not all counts are in yet.
The UST 10yr yield opens today at 1.96% and up another +3 bps and another two year high. The UST 2-10 rate curve starts today little-changed at +62 bps. Their 1-5 curve is a little steeper at +92 bps, while their 3m-10 year curve is also a little steeper at +192 bps. The Australian Govt ten year benchmark rate is up +9 bps at 2.12%. The China Govt ten year bond is +1 bps at 2.74%. The New Zealand Govt ten year is +10 bps higher at 2.70%.
On Wall Street, the S&P500 is up +0.6% in early Tuesday afternoon trade. Overnight, European markets were mixed. Most were up +0.2% but London fell -0.1%. Yesterday Tokyo was up a minor +0.1%, but Hong Kong fell a full -1.0%. Shanghai fared better, up +0.7%. The ASX200 ended its Tuesday session up +1.1% while the NZX50 ended up +0.3%.
The price of gold starts today at US$1827/oz and up another +US$9 from where we left it yesterday.
However oil prices are much lower again from this time yesterday by a bit more than -US$2 at just under US$88/bbl in the US, while the international Brent price is now just over US$90/bbl. The French President reported that Russia agreed to lower the tensions on the Ukraine border, denied sheepishly by Moscow (probably for home consumption).
The Kiwi dollar will open today marginally firmer at 66.4 USc. Against the Australian dollar we are unchanged at our lower level of 93.1 AUc. Against the euro we are firmish at 58.1 euro cents. That means our TWI-5 starts today just over 70.8.
The bitcoin price is -1.4% lower since this time yesterday and now at US$43,075. Volatility over the past 24 hours has been moderate at +/- 2.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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55 Comments
Junk food remains cheap...
Someone's gotta keep big pharma humming.
Did anyone else notice that our covid response has been squarely on restrictions and vaccines but there was ZERO communication about losing weight, exercising and good nutrition to BOOST the natural immune system?
To add insult to injury, many of the people in risk groups (suffering obesity, metabolic syndrome) have been offered free Maccas, KFC and doughnuts for their jabs which is proven to be massively counter productive (not if eaten once but regularly).
Now govt is pushing for boosters for everyone claiming that's the best protection against Omicron. Yet even the WHO advises that boosters should be reserved for immuno compromised people and the best protection is continued mask use etc. and the best strategy to end this pandemic is to increase vaccine coverage all over the world.
The science seems to indicate that boosters reduce the chance of infection by a little bit but not much. The measurable benefit to healthy double jabbed people is minimal and yet we mandate boosters now in every sector that has mandates.
This is just insane.
Bravo Mr Orr. So much for "path of least regret". This is what happens when the RBNZ happens to be in the hands of an un-elected, arrogant, shortsighted and incompetent buffoon who still refuses to acknowledge the serious damage done to the NZ economy and society caused by his reckless and un-necessary ultra-loose monetary policy.
Don't worry. Jimmy Ormsby, managing director of Waitomo Group fuel company said that when fuel goes up by a dollar a barrel, it goes up by a cent a litre at the pump. Therefore according to Jimmy's formula, when the cost goes down by a dollar a barrel, our pump costs will go down by a cent a litre. So keep an eye on per barrel costs, and Jimmy will see us right at the next drop in price.
IKEA thanks you for the free forest. Without your contribution poor multi-national conglomerates wouldn't be able to afford to buy farmland in NZ to plant pine trees. The NZ government thanks you too - rural schools are expensive to run.
https://www.rnz.co.nz/news/country/451673/ikea-owner-buys-5500ha-of-ota…
2200 reverting to native sounds good to me. If we expect to prevent the likes of Amazon deforestation we need to do our bit back here. Selling a bit of carbon rather than transporting co2 based carcasses across the globe must be preferable to some of our erosion based land practices.
Here's a crazy idea pay/recognise farmers for their carbon sequestration - rather than IKEA - and keep the schools open. Have a Tui and tell yourself IKEA is better at saving the Amazon rainforest than a kiwi farmer.
"...Using a GIS-based analysis with available national datasets, approximately 2 million hectares of carbon-sequestering woody vegetation was identified across sheep and beef lands, comprising just under 20% of the total c. 10 million hectare estate. This vegetated 20% of the estate is comprised of 8.2% indigenous forest, 5.5% mānuka/kānuka early successional forest, 3.3% exotic forest, 1.7% indigenous shrubland, and 1.3% exotic scrub.
...On balance, sheep and beef farmland have net annual GHG emissions that lie within a range between +6,143 kt CO2e (positive net emissions) and -3,128 kt CO2e (positive net sequestration)". This net sequestration ignores soil carbon sequestration elephant under the floorboards.
BL_Carbon_report_for_review_final_submit.pdf (beeflambnz.com)
A free market where money is taken from fuel users and given to investors to plant pine trees to sequester carbon in a vain glorious attempt to change the climate back to Little Ice Age conditions. That same money is not available for farmers to enhance their carbon sequestration practices. A free market would have no fuel user subsidies for either farmers or carbon carpetbaggers.
rastus, as Keith Woodford has said on here previously, or ask anyone that's regenerating forest - you can't just leave land and it magically turns back into pristine native bush. We've introduced too many invasive pests (plant and animal) and native plants are hard to re-establish. It's a very hands-on, long and expensive process.
I think you have mis-interpreted Keith. By way of example -
Gorse for the trees: How one man brought back a forest | RNZ
Look at any unpruned mature pine forest sub canopy. Its full of native. Left long enough the carbon pine forest will succumb to native - at no cost.
My native block is adjacent to unpruned pine forest. The understory is chinese privet and woolly nightshade, it's the bane of my existence trying to keep it out. Another pine block across the road that's been harvested and not replanted, just left, is now a lovely forest of chinese and tree privet, gorse and woolly nightshade.
Nearly $300 to fill the 4x4 (100l tank, and takes only 95+).
Thank goodness I bike most places, so I only have to fill it once every 2-3 months.
To be fair, if you don't drive much like me, a 'gas guzzler' could be good buying in the current climate as people will start flogging them to get into something more eco-friendly. My weekly petrol bill is probably far lower than the average.
Anecdotally, at the supermarket I am seeing every time I shop people putting items back on the shelf when they realise they can't afford it any more. Nothing scientific, but you can see it playing out in front of your eyes.
GV is correct. I know quite a number with big engined muscle cars - their pride and joys. Most get driven maybe once or twice a month, just enough to keep them in pristine condition. The rest of the time one or two actually ride bicycles, a couple have PEVs, and a few have old clunkers that'd make a Greenie proud!
I see in Sydney they are getting concerned that petrol may well hit $2.00 ltr 🤣. I don't see how this huge inflationary hit (clearly well above 5.9%) is not going to hurt many very soon. I am fortunate that I can afford to fill up my car if I want and buy good food at the supermarket but that being said I still ride to work every day and shop to a budget. How on earth are middle to low income earners going to survive when prices are only going to continue to go up!!! Throw a recently purchased $1m home in the mix with its associate debt and the mind boggles.
I am starting to think renting out the house, buying a yacht and living off the grid may be a viable option 👍
compounding in all directions. all those vans, couriers, plumbers, electricians, appliance repairs/deliveries, transport of all sorts, extra fuel costs have to be recovered & passed on. And when NZTA and/or councils get everything reduced to 30 kph, up goes travel time & cost relatively too. Still for a government that seems fixedly anti business, anti farmers & anti those still calling themselves New Zealanders, hardly likely to be of any concern is it.
Petrol costs are predominantly a tax on lower income families who can't afford to buy EVs or are forced to live out in the suburbs. For the rest of us higher petrol prices mean less congestion. Why should motoring remain egalitarian when it could be the preserve of the wealthy?
Every dollar saved now is a dollar you can put towards the locally-sourced battery upgrade option from Chch. So while the temptation would be to totally neglect it because you theoretically can (Low maintenance!) keeping the bushings, shocks and control arms in tip-top shape might mean you have an upgrade path in the future. So it could look like a low budget option now, but that may well turn into a medium term solution if you can live with 50kw Chademo charging.
I'm extremely close to going down this route myself, just wish I could see the Android Auto hack for the X/G models in person before I committed to it.
kiwimm,
$5k is risky in my view. I paid $22k last April for a 2017 model with an 83%SOH battery. The mileage is not really important, but it was only 25k.
We bought it to do almost all our local driving-the Mount/Tauranga and it works really well. Fully charged, it has a range of just under 170ks. It gets charged overnight twice a week and the cost is minimal. Quite apart from the ever growing cost saving, it's well equipped and pleasant to drive.
Added 250km of range to my electrical tank for $5.
At current petrol rates, it is cheaper to run an EV by $200 per 1000km. So if you did 60,000km over 3 years then you would save $12,000 - enough to offset a $24k higher purchase price (assuming 50% depreciation over 3 years). Add on cheaper servicing and lower maintenance and EVs work out cheaper.
It is 4 stars - here is the link for you to check Vehicle detail: NISSAN LEAF - Rightcar NZ
NZX may get another sell-off this reporting season- looks like we may be in the bear market for NZ shares for some time. High performing kiwisavers, bonuses and new employment may be distant dream.
NZX companies forced to write off millions of dollars of cloud investment
Fletcher Building reported last year it had up to $75 million of intangible software assets across 599 historic and current cloud computing projects which were now subject to detailed reassessment due to a new accounting interpretation.
599 cloud computing projects?! Still room for more, BE QUICK!
This has nothing to do with business performance. In March 21 the account standards board made an interpretation update.
Almost everyone had to change their reporting for internal implementation of software.
Analysts will look straight through this as there is zero impact to cash flow. Intangible assets are ignored in NTA ratios anyway.
If the market goes down on this then I’ll be buying.
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