Here's our summary of key economic events overnight that affect New Zealand with news that while Omicron is surging, it is having quite different economic impact than Delta.
But first, the first dairy auction of 2022 was held earlier today and it was a lackluster affair. Overall prices rose a tad less than +0.3% in USD terms, and fell -0.6% in NZD terms from the prior event. The key WMP price was unchanged but there was another strong move higher for cheddar cheese, taking it to over NZ$8000/tonne for the first time ever. The global recovery of foodservice activity is helping. SMP (+1.0%) and butter (+0.3%) also recorded gains and in the case of butter it remains near a record high. However none of this will be shifting farmgate milk payout forecasts.
The Americans have sort of prevailed over Canada in a long-running dispute over Canadian policies aimed at shielding its dairy industry from American competition, according to a ruling published overnight from the first dispute resolution panel under the new US-Mexico-Canada Agreement. But it wasn't all one-way with the Canadians happy that most of their support program can remain intact.
The US retail sector seems to have turned in a very positive holiday selling season with sales gains far higher than can be accounted for by price increases.
US employers are having trouble holding on to staff, despite higher pay levels. The number of job quits there increased by +370,000 to a series high of 4.5 million in November, while the quits rate increased to 3.0%, matching the series high in September. First supply-chain issues, now labour costs; the US inflation rate is on a track higher that will seemingly last.
The widely-watched ISM PMI for December slipped, but the signals remain strongly expansionary. New Orders, Production and Employment are growing. Supplier Deliveries may be slowing but order backlogs are still growing. Raw materials inventories are growing but customers’ inventories remain too low. Prices are increasing; exports and imports are growing they report.
The US logistics managers index remains sharply expansionary, reflecting the pressures in their distribution systems.
And the wrap-up of 2021 shows that Toyota overtook GM as the best-selling carmaker in the US. It is the first time in almost 100 years GM hasn't been the largest in that market. The global chip shortage dealt an uneven blow to car businesses. Tesla and Hyundai gained American market share too.
The global manufacturing sector ended 2021 on a positive note. Rates of increase in output, new orders and employment all accelerated, while business optimism data indicated companies expect output to rise further over the coming year. Although the sector remained beset by price inflationary and supply chain pressures, there were at least tentative signs that these were also starting to ease.
In China, the private Caixin PMI improved more than expected and away from a contraction, even if the expansion there is among the weakest globally - and actually calling it an 'expansion' is probably not correct. It remains close to a stall although this latest survey is more positive than the official one.
And staying in China, some brave investors in financial products issued by Evergrande protested outside the cash-strapped company's offices in Guangzhou, with many worried that their returns would be sacrificed to keep real estate projects afloat.
German retail sales offered a small surprise, rising in December when a fall from November was anticipated.
In Poland, their central bank raised its benchmark reference rate by +50 bps to 2.25% overnight in line with market expectations. It was the fourth consecutive increase in response to sharp inflationary pressures. Inflation is approaching 8% there.
In Australia, there were 23,131 new community cases reported yesterday in NSW, another rise, now with 157,8732 active locally-acquired cases (and undoubtedly an undercount), and 2 more deaths. And 14,020 pandemic cases in Victoria were reported yesterday, also another rise. There are now 48,297 active cases in the state - but there were only 2 deaths there too. Queensland is reporting 5,699 new cases but no more deaths. In South Australia, new cases have risen to 3246 yesterday. The ACT has 926 new cases and Tasmania 702 new cases, all big increases. Overall in Australia, 47,202 new cases were reported yesterday and their hospitalisation rates are now above peak Delta levels in some states. And their testing regime is buckling under lengthy wait times and stock shortages.
Worldwide, so many people are now contracting Omicron and having to isolate until it passes, which is affecting workplaces, including schools and hospitals, not to mention airlines, that the economic impact is sure to show up soon. The global surge will probably last for most of January.
The UST 10yr yield opens today at 1.67% and another +4 bps higher that this time yesterday. Bond markets are 'buying' the Fed's signals. The UST 2-10 rate curve starts today noticeably steeper at +91 bps. Their 1-5 curve is steeper +100 bps, while their 3m-10 year curve is also steeper at +162 bps. The Australian Govt ten year benchmark rate is up +9 bps at 1.76%. The China Govt ten year bond is up +2 bps at 2.81%. The New Zealand Govt ten year is unchanged at 2.32%.
Wall Street is lower today, but not by much, down -0.2%. in afternoon trade. Overnight, European markets continued their strong gains, up an average of +1.0%. Yesterday, Tokyo ended up a very strong +1.8% while Hong Kong ended flat, and Shanghai slipped -0.2%. The ASX200 did trade and was up almost +2.0%. The NZX50 didn't trade but is back today.
The price of gold will start today at just under US$1815/oz and back up, recovering the +US$15 it dropped yesterday.
And oil prices start today +US$1 higher at just over US$77/bbl in the US, while the international Brent price is now just over US$80/bbl.
The Kiwi dollar opens today slightly firmer at 68.1 USc. Against the Australian dollar we are softer at 94.1 AUc. Against the euro we are little-changed at 60.3 euro cents. That means our TWI-5 starts the today marginally firmer at 72.7.
The bitcoin price is little-changed today at US$46,653 from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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42 Comments
As someone with family in Sydney - they are happy to get on with their businesses and lives than suffer the constant lockup, lockdown, breathless panic of NZ (& the panic-stricken NZ academics predicting 80,000 COVID deaths).
Most people will get Omicron or a variant - so why not admit this and face the facts. Good on the NSW Health head for speaking some truth.
The left-wing media (eg Guardian) love to rail against conservative govts re their COVID Response. While conveniently ignoring, for example, that there are more COVID deaths under Biden than Trump.
I guess if you're in good health, younger and vaccinated getting on with things is quite attractive.
Most people I think are aware covid is something that's going to be endemic and caught at some point. So nothing admirable or notable about the NSW health head hitting the "bugger it" button. The issue Australia will face is the disruption caused across its economy and services by such large volumes of cases, that'll take a few months to get a clear picture on.
Conservative governments could do with a railing against, because "things either aren't an issue or will just sort themselves out" isn't a great ideology for identifying and solving issues.
Trumps government was clownshoes creating a mess that no replacement government of any political persuasion would be able to fix.
Biden admits that central Govts can’t do much about COVID - it’s going to spread regardless.
https://www.usatoday.com/story/opinion/2021/12/28/covid-biden-no-federa…
Covid has reached peak batshit crazy when nurses who choose to not take mRNA therapy are sacked and covid positive nurses are allowed to work in hospitals. It never was about public health.
"Covid-positive nurses are working in NSW hospitals due to severe staffing shortages
Exclusive: Infected nurses recalled from isolation in breach of state health protocols ‘working with healthy staff and non-Covid patients’"
https://www.theguardian.com/australia-news/2022/jan/03/covid-positive-n…
profile,
I was so intrigued by a recent post of yours that I have kept a copy. I am not surprised that KW did not reply, assuming he saw it. Your cheap jibe about scientists and their school fees devalued your other points. The article to which your link refers is excellent and I have read some though not yet all of it.
You said that 'the direct effects of CO2 are well established' and that is indeed the case. Thus you know that it, with the other trace gases, is heat-trapping. You also know from the well established Keeling Curve that the level of CO2 in the atmosphere has been rising inexorably for many decades leading to, surprise surprise, a global increase in temperature. Now, I don't make predictions, but modellers do, in climate science as in many other fields. They know, as do policymakers, that their projections, particularly for decades hence, are fallible, but may be useful. As computing power increases and our knowledge of the extremely complex interactions within the climate system grows, then these models will be increasingly useful.
You are obviously intelligent and read widely, but sadly, i must conclude that your worldview requires you to exhibit extreme cognitive dissonance.
The direct effects lead to 1.1-1.4 degrees of warming per doubling so nothing out of the inter-glacial ordinary. Hence similar warming in the satellite era to 1910-1940 warming. Boring.
It is only when the troughing climate soothsayers add in the feed back predictions do we get runaway global warming and catastrophe predictions.
Air travel in and out of the UK slumped by 71% in 2021 as the second year of the Covid-19 crisis took its toll on international flying, according to a report.
Just over 406,000 international flights operated from the UK up to 22 December this year compared with almost 1.4m in 2019 before the pandemic struck and travel restrictions were imposed. UK domestic flights were found to have declined by almost 60%.
Super normal.
Also, 7 countries on Earth currently have open borders, 167 have restrictions, and 52 are totally closed. So plenty of other places other than NZ that they won't be going to.
So as much as people want to "get back to normal", normal doesn't really exist as we knew it.
Bond markets are 'buying' the Fed's signals.
Misreading inflationary wages for potentially deflationary labor hoarding, this would be another huge mistake along the same lines of bad subjective interpretation officials have made time and time and time again; most recently 2019’s LABOR SHORTAGE!!!! The Fed’s bias on the economy always is, despite all that average inflation targeting nonsense, highly inflationary.
The economy’s, however, despite the wage data (actually, consistent with the wage data as well as the participation figures) may still not be anything close.
We have nearly 262 million people ages 16 or older in the United States. Almost 60 percent — roughly 154 million people — are employed. That leaves us nearly 108 million on the sidelines. Of those, approximately 8 million are unemployed, defined as actively seeking employment. This translates to an unemployment rate of 4.8 percent. In South Carolina, that number looks better, at 4.2 percent.
But, as evident in this recovery, the unemployment rate tells only a part of the story. It misses the roughly 100 million individuals (about 1.8 million in South Carolina) who aren’t working and haven’t recently looked for work. Link
My next door neighbour is 70 and still works at a New Zealand government department.
Furthermore, whilst visiting the US, as part of my past employment duties, I was always astonished at the significant number of elderly people serving at restaurant and cafe tables.
The global surge will probably last for most of January.
We're already starting to see Omicron past its peak in places like London and New York, much like it did in South Africa a few week ago.
In fact the bloke who oversaw development of the vaccine suggested it was time to stop administering Covid-19 vaccines to the general population in blanket programs: https://www.bbc.co.uk/news/uk-59865108
Your own article states the peak in places like London is still a few weeks away.
And your bloke said this
"There will be new variants after Omicron," he added. "We don't yet know how they're going to behave - and that may completely change the view on what the right thing to do is."
You mean 7 days ago. Over the Xmas and New Year period?
Only a few paragraphs into your linked article, it says
There has been a surge of Omicron cases in the UK, with a record 218,724 cases reported on Tuesday.
That's 1 day ago. It's probably super early to say it peaked a week ago.
PE ratio of S&P500’s 10 largest stocks near dot-com bubble level 2 decades ago. Elevated valuations combined w/rise in yields make stocks vulnerable to corrections. W/S&P500's top 10 comprising 1/3rd of total weighting, any drop in behemoths could push entire mkt lower. (via BBG) Link
Just to put things into perspective: #Tesla has gained $140bn in market cap in one day after Q4 production and deliveries numbers, more than the total $131.4bn VW mkt cap. Each Tesla car delivered is valued at more than one million Dollar. Link
What the mainstream media and governments fail to mention is that Omicron cases may be high (higher than Delta) but the hospitalisations and deaths are very low, especially compared to Delta.
Also that the hospitalisation periods are much shorter, symptoms are much milder (no loss of sense of smell or taste is a big indicator that this is milder than previous strains) AND that if you get Omicron, your body develops defences against current and future variants that are a lot more effective than vaccines. (Interestingly, if you had covid before, you are not immune to Omicron. But if you get Omicron, you get immunity to all past and likely future variants.)
No one mentions how vaccines are supposed to work: They teach the body's immune system to produce the right type of defences (antibodies and T-cells) against a virus. When the virus is no longer present, the antibody levels drop but the body remembers what to do if the virus presents itself again. Also T-cells which are longer term than antibodies, continue to be present in the body.
So when the virus is present again, the body should be triggered to produce the right antibodies to catch the virus. For some individuals, the antibody response doesn't work, but for most, their bodies should remember what to do.
Boosters should be for the vulnerable and those whose bodies don't respond as they should when the virus is present again (i.e. compromised immune systems). For the majority of us who are vaccinated and generally healthy, we shouldn't need boosters or at least not be compelled to have them with vaccine mandates and passes.
Also, why are the poorer countries not given the boosters so they can carry out their vaccination programmes, instead of trying to push boosters on vaccinated populations./countries?
What the mainstream media and governments fail to mention is that Omicron cases may be high (higher than Delta) but the hospitalisations and deaths are very low, especially compared to Delta.
I don't think any of them are hiding these facts.
Also, why are the poorer countries not given the boosters so they can carry out their vaccination programmes, instead of trying to push boosters on vaccinated populations./countries?
Because people tend to look after themselves first. It's why we have standards around working conditions, sick and holiday pay, etc, but happily throw all that away so someone can produce our goods for us cheaper under worse conditions.
I don't think any of them are hiding these facts.
Certainly not in their headlines since it's sexier to talk about how high the numbers are or how quickly it spreads or how it MAY impact/disrupt the economy/services...
Ah, BTW the CDC in the US has now changed the isolation period from 10 days to 5 days. Would other countries follow suit?
The NZ media are finding that the fear-reviewed stories on case numbers and worst-case scenario stories are no longer getting the clicks or readership. And the ‘go-to’ academics are not getting the traction on omicron scenarios.
Case counts not relevant now:
https://i.stuff.co.nz/world/us-canada/300490593/covid19-case-counts-may…
Reporters are telling us what is happening in other countries, which is their job. For the most part, sites such as RNZ and Newsroom, are restrained and informative, which is vastly superior to the emotive, vitriolic claptrap spouted on ZB by Hosking, du Plessis Allen, Hawkesby, echoed by several regulars on this site and exemplified by this extraordinary outburst by Kerre McIvor.
As my Brazil-based brother wryly put it to my nephew on Xmas day via zoom (who was complaining about the Auckland lock-down and loss of "freedom"), "Yeah, we've always been free to catch Covid". He was speaking from experience. His partner nearly died last year, after being inflected with Delta.
That outburst was as unintelligent as I expected. Apparently we should give the unvaccinated more freedom because they aren’t currently overwhelming the health system. Kerry perhaps the reason they are not is because of the restrictions that you want to take away.
There do seem to be more articles that are more reasoned and less panic-stricken sneaking through the media filter now.
https://i.stuff.co.nz/world/europe/127436108/covid19-omicron-may-be-wha…
Knows more? No.
Can anyone say they know everything? But there's no harm in wanting to know more and practicing critical thinking in looking at facts.
If you're attacking me, then you're coming from a weak position if you feel you need to attack a fellow human being rather than their opinions and arguments. Are you against someone having an opinion? What's yours? I'm sure I won't be putting you down for having your own...
Just look at data coming out of the US and the UK, you'll see cases are soaring (i.e. tested positive) but hospitalisations and deaths are only trending up slowly (a number of which are Delta, not Omicron), as compared to Delta which saw dramatic rise in cases and similarly steep rises in hospitalisations and deaths. In the US particularly, where the health of the general population is much poorer than even the UK, it may be different as there are many more people with comorbidities. Source: ourworldindata.org, looking at cases vs deaths.
But in ground zero (S Africa), omicron looks to have peaked, as cases and hospitalisations are dropping. (In fact, they found that a large number of hospitalisations were incidental. i.e. they were actually in for something else and the routine covid test picked up omicron.)
I'm not saying not to get vaxxed or that we should discard precautions now, but I am saying that the fear-mongering and focus on cases should stop and focus more on preparing for post-Covid, rather than continuing policies and attitudes that have damaged mental health, livelihoods and economies the past two years.
Governments should re-look at mandates and vaccine passports as new treatments start to come online, and re-consider the treatment of unvaccinated citizens which has set a poor precedent and further increased the distrust of the same govrernments.
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