Here's our summary of key economic events overnight that affect New Zealand with news retailers worldwide are now on eggshells waiting to see how hard consumers pull back in the face of the supply-chain-induced inflation surge.
But first, it is Memorial Day in the US and they are still on holiday. They are using the break to ponder their ridiculous obsession with guns. Away from there, financial markets seem upbeat. Asian equity markets ended yesterday booking stellar gains mostly. Overnight European equity markets were mostly quite positive. And that was despite peaky consumer inflation data.
Perhaps the better business mood relates to signs that Shanghai is moving toward re-opening its city and region after a two-month lockdown.
A pickup in global demand and tighter supply is seeing the oil price rise sharply.
But supply-chain pressures don't seem to be easing, and may in fact get worse with a China re-opening. Japanese consumers are waiting months for appliances they once took for granted. And that is all to do with supply-chain snafus around computer chips.
China not only has a Covid crisis, and a related supply-chain crisis, it also has a banking confidence crisis in one province. It is bad enough that people took to the streets demanding access to their money.
In Europe, German inflation is surging, principally from energy costs, but food is up sharply too. They are on the economic front line of the war in Ukraine. CPI inflation is up 7.9% in May, rising from 7.4% in April. This is their highest since the 1973 oil shock and well above what was expected. Food inflation is set to surge to more than 11% (vs 8.6% in April), while services are expected to rise 2.9% and this is down from 3.2% in the prior month.
Spanish inflation jumped too, up to 8.7% in May.
These surges, undoubtedly felt across the whole EU, is denting consumer sentiment in a significant way. But interestingly, businesses are looking past the immediate impacts and haven't joined consumers in their depressive fog. Business sentiment remains above long term averages. Confidence in employment prospects remains surprisingly elevated.
It's not good in all of Europe. Sweden revealed its economy shrank in Q1-2022. It is not the only one of course, just the latest one.
Back in the US, Fed officials are out softening up the financial markets for a set of more +50 bps rate hikes.
High inflation is a scourge for retail demand. Around the world, retailers are bracing for consumer resistance to higher prices, and the impact could get very depressive in the next month or two. Costs are forcing prices up right now. Higher prices are keeping consumers wary. The risk of sharp falls in retail volumes is very real, very soon. The fight against inflation seems urgent.
And those consumer attitudes will have a great bearing on how housing market sales activity performs from here.
In Australia, election watchers are now confident the winning Labor Party will govern with a majority in their new parliament. And the leaders of both parties in the prior coalition have been dumped..
The UST 10yr yield will start today unchanged at 2.74% while the US remains on holiday. The UST 2-10 rate curve is little-changed at +26 bps and their 1-5 curve is holding at +73 bps. Their 30 day-10yr curve is also on hold at +204 bps. The Australian ten year bond is now at 3.28% and up +3 bps. The China Govt ten year bond is little-changed at 2.77%. And the New Zealand Govt ten year will start today up +1 bp at 3.53%.
Wall Street is closed for Memorial Day. Overnight European markets all gained about +0.8% except London which was up less than 0.2%. Yesterday Tokyo ended up a very strong +2.2%. Hong Kong joined them up +2.1%. Shanghai however only managed a +0.6% rise. The ASX200 ended its Monday session up +1.5% while the NZX50 rose +0.7% in its session.
The price of gold is unchanged today at US$1854/oz.
And oil prices are very much higher from this time yesterday, up +US$2 to just under US$116/bbl in the US, while the international Brent price is now just over US$117.50/bbl.
The Kiwi dollar will open today at firm 65.6 USc. Against the Australian dollar we are at 91.1 AUc. Against the euro we are at 60.8 euro cents. That all means our TWI-5 starts today at 72.1 and firming.
The bitcoin price has risen +5.2% since this time yesterday and is now at US$30,694. Volatility over the past 24 hours has been high at +/- 3.2%. And see this.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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98 Comments
'principally from energy costs, but food is up sharply too.'
It's ALL energy, DC...
https://resourceinsights.blogspot.com/2022/05/climate-change-energy-and…
https://ourfiniteworld.com/2022/05/17/is-the-debt-bubble-supporting-the…
'The energy dissipated can be the food energy that a person eats, or it can be wood or coal or another material burned to provide energy. Sometimes the energy dissipated is in the form of electricity. Looking back, we can see the close relationship between total energy consumption and world total GDP.'
About proportional to my stress levels :-) Interesting thing is I keep hearing that in most spots that require sand banks that they are not forming like that used to. Either the weather patterns have changed, or man caused intervention with rivers are blamed. I don't know, haven't been doing it long enough. But I am getting better all the time.
Have you checked your inbox in the past week? A lot more than surfing going on.
Interesting challenge for NZ
Using CSIRO technology, Eden Brew is making casein micelles in the lab and able to produce artificial milk that is frothy, creamy and tastes the same as normal cow’s milk, as it replicates the natural fermentation process.
Very interesting and I feel as a country we are walking blindfolded into the future, leaderless. Fonterra started investing in alternative tech a few years ago so they are aware of the risks ahead to dairy. I think the farmers themselves are usually dragged kicking and screaming into the future are are horribly in denial about the impact they are having now and how rapidly things are going to change for them.
The problems are scaling; both the feedstock required (you don't make something from nothing - that's economics, this is physics/chemistry) and the energy input needed.
Unfortunately, the media are reality (physics/chemistry) blind, so no hard questions.
This is meat; same thing applies: https://thepoultrypunch.com/2020/12/artificial-meat-production-a-new-vi…
You have to actually put something in your mouth (other than your foot) and it has to supply energy - which has to have come from a source, being degraded entropically in the process. This is never mentioned.
Normally I would agree with you but in this case PDK is calling out the media for not asking appropriate questions, we really are in the strangest of times, dark ages as regards a cohesive social story (there is none) but new ages as regards the village gossip mill. How this can turn out well I don't know.
You have to actually put something in your mouth (other than your foot) and it has to supply energy - which has to have come from a source, being degraded entropically in the process.
Is that actually a useful statement though? Isn't the point that some sources are better (more scalable/efficient) than others (eg cows)?
USA “ridiculous obsession with guns.” Aye, true enough but it is vastly more sinister and deadly than just that adjective. The worst part being in reality not a lot can or will be done about it. There are probably as many illegal firearms in “society” than those registered. You can obtain a stolen gun as easily as a watch or phone. Nearly 100 years ago the USA attempted to ban booze. As fruitless then for that. The whole damn shooting box is far too big and wild in parts to ever effectively control. Law and order is virtually hit and miss.
Take away the guns and the root problem still exists. The shooter in the last episode was taught to hate by the community he grew up in. He had a lisp and was teased and bullied brutally about them. We do not teach our children to accept difference. Instead we fear and ridicule it. Childhood bully can be traumatic and the effects can last a lifetime. We generally consider ourselves to uphold egalitarian values of tolerance, but at the end of the day that is just a facade. How we treat others is a reflection of us, not them, and is core to our societies. So take away the guns and there are other means to inflict your hate.
While a small number of articles talks about his history, none seeks to change behaviour, they all just talk about taking the guns away.
Good people shooting someone stealing their TV is a diversion. Here instead is the reality. Tens of Thousands per year of Defensive use by gun owners--and sometimes it results in heroic outcomes--right person at the right time: https://www.foxnews.com/us/west-virginia-woman-shoots-kills-man-fired-p…
and not so good ones
Father charged after toddler fatally shot mother during Zoom call
7 Gang shooting in Auckland last week in 2 days. If NZ can't take guns away from criminals why is a good idea in the US to take guns away from people who are more likely than here to encounter criminals -former felons-with guns who by law are not allowed to posses a gun in the first place?
8 gang shootings and no injuries. This is because the only guns the gangs can get their hands on are old shotguns and sawn off 22s. Compare this with the USA where kids can by AR-15s that fire 400 rounds per minute. The faux outrage of the NZ gun loving USA wannabes is laughable.
Because most gang guns seem to have been bought from NZers who purchased them legally in the first place. So, gangs would have more assault rifles if legal owners had more assault rifles. At least since National got rid of the gun register years ago.
Perhaps if we had a gun register to reduce sales to gangs - though some would likely sell them anyway and report them stolen, however perhaps recurring inability to properly secure guns would be a good reason to be refused future purchases.
Actually, from the police figures, the criminals are stolen. Once stolen, the registry is useless. The exception being the 12 gang members and other 501s they gave firearms licenses to, as the didn't call Australia where they had form.
Others are imported along with drugs, especially handguns. . If you can bring meth in half ton lots, some guns to protect it wouldn't be a silly idea. A couple of years ago, a police bust included 4X M4 rifles, which are real machine guns as used by the army. They had never been legally imported into nz.
Not much sympathy for scum or their family who grew them.
https://www.odt.co.nz/rural-life/rural-life-other/piopio-home-invasion-…
You can see parents forming vigilante type of protection. Not far from where we lived when the school bus went down the main street of town there was a parent every afternoon on every corner to oversee the little ones’ safety as being dropped off. That’s 25 years ago or so. Perhaps now those same guardians today, are armed and ready.
All very true Murray, but the difference is that outside of America a dozen school kids won't die as a result. You can't tell me America is the only place with issues teaching kids to accept difference.
The probability of getting mugged in London and New York is the same, but in New York you are 54 times more likely to die in the process.
the problem is a human one. In the US guns are accessible, but take them away and they can use cars, bombs, manufacture their own weapons and so on (in Japan someone made their own chemical weapon a set it off in a train). The problem is not the guns it is us and how we behave towards others.
NZ is better than most countries, the shooter brought Aussie ideology here. Without guns there is still the means and a good planner will still create a big body count if they are motivated enough. I think we got it wrong about the guns, but that is a minor thing. What was major was the Police did not do their job properly, who got called out for that? It still comes down to how we threat those around us.
No it's idealistic, but if we don't expect better we'll never get better. Yes the US does have a gun fetish, but the vast majority of gun owners do not go out randomly killing those around them. That is why the NRA can have the sway it does with it's lobbying. I would suggest that in NZ people with guns are more likely to commit an offence based on statistics. In stuff today I note an article where down south someone shot a cattle beast over night on a farm. Did so from a road. I personally know when a family's pet deer in the house paddock was shot from a car on the near by road, and when poachers shot a cattle beast on a friends farm and left the carcass in a creek. Dickheads with guns should not be trusted, but whether it is a MSSA or bolt action .22 doesn't really matter. It is the people not the guns which are the problem.
when you're focused on the guns you're ignoring the real cause. Don't start getting petty because you don't want to look in a mirror. It is that attitude that breeds hate. You might dismiss my point as trivial, but ask the children who have been and get bullied what they would do about it if they could?
I was away from the computer, but in strictly general terms no. But I do see where these guns are used for competition shooting where they should be allowed. I do see the need for the gun and the owner to be registered. But the real question is the people. NZ is better than most places in the world in this matter, how do we improve on it? How do we work at teaching acceptance and tolerance rather than fear, hate and ridicule/
unfortunately very true and very obviously instances are not limited to schools. the weapon of choice for the IRA was bombs. so too the Boston marathon attack, Oklahoma and go back to the first WTC event plus centuries of the same when such were known as anarchists for instance. The obvious attraction, is carnage can be triggered remotely and the perpetrator is thus available for another go somewhere else.
Sharon Zollner, one year ago:
https://i.stuff.co.nz/business/124438249/gale-force-economic-warning-wh…
That's why I find it all the more intriguing how she has regularly warned over the past few years that it might all go kaput. And oddly she doesn't appear to get shutdown by anyone else in the bank.
Unless of course the line of messaging is intended to be some form of threat to the RBNZ to keep the OCR suppressed to protect the debt.....but surely our retail banking sector haven't become that desperate.....(and unethical...)
Bank Economists are free to speak about the future... They may have their house view and their street view.
Sharron was warning about the position we now face, many thought the very low rates in Covid were too low.
NZ Real Estate follows offshore, China fallen, US falling fast, mmmm could the new rule be
Real Estate haves every 10 years?
Bang on. Lots of companies compete with each other to sell us stuff - houses, mortgages, cars, beer, whatever.... its what they do. the job of the bank is to make money for its shareholders.... the RBNZ is surely here to mitigate the risk to the economy of inflation and exchange rate etc via the OCR. The Government is here to get re-elected and balance the needs of their sponsors, lobbyists and voters.....
Ultimately it has to be an individuals responsibility to learn all this, read news, develop their skills/career and balance the risks of their investments etc based on what they know. And also to choose which party to vote for based on their own needs and values... or choose another country or whatever.
Lots of things going on - life is a great game, even better if we accept that ultimately our outcomes are based on our own decisions.
Love the opinions here tho.
The risk of sharp falls in retail volumes is very real, very soon.
There's only so much I can disclose, but from what I can see there has been a notable downturn from mid-March. Even looking back at the GFC I can't see the same pattern. No doubt this is partly due to supply chain issues, but I'm sure I can hear the sound of sphincters puckering.
Will be interesting to see how these types of markets do over the next few years, similar to shares and houses I imagine. On the one hand there is still plenty of money out there needing somewhere to be invested (and putting it under the mattress is a pretty bad option with inflation). On the other hand almost everything looks overpriced and due for a correction.
The bitcoin price has risen +5.2% since this time yesterday and is now at US$30,694. Volatility over the past 24 hours has been high at +/- 3.2%. And see this.
Hence why it is Bitcoin not Shitcoins. Altcoins are like high risk tec plays, move fast and break things but with a massive reward if it succeeds.
No idea for the end of the year, But it will be higher in 5 years time.
When you can print an infinite amount of fiat $ that is divisible by only 21m Bitcoin it is basic maths that the $ value of each Bitcoin will go up. Now how much a $ gets you is the real question.
My bet is it will go up by a lot, hence I put my money where my mouth is :)
I'm not against this:
No idea for the end of the year, But it will be higher in 5 years time.
But this is factually incorrect:
When you can print an infinite amount of fiat $ that is divisible by only 21m Bitcoin it is basic maths that the $ value of each Bitcoin will go up.
It would be basic maths if bitcoin were the only thing you could buy with $, but it's not.
It is the only thing that is provably scarce, everything else can increase in supply with additional effort and better technology.
Also my maths is still correct? even if it is not the only thing you can buy, if there are more $ created, then even if the proportion in BItcoin stays the same, more $s are still going to flow into it and hence measured against the $ it will increase.....
Ergo it is the best place to store your wealth, and will suck the monetary premium out of everything else we use as a "store of value" because fiat currency is constantly debased by at least 2% a year, Eg realestate in NZ.
Bitcoin Block Reward Halving Countdown (bitcoinblockhalf.com)
Also my maths is still correct? even if it is not the only thing you can buy, if there are more $ created, then even if the proportion in BItcoin stays the same, more $s are still going to flow into it and hence measured against the $ it will increase.
Only if there is demand for it. There is no mathematical law that says that $ will continue to flow into bitcoin.
I'm not against bitcoin at all. Just pointing out that it's flawed to assume that the price in $ has to increase over the long term.
Tensions maybe diminishing? - Medvedev hails Biden’s decision not to send Ukraine rockets reaching Russia
In Europe, German inflation is surging, principally from energy costs, but food is up sharply too. They are on the economic front line of the war in Ukraine.
Putin confirmed to Erdogan that Russia can export food if sanctions are lifted — Kremlin
Advisor, what are your views on this?
https://www.productivity.govt.nz/assets/Inquiries/immigration-settings/…
The Commission makes 24 recommendations to improve immigration policy settings to lift New Zealand's productivity and wellbeing, including the Government:
- Publish an Immigration Government Policy Statement (GPS) to clarify how immigration will be managed and connected to other government objectives, including what investments will be made in absorptive capacity.
- Create stronger links with education and training policies through the GPS and by requiring Workforce Development Councils to report on how demand for migrant labour and skill gaps inform their training priorities.
- Engage with Māori in good faith on how to reflect Te Tiriti o Waitangi in immigration policy and institutions.
- Increase funding for iwi involvement and partnership in the expansion of the Welcoming Communities initiative.
- Reduce the use of Skills Shortage Lists for immigration purposes and encourage wages to reflect scarcity.
- Regularly review visa categories and the residency points system to ensure they sufficiently prioritise high skilled migrants.
- Cease the practice of tying migrants to a single employer.
- Provide additional funding for the Labour Inspectorate to support labour market regulation, the proposed accredited employer scheme, and the integrity of the immigration system.
Surely we are missing something about infrastructure being indexed to current population and that each additional immigrant requires an appropriate investment from the government to make up for the new user?
Reduce the usage of the Skills Shortage Lists? For the love of all that is good!!! We won't be able to move for "Retail Managers".
I see they are "engaging" with the "education" sector. This is a simple rort, as I used to walk past the "language schools" I am relaxed in saying they were simple fronts for residency schemes. As they used to come out and socialise there was NO English being spoken.
This is an example of why our society is rotting, we are listening to fools.
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