Here's our summary of key economic events overnight that affect New Zealand with news China has pulled the trigger on a significant increase in infrastructure spending. And that is not to ignore a sharp jump in the UST 10yr yield overnight.
But first up today, the UN is saying the Ukraine crisis risks tipping up to 1.7 billion people - over one-fifth of humanity - into "poverty, destitution and hunger". Ukraine and Russia supply 30% of the world’s wheat and barley, 20% of its corn, and over half of its sunflower oil. Prices are rising sharply now, and there is a direct correlation between rising food prices and social and political instability. They see a "perfect storm" that is likely to devastate the economies of developing countries. There is no real evidence yet the developed world has turned it attention to this looming crisis.
In the US jobless claims rose slightly last week, but an increasing number of those on these benefit shifted into employment, taking the number on them to a record low 1.57 mln as their labour market continues to strengthen.
Even though car sales slipped in March, retail sales of everything else rose at a very healthy rate. Overall they came in +7% above year-ago levels. Without vehicles, the rise was +9.4%. In fact for Q1-2022 retails sales excluding vehicles were up +13.3% from the same period a year ago. That is far more than inflation.
But these practical expressions of sentiment (jobs, retail sales) are not being reflected in attitudes. A steady diet of news negativity is keeping sentiment down, although it is latest survey, the widely-watched University of Michigan survey is starting to reflect a more up-beat sentiment, one that 'surprised' the surveyors.
And this was despite higher American mortgage rates that are continuing the slowdown in mortgage applications. In fact a key measure has now hit 5% for their main mortgage interest rate in an extended sharp runup. Mortgage brokers say in fact it is now at 5.13%.
US industrial production rose again, up +5.5% in a year and the March increase booked a fifth solid rise in the past six months. The rise of production for both consumer goods and business equipment was actually quite impressive in the month, tipping an annual pace of about +15%.
And that was backed up by a strong result in the New York Fed's regional factory survey where new orders and shipments rose strongly in March. Employment rose as well. But there was no escaping high costs, which hit a record high gain.
Maybe some of that is a beefing up of supply-chain resilience. Business inventories rose slightly more than expected, and the inventory-to-sales ratio picked up marginally. But it remains at historically low levels, and therefore not indicating supplier stress.
But a closely-watched freight monitoring service is showing the froth is going out of their logistics industry.
China has pulled the trigger on more generous credit expansion settings. As expected it has cut its reserve ratio, this time by -25 bps. After this cut, the weighted average deposit reserve ratio of financial institutions becomes just 8.1% - that is, on average their financial institutions now only need 8.1% of reserves backing up their lending activity. But in the grand scheme of things, it has been a modest move so far.
Far more impressive is its rush to get big new infrastructure projects approved and underway. They have already approved 32 projects worth NZ$120 bln for new transportation, energy, and high-tech activity. In all of 2021 they approved 90 projects worth NZ$180 bln, so the pace is startlingly faster in 2022. And the private sector is getting regulatory encouragement too.
They need it right now, because the pandemic lockdown in Shanghai is close to causing a widespread business stall there.
Container freight rates out of China continue to fall. But bulk cargo rates have started to trend up again.
Chinese house prices are said to be rising. But the latest data sows them falling in March from February in 38 of the 70 largest Chinese cities, although that does not include Beijing or Shanghai. But it does now include Guangzhou. Year-on-year, the overall increase is now down to just +1.5% and a stall seems to be underway there. Separately, Hong Kong house prices have stopped rising and may also be falling now.
In Europe, the ECB left all its settings unchanged, inhibited from returning to 'normal' by the sudden rise in risks in Eastern Europe.
In Australia, their March labour market data revealed only minor changes. Employment rose +17,900 to a fresh record high of 13.4 mln, below market forecasts of +40,000, as full-time employment increased by +20,500 to 9,248,600 while part-time employment fell -2,700 to 4,141,300. Their jobless rate was unchanged at 4.0%. Despite all the small gains, the total number of hours worked in their economy slipped, and not for the first time. The March 2022 level is actually lower than the March 2021 level. Plus, total hours worked in March 2022 was lower than for February 2022.
The UST 10yr yield has risen sharply again while we were on holiday, up a significant +14 bps to 2.83%. The UST 2-10 rate curve starts today steeper at +37 bps. Their 1-5 curve is steeper at +103 bps. Their 30 day-10yr curve is unchanged at +257 bps. Just about all the other minor curves are quite 'positive' again. The Australian ten year bond is now at 3.03% and and up +5 bps. The China Govt ten year bond is unchanged at 2.82%. But the New Zealand Govt ten year starts today at just on 3.43%, down -5 bps.
Wall Street is closed today, but ended its Thursday session down -1.2% to be down -2.3% for the week. European markets were all closed as well, and although they all booked a Thursday gain, most were lower for the week. Tokyo fell -0.3% in its Friday trade but managed a +0.8% weekly gain. Hong Kong was closed ending its week down -0.7%. Shanghai ended its Friday session down -0.5% and its week down -0.9%. Of course the ASX and the NZX were closed yesterday. The ASX200 ended its shortened week up +0.6% and the NZX50 ended down -1.4%.
The price of gold starts today at US$1974/oz and down -US$5 from this time Thursday.
And oil prices are up +US$2.50 today at just over US$106/bbl in the US while the international Brent price is now just on US$111/bbl.
The Kiwi dollar will open today a little weaker at 67.2 USc. But against the Australian dollar we are almost +½c firmer at 91.6 AUc. Against the euro we have firmed as well to 62.7 euro cents. That all means our TWI-5 starts today at 73.8 and little-changed.
The bitcoin price is down -1.4% from this time Thursday at US$40,415. Volatility over the past 24 hours has been modest at +/- 1.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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99 Comments
Literally unhealthy environment, but let's still focus on economic growth, and reporting on car sales like they are a good thing
https://www.theguardian.com/society/2021/mar/28/shanna-swan-fertility-r…
https://www.theguardian.com/environment/2022/jan/15/global-heating-link…
Four essentials:
- Food
- Shelter which includes clothing
- Security
- Transport
Examples:
food on grow site without security = goneburger
Food transported to consumer without security = pirates
Shelter without transport for materials = no roof
Security without transport = when minutes count, the cops are mere hours away
And so on.
A lot of NZ’ers discount the possibility of a food crisis occurring here. What they don't factor in is the near total reliance of our food system on imported energy. This point was made repeatedly in the 1970’s then seems to have been forgotten in the neo-lib period since.
Yep. Look what's happening in Sri Lanka since the fertiliser tap was turned off.
Relying on overseas (or any?) fert is a strategic weak point...
Most of our fuel is refined in Singapore and South Korea. Most of the crude is from the Middle East. It's going to be interesting to see how the stability of these supplies pans out given that the supply chain passes through many areas that rely on Ukrainian and Russian wheat or contested waters....https://ourworldindata.org/ukraine-russia-food. Na she'll be right, nothing bad happens in Nu Zullind.
Let's look through the neoliberal book of pithy quotes that will save day. "A rising tide"? Maybe not. "We need to privatise", hmm. "Production should be restricted to where costs are lowest"? Wise? I know, "The market ensures that everyone gets what they deserve"
But James Shaw says we must reduce our meat consumption. Not sure if he went as far as saying no meat at all.
Thank goodness the NZ officials (not bureaucrats in this case) had the IPCC change this clause in one of its reports.
“New Zealand diplomats helped remove references to the need for “plant-based” diets from the latest IPCC report’s influential summary”.
" “Summary for Policymakers IPCC AR6 WG III C.9.1
“Demand-side and material substitution measures, such as shifting to balanced, sustainable healthy diets [See Footnote 62], reducing food loss and waste, and using bio-materials, can contribute 2.1 GtCO2-eq yr-1 reduction.” "
Yield Curve Inversion Was/Is Absolutely All About Collateral
If there was a compelling collateral case for bending the Treasury yield curve toward inversion beginning last October, what follows is the update for the twist itself. As collateral scarcity became shortage then a pretty substantial run, that was the very moment yield curve flattening became inverted.
Just like October, you can actually see it all unfold.
According to the latest FRBNY data taken from Primary Dealers, repo fails during the week of April 6 (most recent figures) were a whopping $507 billion combined (remember, an unknown proportion of fails, likely a huge chunk, in my view, is due from failed collateral for collateral swaps). This is the highest since the worst week of GFC2 in the middle of March 2020, the second worst weekly total in more than four years; that’s how bad deflationary potential has gotten.
The Kiwi dollar will open today a little weaker at 67.2
Eurodollar University: Call For Papers
This only begins with the dollar exchange value; I’m not the only one who has noticed how the dollar tends to rise when worldwide financial messes and globally synchronized downturns materialize.
The UST 10yr yield has risen sharply again while we were on holiday, up a significant +14 bps to 2.83%.
Interest rate swaps tell us market perceptions of both risk (fixed leg) as well as funding costs or liquidity (floating). When the swap spread, that is, the quoted price of the fixed leg when compared to the same maturity US Treasury yield, compresses even to the point of being negative, it suggests a substantial degree of imbalance on one or both of those sides – perceived credit risks as well as funding difficulties.
No country should be relying on wheat, barley, maize and sunflower oil to feed its people. All these products are severely detrimental to human health. We are not living in the 19th century where such foods are required to stave off starvation or feed slaves. A lot of this produce is used to make absolute rubbish for the people to pig out on. Coca cola and doughnuts and a host of other unnecessary "foods".
Now would be a good time for countries to review these "foods" and start growing their own sustainable meat and produce and generally getting their populations healthy again. It's not rocket science! It's not even that hard.
Good examples would be Pacific islands that have bountiful sea life, good local growing conditions for tropical fruits and vegetables and even space for producing pork, eggs and poultry. Study the diet of the Okinawans for the way forward.
Most populations can reduce their food intake by about 50% and reap huge health rewards.
This is not a crisis but an opportunity!
The flaps may have been boned out or fed to the dog as at some time in the past but possibly aren’t fit to eat.
The BBC has reported on our flaps trade to Tonga https://www.bbc.com/news/magazine-35346493
I definitely bought lamb flaps quite regularly at my local Foodtown in Te Atatu South in the eighties. Quite chewy with a rubbery membrane but cheap and delicious and nutritious.
Lamb flaps have been blamed for Pacifica obesity however some islands banned the imports and obesity still went up. The real culprit is sugar in soft drinks and wheat in bread. Everyone drinks soft drinks as it is hot there and it's cheaper than water. Also fruit juices in more recent times. Lamb flaps were the healthy part of their diet. All negated if you swallow it down with soft drink though. They may have seen the Western food pyramid that recommends up to 11 servings of grain a day for active people. 11 servings, can you believe it?
So, the total amount of land needed to feed a person for a year is approximately 5.5 acres if you'll be raising all three animals for meat and just 3 acres if you'd instead raise only pigs.
Sri Lanka pop 21 million...healthier option for both the land and population is a plant based diet
Lamb and beef are not typically grazed on horticultural land. Think about pigs, chickens and ducks too. It's also not a case of 'either or', just get rid of the sugars, wheats and maize or feed those things to animals. Humans need to eat far less than most people think. Many people are carrying a year's supply of fat on their bodies. Obesity is more of a problem than malnutrition although obesity is a form of malnutrition.
I absolutely disagree that most would do better on a plant based diet. That's just madness and contradicts what we know about human nutrition over the last two million years.
Also by "plant based" you actually mean a sugar based diet.
I'm currently cooking a Fred Flintstone sized pork chop for lunch. Only $5 for a half kilo chop. I don't eat bacon as it is too processed and often has added sugar and nitrates.
The bad health outcomes of meat eating have been overstated and conclusions were drawn from people who had many poor diet practices, like eating processed meats, drinking, eating high carbs etc. I don't know of any studies that have been done on a high meat eating cohort who endeavour to keep very healthy with exercise, sleep, fasting etc.
Here is an interesting article from the New York Times:
Eat Less Red Meat, Scientists Said. Now Some Believe That Was Bad Advice.
If we can convince the world to eat more meat NZ can make a lot of money. I know it is a bit sad for the poor animals and this emotive part of the argument tends to cloud things. I think it's admirable to not eat meat for personal reasons.
Can you reassure me by pointing to any society in recorded history that live predominantly on beef and lamb?
I guess the Eskimo’s could be quoted as a non cropping society, but they appear to have access to berries and fungii in summer.
Atilla the Hun did quite well but that would be because they ate a lot of dairy…joking..
North American First Peoples that hunted bison. When "discovered" were probably the tallest and healthiest people on the planet. Bison would be similar to beef. Pacific people were very robust as well.
However it is suspect to compare modern hunter gatherers with prehistoric, pre-farming humans. These people were still modern in a sense and had been influenced by agriculture as well as now existing in world depleted of its megafauna. Also many of the people in the Americas were unhealthy due to the pre-Columbian civilizations agricultural diet.
The main indicator of poor health outcomes has been civilization. Happened to the Egyptians just like it did to the Pacifica people.
I think you’ll find that for Hunter gatherers the hunting part was a minor component of the diet. That was really about men demonstrating their manhood. The grubs, nuts, and the berries gathered by the women was the core component and that part - combined with an active lifestyle - was very healthy.
Completely wrong. You are basing your theory on modern observations of hunter gatherers in a world with depleted megafauna. All prehistoric tools were for the processing of animals. Our gut, stomach acid and physiques are adapted to animal hunting and consumption.
The evolution of the human trophic level during the Pleistocene
A sustainable food production approach includes plants and animals. In the US animal manure is now at a premium. This is our future! Note, this was before Russian/Belarussian fert supplies became restricted! https://www.bloomberg.com/news/articles/2021-12-09/global-shortage-of-fertilizers-sends-demand-for-dung-soaring
Study the diet of the Okinawans for the way forward.
Goya (bitter melon) is a staple in the Okinawan diet. Very healthy apparently. Also interesting to note that the Okinawans are notorious boozers. And it is the poorest prefecture under control of the Japanese govt.
Bitter melon could hardly be a "staple"although, as it has almost no calories, would be quite a good one for losing weight. The purple-fleshed Okinawan sweet potato is considered their staple however they eat quite a lot of pork and fish as well as 30% green and yellow vegetables. link
The key to the Okinawan diet is not much wheat and not eating too much but not eschewing pork and fish either.
As for the drinking is has been noted that Okinawan longevity has been decreasing in males recently.
Bitter melon could hardly be a "staple"although, as it has almost no calories, would be quite a good one for losing weight
Yes. Wrong choice of word referring to goya as a 'staple'. 'Commonly consumed' makes more sense. Its health benefits have made it popular across mainland Japan.
I agree with the sentiment here. However it is hard for most people to comprehend.
The healthiest humans were pre-agricultural immediate return hunter-gathers. And by that I don't mean having the longest life expectancy. The infant mortality rates were very high but once you made it as an adult, you'd be healthier than the average modern human and would live just as long. If people are interested in this sort of thing I would recommend Dr. Chris Ryan's Civialized to Death. (Also covers other post civilization issues such as inequality, slavery, women's rights, animal abuse, communicable diseases, obesity etc). There is also lots of study being done of the few remaining modern hunter-gathers in terms of their superior gut biome.
The only problem now is that we have too people to feed and not enough space to return to pre-agricultural times. We do need to come up with a better base diet for modern people. I'm a big fan of permaculture, sheep and chickens in orchards, vege gardens, community/school/preschool vege gardens and orchards.
A steady diet of news negativity is keeping sentiment down, although it is latest survey, the widely-watched University of Michigan survey is starting to reflect a more up-beat sentiment, one that 'surprised' the surveyors.
Surely someone on the Goldman call will ask the bank's resident DJ (and occasional CEO) how the world's most powerful trading floor has been unable to make money trading stocks in the past 9 months - was the company just blindingly following David Kostin's "buy everything" advice (which has been aggressively trimmed in recent weeks) - although we doubt it.
But if they don't ask about how Goldman lost almost two billion trading stocks in the past three quarters, surely someone will ask why the bank keeps dumping stocks, pardon "harvesting" gains, hand over fist. After all, this is the fourth quarter in a row this has taken place.
Recall, three quarters ago we reported that "Goldman Has "Aggressively" And Quietly Liquidated A Quarter Of Its Equity Investments" showing that "having started the year with a $20BN equity portfolio which has enjoyed a $5BN increase in market prices, Goldman dumped a whopping $5.5 billion of its equity assets so far (excluding a modest $1.5BN in purchases) or more than a quarter of its entire portfolio as of Dec 31. "
What does that mean in English? Simple: in Q1, Goldman continued to "aggressively" dump its positions which are in the money in an environment that is "supportive", i.e., in which the dumb money is providing a constant bid into which whales such as Goldman can sell.
The last time Goldman was "aggressively" selling into a "supportive" market? Well, we have to go back all the way to 2007 and 2008 when Goldman was busy creating the very CDOs which its prop desk would then "aggressively" short. We all remember how prophetic that particular move turned out to be. Link
Since the early 1960s, global crop production has increased by over 250%.
We did the breakdown, or decomposition, in two stages. In the first stage, we found that only 11% of the overall increase in crop production (including crops used for food, feed, fiber, and fuel) came from an expansion of cropland area. The bulk of the growth, 89%, came from growth in what we call aggregate yield—total crop output per unit area per year (Figure 1). Increasing yields is not without its downsides, but overall this is good news since it means that less natural habitat had to be converted to farmland. Other research (including papers by Thomas Hertel et al and Nelson Villoria) suggests that without yield improvements, several hundred million hectares of land would have been taken over by cropland."
https://thebreakthrough.org/issues/food/drivers-of-increasing-global-cr…
A great resource to back up your point here:
https://ourworldindata.org/crop-yields
The only caveat is that a lot of that increase is down to fertiliser use, which has had obvious consequences
Global fert use has gone up by around 340% since the 60s
https://ourworldindata.org/grapher/fertilizer-consumption-usda?country=OWID_WRL~CHN~IND
A great reason why governments shouldn't subsidise fertiliser and subsequent waste. Fertiliser is only one, and not the key factor - especially with the advent of gene editing and precision agriculture. From your OWID link:
""What caused this significant drive in yield improvements? There are a number of factors which are likely to have contributed to sustained yield gains: fertilizer application, irrigation, increased soil tillage, and improved farming practices. However, a key driver in the initial rise in yield is considered to be the adoption of improved corn varieties from plant breeding developments. The initial period of yield gains in the late 1930s-early 1940s coincides with the transition period of farmers from open-pollinated varieties to hybrids. This process of cross-breeding between open-pollinated varieties, combined with improved breed selection practices is thought to define the key turning point in US corn yields."
It is possible to significantly boost the yield of rice and maize using CRISPR gene editing, trials in farm fields show
https://www.newscientist.com/article/2313582-rice-and-maize-yields-boos…
What a profoundly ignorant statement. Have read up on plant breeding and genetics. Borlaug and breeding of semi dwarf varieties. Or even have a look at he Ourworldindata link above. Amazing how people cling to 200 year old Maltusian beliefs. If only Maltus got to meet Mendel..
"What caused this significant drive in yield improvements? There are a number of factors which are likely to have contributed to sustained yield gains: fertilizer application, irrigation, increased soil tillage, and improved farming practices. However, a key driver in the initial rise in yield is considered to be the adoption of improved corn varieties from plant breeding developments. The initial period of yield gains in the late 1930s-early 1940s coincides with the transition period of farmers from open-pollinated varieties to hybrids. This process of cross-breeding between open-pollinated varieties, combined with improved breed selection practices is thought to define the key turning point in US corn yields."
Borlaug seemed to understand something you choose not to.
"When accepting the 1970 Nobel Peace Prize, Borlaug stressed that the world still faced enormous problems in feeding its population. He made it clear that the Green Revolution had not solved world hunger, it had merely bought us time. He would mention “the population monster” in nearly every speech he gave in the latter part of his career."
I can see why you wanted to change the subject - but probably not the best pick. It is like you are stuck in the 1970's.
Fertility rate: 'Jaw-dropping' global crash in children being born
https://www.rnz.co.nz/news/world/421284/fertility-rate-jaw-dropping-glo…
Hmm, fertility has certainly dropped in most countries but there hasn't been a crash in babies being born...
https://ourworldindata.org/grapher/births-and-deaths-projected-to-2100
And yet another record crop yield forecast for 2022. Clearly farmers don't sit around reading doomy headlines and worrying about climate change prrojections.
"FAO’s world cereal production forecast for 2021 is marginally higher this month and now stands at 2 799 million tonnes, up 0.8 percent from the outturn in 2020.
Looking ahead, FAO’s wheat production forecast for 2022 has been lowered slightly since the March estimate, largely as a result of the conflict in Ukraine, but it still points to an increase of 1.1 percent to 784 million tonnes."
https://www.fao.org/fileadmin/templates/worldfood/images/home-graph_4_a…
2nd largest producer of wheat India just had a record crop.
https://www.reuters.com/world/india/record-wheat-crop-high-stocks-help-…
We're all facing an energy cliff and the world's population just keeps on rising. Nobody here is mentioning that this could just be in large part the consequences of every increasing demands for resources: per capita multiplied by the no. people. Depressing thought, but maybe the party is over. Albert Bartlett gave the same lecture at Univ. of Colorado at Boulder for many years- maybe his videoed lecture is still on YouTube. Humans fail to understand the exponential growth factor, and he applies it in several examples.
Every major country is going through some crisis in their society. I would suggest the 1% know this and have their own plans in place.
We eat very little red meat, lots of chicken, veg, lentils, rice, pasta and sometimes fish as it is really expensive here. We cook all our own meals. For example tonight is risotto from scratch using leftovers from yesterday.
I must be hiding under a rock because I haven't noticed a huge increase in what we spend. When meat we like is on special we buy a lot and freeze it... eat the veg that is in season and buy from a green grocer and not countdown etc.
I guess the crunch is to come for us?
I live handy to the bush get a deer when I need one , cost meat almost zero some petrol and a bullet or two . Keep a great vegetable garden almost never buy greens some chicken when priced right . Good exercise a bit of planning and a vacuum packet, freezer kept pretty full good home orchard live on a couple of acres .
Do the same Ffrank. Haven't bought red meat for a long time. Bit of mutton/lamb if we have one in the paddock from time to time. Veggie garden just has the basics. Would be good to spend some time getting a proper annual routine set up. Built a decent sized green house to use. Southern winters probably limit a few things, but we did have good success with water melons one year.
Yes I'd like to sort out a supply of spinach rather than silverbeet. Usually have tomotoes and cucumber in the hot house every year. Grew a few different species of chillis and capsicums for interest sakes but the aphids loved them. Everything we grow in the hot house is in fish bins which we then cycle the soil into the veggie garden after each season.
Veggie garden is usually carrot, onion, beetroot, spuds with the odd brassica. Yams would be good to grow as well as asparagus, although they seem to be a long term plant. Might need to build another raised veggie garden bed.
Our spinach is the PerpetualSpinach variety, it’s really a silver beet.
Its sort of easy care biennial, if we don’t need spinach the leaves go straight to compost, as does the oregano and mint.
I like your tubs plan, we don’t rotate our tomato bed, just use Jay,s fluid to sterilise the ground.
My view of veg is they should be kept compact and the trimmings go to compost.
"Far more impressive is its rush to get big new infrastructure projects approved and underway. They have already approved 32 projects worth NZ$120 bln for new transportation, energy, and high-tech activity. In all of 2021 they approved 90 projects worth NZ$180 bln, so the pace is startlingly faster in 2022. And the private sector is getting regulatory encouragement too."
Impressive?...the Chinese economy has a GDP of NZD 22,000,000,000,000.....NZD180,000,000,000 (or 0.8%) over god knows what period of roll out could be more realistically described as underwhelming.
Ukraine and Russia supply 30% of the world’s wheat and barley, 20% of its corn, and over half of its sunflower oil.
Shouldn't it be some warning about population sustainability if so many countries are reliant on imported food commodities? It seems the UN should be having urgent conversations with governments about ensuring they have a local strategy to feed their population.
It's actually quite expensive to buy here. Pork and chicken is way cheaper.
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