Here's our summary of key economic events over the weekend with news the war in Ukraine rages on, expanding and getting dangerously close to drawing in NATO. Russia seems frustrated it wasn't a quick affair (as in Belarus, Kazakhstan, and Georgia) and is lashing out.
In economic news, Japan might be rising from its national funk over the past few years. Household spending there increased by +6.9% in January in real terms from the same month a year ago, easily beating market forecasts of +3.6% and reversing from a -0.2% fall a month earlier. This was the first rise in personal spending since last July and the strongest pace in eight months. Consumption has recovered following soaring vaccination progress.
In China, their jobs imbalance is an issue at the highest levels in Beijing. In 2022, 16 mln "urban job seekers" will enter their labour force. But Government plans will only accommodate "11 mln to 13 mln urban jobs in 2022". Premier Li Keqiang revealed the imbalance at a Party conference - and at the same time announcing that he was stepping down (but this item is not suggesting the two issues are related at all). There is still no word on the expected crowning of Xi Jinping as President for life at the current party congress.
And staying in China, vehicle sales surged almost +19% year-on-year to 1.74 mln units in February. That was a sharp improvement from the lackluster January result. Sales of passenger cars rose almost +28% year-on-year to 1.49 mln units.
And China is ramping up its coal production fast.
China is also finding pandemic infections rising fast again, now at record levels for them. If the latest rapid spread brings out their standard playbook, lockdowns will quickly affect their economy, this time hit when vulnerable. Chinese cities with low health care budgets and low financial self-sufficiency tend to enforce more stringent curbs to reduce the risk of outbreaks - and that is a lot of cities.
India is continuing its tradition of underperformance with industrial production rising but well below expectations. India is consumed by their culture wars at present, and governance competence isn't on the minds of voters who have been going to the polls there and delivering strong results for the extremist Hindu nationalist party who currently hold power. 'Miscalculations' on their border with Pakistan are another potential flash-point. They have issues on their eastern border too.
In the US economic sentiment is sinking. The latest University of Michigan consumer sentiment survey fell to its lowest level since November 2011, as inflation expectations rose sharply, of course due to the surge in fuel prices caused by the Russian invasion of Ukraine. Both the 'current economic conditions' index and the 'expectations' gauge fell. The year-ahead expected inflation rate was 5.4% and its highest level since 1981 as expected petrol prices posted their largest monthly upward rise in decades.
Investor mood over the weekend isn't flash either with the S&P500 futures -1.3% lower ahead of tomorrow's Wall Street open.
Part of that mood shift may be because the Fed seems locked in for a +25 bps rise later this week and now markets are 'debating' their pricing for the next (early May) rise for which there is growing sentiment for a +50 bps rise.
In Canada their labour market is expanding fast again, mainly for part-time jobs (+215,000 in February), but even without that, the full-time jobs gain (+122,000) alone would have been good enough to call this an overall positive result, far better than was expected and far more than making up for past weaknesses. It was their best result outside the 2020 pandemic recovery. But despite these gains, their jobless rate is still a high 5.5% (although down sharply from 6.5% in January).
Commodity prices are remaining extremely high, even if they haven't risen further at the end of this week. Nickel still isn't trading again on the Chinese-owned LME, a market embarrassment for the exchange operator, and for Beijing who are now weighing 'rescuing' the Chinese billionaire whose short bet has wrecked the market for nickel. Also shut for the foreseeable future is the Moscow stock exchange with authorities there not willing to have losses crystalised in on-market pricing.
More details are emerging of the impact the war will have on wheat and corn supplies, especially for animal feed. Some importing countries are raising the alarm already and the UN food agency has issued an alert on the coming crisis.
Sky-high commodity prices are having other downstream impacts. Insurers in the US are seeing sharp increases in thefts of catalytic converters from cars (exhaust systems) in the hunt for valuable platinum, rhodium and palladium.
The cost of shipping containers by sea slipped again last week, now at its lowest overall level for 2022 even if that isn't much of a standard. Outbound freight rates from China are still the main pressure points.
In Southern California, its backlog of ships waiting to unload containers is easing, and quite quickly now. It is down to 50, a sharp reduction from the peak of 109 at the start of 2022.
Bulk cargo freight rates moved back up again this week, and are now at their highest level of 2022. This is where the grain trade is affected.
In Australia, their new home building sector is under pressure. Their peak industry body said new home sales fell by -7.0% in February following an -8.3% drop in January. But the recent NSW and Queensland floods seem to have destroyed about 5000 houses, and that rebuilding will take years as insurers work through the mess. It won't be a quick salve for the existing home building industry.
And RBA Governor Lowe now says it would be 'prudent' to plan for interest rate increases there, reversing his 'lets be patient' stance. Financial markets are way ahead of him, already pricing in five rate hikes in 2022 as sky-high commodity prices change the inflation landscape.
The UST 10yr yield opens today at 2.00% and unchanged from Saturday. The UST 2-10 rate curve starts today steeper at +25 bps. Their 1-5 curve is steeper too at +76 bps and their 30 day-10yr curve is steeper as well at +180 bps. The Australian ten year bond is up +1 bp at 2.36%. The China Govt ten year bond is unchanged at 2.83%. And the New Zealand Govt ten year is also unchanged at just under 3.00%.
The price of gold starts today at US$1991/oz and up a minor +US$1/oz from this time yesterday.
And oil prices are a little firmer today. In the US they are now just over US$107.50/bbl. The international price is just over US$110.50/bbl.
The Kiwi dollar will open today softer at just over 68 USc. Against the Australian dollar we are now at 93.4 AUc which is a marginal firming since Saturday. Against the euro we unchanged at 62.4 euro cents. That all means our TWI-5 starts today at just on 73.5 and little-changed.
The bitcoin price is little-changed today, up +0.8% from this time Saturday to US$38,972. Volatility over the past 24 hours has been modest at +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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72 Comments
I was surprised how little prices had changed at the supermarket yesterday. Everything I bought was at the same price I remembered it to be except fruit and veg. Obviously fuel prices are very elevated (this isn’t really that unusual considering the types of countries it comes from), and building supplies are crazy expensive, but excluding those is inflation really that bad at the moment?
when was the last time you did the shopping?!
It might be wise to stock up on pet food, i think they're going to go through the roof
Pork chops were especially cheap at New World last week although lamb seemed very expensive.
some meat items may swing in pricing due to the availability/cost of chilled shipping containers. they're still very hard to come by so could be an excess of meat normally destined for export
Yes, and it has been for some time. The official stats have provided a blanket for the RBNZ to hide behind (not like they get held to any real scrutiny over missing the PTA by a factor of 2 anyway) but fruit and vegetable prices are up something like 21%. While it feels like things aren't going up, they are just going up in relentlessly small increment. It's the old frog in a pot deal, except with the basic necessities of life.
So not a crisis then?
I am sure it's a crisis for people on low and low-medium incomes.
$40-$50 extra per week may not be a big deal for those of us on high incomes, but for those on low incomes it is.
Food cost inflation as well as wage inflation certainly won't be helping cafes and restaurants, either.
An extra $50 in the tank. An extra $50 at the till. That's going to be noticeable for a lot of people who have previously been insulated from the odd 1% - 2% increase over the last decade or so. That's an extra $400pm that you can't put towards paying down a mortgage on an asset that is declining in value, if you're worried about that too.
The squeeze is real. It starts slowly, but once it spooks enough people, it will start taking jobs and businesses with it. The NZ I see today is heading for the NZ of the early 1990s real quick.
Lol - but the financial advice from the property spruikers is for everyone with mortgages to bunker down and reduce discretionary spending....which of course if everyone does, and you look at it from a macro/economy wide perspective, results in a almost certain recession with further declines in real take home pay, which makes it even harder to service the excessive amount of debt people have found themselves in.
If you are happy to impoverish others for your own gain then you are likely already a property investor
I track all my spending. My average grocery shop is up 12% on this time last year.
Yeah we have a similar increase. Meat and Veges have been the killer.
Thing we are also noting is the lack of availability (Cat food) and significantly lower quality (particularly in fruit/veges)
"From the analysis above, the observed price increases are consistent with a 2.2% decrease in available supply of calories from corn, rice, soybeans, and wheat. Similar declines occurred in 2018, in part due to drought in Argentina and lower wheat acreage in Russia, and in 2012, in part due to drought in the US.
The increase in wheat prices will not cause massive increases in the price of American bread. Most of the price of food is determined by the cost of processing, packaging and marketing. The USDA estimates that farm gate sales of food commodities made up 14% of the retail value of food in 2019. If farm prices increase by 50%, then we would expect food in the grocery store to increase by 7%.
...In summary, the Russian invasion is a large shock for agricultural commodity markets, but not historically large. Markets and trade patterns will adjust to absorb it. Farmers around the world will produce more and consumers will cut back or substitute. The transition may be difficult in some places, especially countries such as Egypt that typically rely on wheat from Russia and Ukraine."
https://agdatanews.substack.com/p/were-not-facing-a-global-food-crisis?…
The populations of many countries would benefit greatly from eating less wheat. Looking at you Egypt.
... the Egyptians would dispute your accusation ... but , I think they're deep in de nile ...
NATO and other countries are taking great risks in openly stating they are supplying weapons to Ukraine. This makes those shipments legitimate targets.
Recall the Lusitania sunk in WW1 by a German U-boat.
or the U Boat sinking of US Reuben James, escorting a british convoy 1941, before the US had entered WW2. Plenty of precedent indeed.
NATO and other countries are taking great risks in openly stating they are supplying weapons to Ukraine. This makes those shipments legitimate targets.
Highly doubtful Russia will be able to hit such targets - they lack the intelligence (information, not smarts) nor the precision weaponry to do that sort of operation. They're more likely to saturate bomb the whole street next a bunker than actually hitting the bunker (where the NATO-supplied weapons are kept).
Would assume greater percentage airlifted and after dark. Bit like a modern day Berlin airlift. Probably working on getting some of the heavier stuff in and out and about too. Ironically, oddly enough, Russia might be creation their very own Stalingrad.
Ardern has finally woken up. Must be losing votes...
Apparently there is 'undoubtedly' a cost of living crisis for many families. Although I wryly note that there appeared to be some doubt on that last week, so I'm guessing some internal polling must be showing National making ground as people start to ask why they are paying more and more in a low-wage economy to a government that seems to tell them they should make do with less and less.
No political Party can make a difference to physical issues coupled with math. The latter two just 'are'.
From here on in, if we want more and more, we have to reproduce less and less.
Either way we're f---ed.
Thought exactly the same thing when i saw the headline.
They say a week is a long time in politics - but there is some spectacular gymnastics happening now.
The next challenge for the government will be the pay freeze imposed on public servants.
... correct me if I'm wrong , but didnt they announce a new bottle recycling scheme last Friday .... 20 cents refund on any glass bottle taken to a Kiwiglass depot ... the poor people will scour the countryside for wayward bottles ... they get pocket money , the environment gets cleaned up : win/win !
And of course, we can help by drinking more, and leaving bottles scattered about.
Can't make it too easy for them, so will hide some in the bushes, in the gutter etc. - while I'm there.
... you , good sir , are a true patriot ... going above & beyond , to help solve the cost of living crisis : Bravo ! ...
How much will it cost to get to a Kiwiglass depot?
... we'll pay twice ... firstly a 20 cent refundable deposit on every bottle we buy ...after we've used the contents , and rinsed it clean we'll pay petrol money to drive to the Kiwiglass Depot to get our 20 c back ...
Ummmm .... its cheaper & simpler to just bung them in the yellow top recycle bin ... as we currently do ... isn't it ! ...
Another not so well thought out Labour Government scheme ...
I initially thought it was a great idea until I thought of the transport implications. Elderly people who rely on family or online grocery shopping, would pay the extra 20c, but wouldn't be able to drop off their bottles for recycling. This would make their grocery bills higher. The same would apply to the handicapped and those living in remote areas.
Good idea, but the devil is in the details.
Back in the dark old days, when I ran a maintenance grader (Cat 112), there was always a beer bottle crate slung on the front frame, ready to receive the frequent caches of bottles hiffed into the water table. Proceeds to the end of year party.
The pay freeze will disadvantage those least able to afford it - many public servants are employees of a DHB or otherwise with little scope for moving a job. On the other hand, the Wellington public servants who are ostensibly targeted by the pay freeze policy can simply get around it by finding a job with a new employer and negotiating a pay rise. I know of one personally who got a 35% pay increase by shifting employers (same job title).
To recap:
- It was a policy made to score political points
-They were never going to be able to enforce it against the Wellington bureaucrats
- It only affects the lower paid public servants who have no choice but to go cap in hand for a pay rise
Conclusion: Stupid policy made by stupid politicians who either made it off the cuff and couldn't think it through, or disregarded advice saying it was a stupid policy and did it for the optics.
She doesn't care about the poor. Only her power and the polls.
Well again we arrive back at Orwell’s definition, something like - it’s not so much that the socialists love the poor, it’s their hatred of the rich that drives them. Remember passing time with a US couple at Auckland Airport during Obama’s administration and the then anti socialism mood prevailing in the USA. Now she was a district court judge and he was a corporate lawyer. Their definition something like, they will take money that we have earned, paid tax on and saved and give it to those who have done none of those things. Inevitably as the divide widens between those with and those without, the more the rancour and agitation builds , from each side.
Chuckled reading a foolish release from the government this weekend on bringing "advanced manufacturing" specialists (earning median plus $1) into NZ.
NZ's "advanced manufacturing" sector, as per this release, employs 10.7 per cent of the workforce (248,400 people), accounts for 10 per cent of GDP ($24.1 billion) and 73.5 per cent of goods exports ($44.5 billion).
I don't understand whether classifying all manufacturing as advanced was a deliberate exaggeration to make the government look good?
Or the morons in power are really in awe with a bunch of "advanced" machines around the country turning raw milk into powder, butter and cheese.
There is all sorts of jargon like this being used these days. One that really irked me was the phrase "high performing team" which a previous manager used to use at every opportunity. (Related to the people who reported to him). Personally my role had almost nothing to do with others in his "team". So really I wasn't in his team. Was my performance high performance? Ummm. Not really. I have the normal work ethic of older people. (eg No cellphone use during work hours, not getting coffee inbetween breaks). But I did take all my breaks to go for walks around the neighbourhood. (Recovery from too hot, no open window and noisy no privacy open plan workplace).
I think we're through the looking glass with stuff like phone use etc, unless it's particularly egregious. But I think we're now reaching a tipping point with labour where employers are being challenged to walk the walk. Throwing around terms like 'high performing teams' is one thing, but are you matching it with above-average market-rate salaries? Are you doing more for your 'high performing' teams than the odd resilience workshop once every six months? Or is the expectation of 'high performing teams' just LinkedIn buzzword bingo from people who lack the courage to just tell people to work longer hours and that they won't get paid any extra for it when they nail things?
Amazing that this rebalance of not wanting to work for predatory managers and businesses is being framed as 'The Great Resignation' as if the problem is the employees, and not the fact that businesses who don't want to spend time on internal reflection and money on wages that mean people can afford to keep coming to work.
If you are really high performing (and in IT), being overemployed is totally a thing now. I would do it if I was in a role that allowed full remote work and the demands were low.
Had a CEO in the 70/80s who had come up through the ranks and thought could enhance his image by quoting all the buzz words, jargon, euphemisms he got to hear when at industry meetings in Wellington, amongst all of the pin stripes, the MBAs etc. Bit sad because he was good at his work, knew what he was doing and really, it had the opposite affect on staff. Like you I never ever in my career lost sight of the objective of letting your work, your output & results, do all the talking.
Our prime minister is a thought leader , who's taking us on a journey towards disruptive innovation ... we are going to think outside the box , because it's too late to accept picking the low hanging fruit ... we must move the needle as a nation , as we forge a new destiny ... value added will be the new norm .
And ensure maximum sustainable employment...what the heck does that even mean
It means create as many low paid jobs as possible so you can brag about low unemployment.
Thanks to high living costs, high migration and poor government policies, you no longer have to sit idle at home to be poor.
You now how to work 40+ hours a week in our faltering economy to not afford to pay your bills.
This whole thread is why economists say productivity doesn't matter in the short term, in the long term it's the ONLY THING that matters.
blue sky thinking will be required to facilitate stakeholder buy-in
That's perfect., because once we all end up defaulting on houses that are worth less than we paid for them, we'll all be living under the stars.
See? It's all gonna work out. Now stamp these 50,000 visas quick-smart or else you will not get your onion allocation this week.
Promote synergy... like a boss
Let's have deep dive so we can drill down into the numbers around our business core competencies, we need to take a holistic approach to dealing with the paint points and unpack the issues at hand so we can embrace our team to move the needle and knock it out of the park.
I have the normal work ethic of older people. (eg No cellphone use during work hours, not getting coffee inbetween breaks). But I did take all my breaks to go for walks around the neighbourhood. (Recovery from too hot, no open window and noisy no privacy open plan workplace).
Incredible how our stories are so similar, especially the last part. I really dislike the windowless open plan office, seeing it more as a cost-cutting exercise than actual logic.
I worked in a place where the new leader was a proud self-declared progressive liberal feminist who believed in diversity, equality and "high performing teams and values". Suddenly there'd be lessons on the benefits of plant-based diets, (self-)promotion of diversity and unconventional leadership, and snide remarks about the overabundance of "pale, male and stale" and "old white men" in the industry. (All this despite the fact that "old white men" were the ones who gave us non-whites employment opportunities in NZ...)
We were also subjected to personality tests where the results didn't inform and educate on how to interact with individuals but were instead weaponised against us. For all the talk about diversity and "anti-racism", it seemed as if in the new leader's mind, "diversity" was only about having more women in the organisation and preferably (still) white. Also any debate or critical thinking/questioning on any topic put forth by said leader was viewed as toxic and unsupportive.
Three of us non-white staff members (1 male and 2 female) were made redundant at the first round of Covid difficulties, to be replaced by a well-paid single white female. Reasons were that we weren't "high performing enough" and yet now they'd looking to hire more to keep up with the work that we did. We were also typically paid less than Kiwi staff (as we found out through this "restructuring exercise") and were working well above our job descriptions.
Advisor,
Yes most of our manufacturing sector is actually the agri-food sector. It incudes Fonterra, Synlait, Open Country, Silver Fern Farms, Alliance, and AFFCO. Outside of the subsidised aluminium smelter with cheap electricity and also not having to pay about $150 million of of carbon liabilities, there is very little manufacturing outside of agrifood. Even companies like F&P Healthcare increasingly do their manufacturing outside of NZ.
KeithW
In short, the bulk of our manufacturing sector involves putting our farm produce in packages that fit best in shipping containers.
What else can you expect in a country where politicians and investors favour residential property over intellectual property?!
In the US economic sentiment is sinking. The latest University of Michigan consumer sentiment survey fell to its lowest level since November 2011,
Businesses Can't Pay Sufficiently Now, or In the Future
Is there actually a labor shortage? Not really. Cos clearly aren't paying the market clearing wage. The so-called Great Resignation is actually Great ItsNotRecovery Part 2. Quitters last year quit because busn just won't pay up. SSDY. https://alhambrapartners.com/2022/03/11/pay
And from the financial genius Nancy Pelosi in the states.
"When we're having this discussion, it's important to dispel some of those who say, well it's the government spending. No, it isn't. The government spending is doing the exact reverse, reducing the national debt. It is not inflationary."
I mean in the sense that so little filters down to the average American to actually use themselves, I think she's probably technically correct.
I guess Saudi oil purchases will be prohibited by Western powers.
Prime Minister Boris Johnson is due to visit Saudi Arabia soon, to beg for Saudi oil to replace Russian gas. We cannot show our revulsion for Putin’s atrocities by rewarding those of the Crown Prince. Johnson must speak up and condemn these killings. “
Boris stay home, get fracking the Bowland shale and help out his fellow countrymen.
200 year proven resource of nat gas ... and Boris caved into the Greens demand & shut it down , in favour of Russian gas ... was amazed when he did that , lost a bundle on my AJL shares too ...
Exploration for shale gas occurs in onshore basins, with two approaches used to predict the maximum gas in place (GIP) in the absence of production data. The first estimates adsorbed plus free gas held within pore space, and the second measures gas yields from laboratory pyrolysis experiments on core samples. Here we show the use of sequential high-pressure water pyrolysis (HPWP) to replicate petroleum generation and expulsion in uplifted onshore basins. Compared to anhydrous pyrolysis where oil expulsion is limited, gas yields are much lower, and the gas at high maturity is dry, consistent with actual shales. Gas yields from HPWP of UK Bowland Shales are comparable with those from degassed cores, with the ca. 1% porosity sufficient to accommodate the gas generated. Extrapolating our findings to the whole Bowland Shale, the maximum GIP equate to potentially economically recoverable reserves of less than 10 years of current UK gas consumption.
Could you please stop parroting misinformation GBH (unless you intend them to use 1/20th of their current consumption each year over the 200 years).
Later papers are more optimistic than your 2019 paper - as are Texan frackers.
"Our work further supports previous authors’ core-based studies in concluding that the Bowland Shale holds good reservoir characteristics, and we propose that there are multiple intervals within the shale that could be targeted with stacked horizontal wells, should those intervals’ mechanical properties also be suitable and there be adequate stress barriers between to restrict vertical hydraulic fracture growth.
...The Bowland Shale at PH-1 contains over 100 m of shale which is considered to have very good reservoir characteristics (such as high TOC, low clay and low water saturation), and porosities considered reasonable for tight mudstones. These intervals are located predominantly within the upper section of the shale."
https://academic.oup.com/gji/article/228/1/39/6355446
"Last year I asked a Texan gas expert, who has drilled into the Bowland Shale, how it compares with American shale gas reserves.
“It’s much better than what we have in the US,” he replied, “better than the Haynesville in Louisiana or the Marcellus in Pennsylvania, thicker and richer in gas”."
There is a lot of peer reviewed "mis-information" out there Pluto.
"Our work further supports previous authors' core-based studies in concluding that the Bowland Shale holds good reservoir characteristics, and we propose that there are multiple intervals within the shale that could be targeted with stacked horizontal wells, should those intervals' mechanical properties also be suitable and there be adequate stress barriers between to restrict vertical hydraulic fracture growth."
https://www.scopus.com/record/display.uri?eid=2-s2.0-85116563649&origin…
Can you re-post that last reference, it didn't work. Thanks.
Geophysical Journal InternationalVolume 228, Issue 1, 1 January 2022, Pages 39-65
Document details - Determining reservoir intervals in the Bowland Shale using petrophysics and rock physics models
https://www.scopus.com/record/display.uri?eid=2-s2.0-85116563649&origin…
Cheers, I'll give it a read.
Yes, only Putin bad. Saudi leadership are angels as is their fully democratic country with all human rights assured. That's why the West allies themselves so strongly with them, buying as much of their oil as possible (a lot sold to Singapore and Korea... where does NZ get it's fuel from?) and selling them as many weapons as we can to supports them as much as we can in murdering civilians in Yemen.
So where's China in terms of Ukraine? They may think they are being smart and gaining from this - well they won't be gaining if this becomes WW3, that's for sure.
FFS.
WW3 might see an end of the Bretton Woods agreement and the dominance of the USD. So from a Chinese perspective, not a bad outcome if they want greater influence or recognition and the worlds real super power. The US is certainly folding and acting like a global bully with its reserve currency status. Its usually the country on the decline that wants the fight, not the country on the rise. Although the country on the rise usually finishes it and then dictates terms for the following 80-100 years.
Following its emergence, the eurodollar market played a big role in the Bretton Woods system and also its breakdown and eventual demise in the early 1970s. Link
SWIFT Isn’t The ‘Nuclear Option’ For Russia, Because The World Is Eurodollar Not Dollar
The point is, there wouldn't be much if anything left of China following WW3.
‘Why would we want a world without Russia?’ Putin on Moscow’s nuclear doctrine
I am sure China shares this sentiment.
Interesting interview with General Sir Nick Carter, Former UK Chief of the Defence Staff about the war in the Ukraine and other security matters (e.g. China.) Offers some insight into what NATO might be thinking:
Key take out?
We may be returning to a world of forwards NATO deployments and increased military budgets. NATO expects China to remain largely on the sidelines.
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