Here's our summary of key economic events overnight that affect New Zealand, 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.
(We should also perhaps note that parts of the US cattle herd has a problem with a Bird Flu infection.)
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.
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The UST 10yr yield will today at 4.24% and down -2 bps from this time yesterday. The key 2-10 yield curve inversion is little-changed at -36 bps. And their 1-5 curve inversion is also little-changed at -77 bps. Their 3 mth-10yr curve inversion is holding at -115 bps. The Australian 10 year bond yield is now at 4.05% and down -1 bp from yesterday. The China 10 year bond rate is down -2 bps at 2.31%. The NZ Government 10 year bond rate is now at 4.67% and up +6 bps from yesterday.
Wall Street has opened its Tuesday session with a minor +0.2% rise. Overnight European markets were mixed with London up +0.2%, Paris up +0.4%, and Frankfurt up +0.7%. Yesterday Tokyo closed unchanged. Hong Kong closed up +0.9%. Shanghai closed up +0.2%. Singapore ended its Tuesday session up a strong +1.1%. The ASX200 closed down -0.4% however, and the NZX50 closed down -0.3%.
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%.
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70 Comments
Did you (or David Goldman) actually read the NY Fed analysts note?
Here it is: https://libertystreeteconomics.newyorkfed.org/2024/03/what-if-china-man…
It doesn't exactly say what you suggest. It is cautious analysis, not the second-hand spruiked Twitter headline you refer to.
The shift in China’s policy focus is evident in recent credit trends. While aggregate bank lending growth has remained relatively stable, lending has been redirected from the property sector and toward the manufacturing sector. Indeed, as shown in the chart below, the growth rate for new industrial lending has roughly quintupled since 2020 and has doubled in just the last eighteen months. Growth in new “green loans”—which overlap with other sectors but are heavily concentrated in manufacturing—has picked up even more dramatically. Growth in new lending for property-related activity, meanwhile, has fallen to near zero.
Following on from yesterday - Murray86 in particular:
https://strategic-culture.su/news/2024/03/26/the-nuland-budanov-tajik-c…
Both have to be read through a lens; Escobar a red one, Kunstler a Covid rabbit-hole one, but worthy of comparison with western MSM chanting.
That Baltimore bridge, of course, is classic complexity-meets-entropy. Much more telling than DC's headline...
Such intellectual contortionism. Russia kills as many Ukrainians in its invasion every day as were killed in the Crocus attack by Isis. Russia was warned by the West, yet still couldn't find the ability to act as a functional state. Prefering instead to use the warnings as further grease for the propaganda machine, which is the only part of dictator Vlad's regime that functions smoothly, by claiming the west were attempting to "intimidate" Russia.
Nah it was definitely those CIA 'black ops' radical Ukrainian neo-Nazi Jewish ISIS Islamic extremists, because the Russians have never dropped the ball on anything ever (source: some website that runs ads for gas station boner pills and probably has 'real truth' in the name somewhere)
Vlad certainly had pie on his face after his spin operation turned into actual deaths of his much treasured Muscovites. Probably why it took so long for the little man to appear in public with his clumsily concocted "flood the zone with sh!t" strategy? Blaming someone else is a national pastime in the Russki Mir . Probably socially engineered into the population after a century of being executed for looking at an official the wrong way.
Not just a century. The centuries of regime by the Tsars ,the Okhrana their secret police etc, wasn’t much better. The Bolsheviks just perfected and enlarged what existed. The tragic history of a long suffering population has made the people into victims by the millions, easily manipulated and exploited by the basic weapon of fear.
As the car grows more complex through the addition of features, components, and interconnected systems, it becomes more sophisticated but also more prone to entropy or disorder. This entropy can manifest in various ways, such as wear and tear, mechanical failures, or accidents.
The crash and destruction of the car symbolize the point at which the complexity of the system exceeds its capacity to manage entropy effectively. Despite efforts to maintain and control the car's complexity, unforeseen events or systemic weaknesses lead to a breakdown, resulting in a loss of functionality or even total collapse.
In this context, the crashed and destroyed car serves as a cautionary tale about the limits of growth and complexity within systems. It highlights the importance of understanding and mitigating entropy to ensure the long-term sustainability and resilience of complex systems, whether they are automobiles, ecosystems, economies, or societies.
Who is Nuland working for currently? Escobar's indication of events suggest it can't be the CIA - holding press conferences that essentially threaten Russia is not really considered the way things are done.
But the reality is that we are unlikely to ever know the real truth about what goes on behind the scenes. Would US politics still sanction such fiddling under Biden? Under the Republicans I would be more prepared to accept, but both sides have to know that what ever they do will ultimately bubble to the surface and burn them. Or do they just not care?
And then you lost it on the Baltimore Bridge. "complexity-meets-entropy." Rubbish. The container ship lost power at a critical time and wan't able to restore it quick enough to avoid the pillars. You might get away with the argument that complexity of the machinery led to its failure, but timing is just pure bad luck. And that complexity argument is essentially say we should go back to the stone age, but shit still happened then too.
Bollocks - and you are better than that, cranially.
I do a lot of sailing, some of it offshore. I also live off-grid. I can tell you about complexity - it has more chance of failing. The more the complexity, the greater the chance. Tainter's 'Collapse of Complex Societies' (1988) is the classic treatise. Adding enough resilience/capacitance is the antidote, but we have abandoned that decades ago. The simple, and the over-capable, are the best, long term. BTW, the Ever Given grounding, the Panama drought, these are all just statistically-certain disruptive events, given sufficient time. What we don't do, is factor time long enough (think earthquake capacity); too greedy for 'wealth'; too focused on 'growth'. The cost - in this case, say, two tugs to each moving ship - we judge prohibitive and we get away with it most of the time - until we inevitably don't.
The complexity is the number of such vessels, their age(ing) - which is entropy - and the feed-back-loops (Systems thinking) which are: blocked port; diversionary load on others, missing arterial ditto, global logistics ditto.
I think Nuland got too arrogant, or was under pressure and blurted - and had to be removed. Read the Kagan/Kagan 'While America Sleeps'; she's married to one of them..
Oh, and 'stone age' is pure spin 101 - shoot the messenger via a shudder-inducing association. You should be above that - less complexity equals more resilience and it is a discussion our society badly needs.
Go well
There is a disturbance in the force today PDK as I have to agree with you on some points. ;).
Complexity is fragile, it's an innate qualification, but the answer is redundancy, careful redundancy with agreed degradation whilst repairs are made. All important and complex systems cannot be complete without effective redundancy of agreed scope and depth.
Boat load of assumptions there PDK. I don't disagree with your concepts but you're assuming too much around the boat failure.
Statistically you are right that if we build machinery then unless it is properly and fully maintained then it will break down (mostly, because even then it can fail for a variety of reasons), and Murphy's law states that when it does so it will be at the worst possible time. Simplicity does not guarantee success or protection, redundancy might, but I've seen redundant systems fail too. A good story which proves both your and my point; the F16 fighter is essentially a electric jet. Quadruple redundant flight control systems, engine driven generator, big battery and an auxillary generator (APU). One of the earliest failures that lead to a crash, the pilot reported a generator failure that initiated an automatic start of the APU, which then promptly also failed, and when the battery tried to take up the load it too failed. The pilot at that stage decided to give the plane back to god and walk home. No way left to maintain control of it.
As to the stoneage response, again you're too quick to dismiss the linkage. As I said shit can happen at any time irrespective of the level of simplicity/complexity.
It wasn't the stone age - it was the firewood age.
That spin started with Julian Simon, or perhaps the Saudis, a long time ago. Probably an on-purpose fudge; oil with rocks, the latter being in somewhat abundance....
Took in a lot of people - there are still those who bleat it unthinkingly/uncritically.
Agree 100%, to much complexity in IT systems for core services worldwide, constantly trying to reduce costs, rather then simplify....
outsource to someone who outsources to someone else, ever been on a problem bridge where you realise no one from the company you purchased the service from is actually involved in provision?
Reduce costs. Undoubtedly the aim. Seems to be thought efficiency is often simultaneously reduced. For all the automation, computerisation and technology customer service across the board has hardly improved. Two examples banking and airlines. In trying to solve a problem if the answer is not on the computer screen of the let’s say agent, then you won’t get an answer let alone a solution. That suggests staff are now trained to a much shallower depth and rely on the computer to do their thinking hence the equally tiresome and irksome excuse - it’s a computer mistake. Computers are not thinkers they are processors of the systems and information they are given. Based on the progression to date in my opinion advancing into AI cannot but worsen the existing problem.
The material demand of their infrastructure-maintenance, YOY, wipes all else off the table.
Call it 'cost' if you need to stay in church - but material demand it is.
The US is a collection of decaying infrastructure, compromised complexity, and subsequent stress which is inducing polarisation - in no small part caused by the whole narrative sitting atop a false one; that economic activity is somehow divorced from real activity.
https://consciousnessofsheep.co.uk/2024/03/24/the-enemy-was-always-with…
Decaying power grid, old nuclear power plants, old rail lines and bridges. So much maintenance.
We have same problems here, not sure we can afford to properly maintain current infrastructure in the face of extream weather events let alone upgrade to the next level of resiliance (all that talk has gone away with the flood waters) we lost power for 82 hours and we are only 10km from Silverdale.... for us its genset and petrol tanks at the ready at all times.
"Between the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), the 117th Congress invested $1.25 trillion across the transportation, energy, water resources, and broadband sectors for the next five to 10 years" Feb 1 2023
Perhaps not enough to solve every problem but a big growth driver.
As for us, see DH's article today on unbridled immigration, its game over.
But a big growth-driver'?
Firstly, their debt exceeds their GDP, and has done for a while. So sooner or later, that metric has to be seem as bull---t, if it's how you are measuring growth.
Secondly, as stated, decay is outpacing capacity. So you can't call it physical growth either (counting income without counting expenses, is invalid in your terms, right? Try applying that thinking, to physical infrastructure).
It's just deficient thinking; if you are extracting a finite resource - say fossil energy - then you're not 'investing', you're depleting.
Economics is a false-accounting - it has driven our species to the edge of the existential cliff - funny how some still choose to worship at the shrine...
However you define it or describe it, the global growth is based and functions on debt. Defining and describing debt though is something else until the wolf starts knocking down and burning the various forms of houses. The large export concern I worked for, from the 70’s for 30 odd years is still going, after significant restructuring. Before rogernomics it was necessary each year to return to credit. The banks were not allowed to provide what was called hard core debt. By the time I left the debt was certainly hard core. The bank (banks by then in fact) rested their case, in simple terms, provided the interest could be paid, all was then good. That I submit is an example of a building block in the monumental pyramid scheme of debt that the world compounds every hour of every day.
"... there is an insatiable appetite for US Treasuries ..."
Part of the 'appetite' comes from regulation and law about what pension, life insurance, banks, public and other funds must hold to be considered 'safe'. Doesn't just apply to US Treasuries either. Most countries require holdings in their government's debt to remove exchange rate risks. And these funds just keep growing in nominal terms so there is continuous demand from them.
Bit of a con really - governments forcing businesses to hold government debt so the funds give the perception of being 'safe'.
Gees what do these guys put in their porridge?
https://www.stuff.co.nz/money/350227001/year-hanging-asb-says-tough-tim…
"...general wage growth was likely to be more than inflation this year, so consumers’ spending power was returning...
“Overall, there are some bright spots in the outlook and all signs are pointing to New Zealand being near the end of its tough fight to contain inflation, but the rest of 2024 will not be without its challenges for households and businesses.”
House prices were likely to pick up about 7% this year, and more next year, he said.
Interesting article from the New Zealand Initiative - I think a picture says a thousand words in this case.
https://www.nzinitiative.org.nz/reports-and-media/reports/cabinet-conge…
Does help explain why reducing central govt head count is going to be difficult without organisational reform - lots of people in Wellington spend lots of time consulting with each other purely because of organisational design and the requirement to consult widely
It's ideology from a bygone era.
Blah blah smaller government blah blah
Oh, but we need underwritten/bailed-out
Smaller government blah blah
Oh, but we need infrastructure to service
Smaller government blah blah.
Peddling yet more decks on a sinking ship, with less officers on the bridge. That will work out well.
It's not about the government doing less, it's about having some clearly defined responsibilities and lines of command rather than a horrible convoluted mess where it's not clear who is responsible for what - and often multiple ministers are responsible for the same thing.
You always seem to say that agnostium. It's your theme here.
As for the endless consultation it's probably about the need to balance internal politics within the civil service, not about getting stuff done.
Arguably, while a fast single decision maker will get things wrong from time, they will do so less frequently than a cast of hundreds taking two years.
-that consumer sentiment didn't improve in the March Consumer Survey-. Doesn't come as a surprise to me as Main Street USA is completely disconnected from Wall Street NY. The last 6 months almost every Household - or Establishment Survey has been revised down afterwards after the festive headlines and both surveys are contradicting each other. The result is a steady but consistent downward trend of average weekly hours worked and therefore average weekly income.
On top of that some research from a group around Larry Summers calculated that if the present government would use the 'old' definitions of inflation, the inflation would be at 18% in 2022 in the USA.
So I repeat, that the sentiment in Main Street lags the sentiment in Wall Street is not surprise for me.
Used links:
https://www.youtube.com/watch?v=P6PFvNvbKuQ&ab_channel=EurodollarUniver…
https://www.forbes.com/sites/theapothecary/2024/03/23/summers-inflation…
Here are the latest hiring numbers from Seek. Doesn't make great reading, particularly job application numbers.
Anyone care to make an unemployment prediction for the next release?
https://www.scoop.co.nz/stories/BU2403/S00377/seek-nz-employment-report…
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