Here's our summary of key economic events overnight that affect New Zealand, with news many global indicators are coming in quite weak today.
First, American existing home sales dropped -5.4% in June from May to an annual rate of 5.12 mln in June and a two year low and well below market forecasts of a 5.38 mln sales rate. It is the fifth consecutive month of retreat as tougher affordability continues to take a toll on potential home buyers. The median price for all housing types was US$416,000 (NZ$668,000), a record high and up more than +13% in a year. Total unsold inventory rose sharply, up almost +10% from May to 1,260,000 units.
It will be no surprise then that mortgage applications are falling. Last week they slid more than -6%, indicating that the June housing activity drop has continued into July, because this was the third consecutive weekly fall in mortgage applications - and the largest of them. The mortgage interest rate rose last week, after a few weeks of declines, and this won't help affordability or sales.
There was a well-supported UST 20yr bond auction earlier today and that brought a median yield of 3.33% which was actually lower than the 3.41% at the prior equivalent event a month ago.
Canada's inflation rate came in at 8.1% which was higher than May's 7.7% but well below the expected 8.4%. Analysts will need to start expecting these rises to be tamer than they had suddenly come to expect. To be clear, they are still unusually high, and this Canadian rate is a 39 year high, but some of the impetus is leaking away now. In May the annualised mon-on-month rate was 17% - in June it is back to just over 8%. Energy costs account for much of the leveling out.
China reviewed is Loan Prime Rates today, but left them both unchanged.
Some suppliers to Chinese real estate developers are refusing to repay bank loans because of unpaid bills owed to them, a sign that the loan boycott that started with homebuyers is starting to spread. Hundreds of contractors to the property industry complained that they can no longer afford to pay their own bills because developers still owe them money.
Separately, China is reporting large declines in road freight caused by renewed virus restrictions.
Meanwhile, Taiwanese export orders continue to recover strongly in June after the short and unexpected April drop.
German producer prices rose at a +7.2% annual rate in June from May, far less than the year-on-year +33% rise - and a clear indication the heat is going out of their producer price pressures.
The EU reported a deep and serious dive in consumer sentiment in July, driven by high energy and inflation costs, the war situation, and now unrelenting climate stress. Confidence sunk to an all-time low for a series that began in 1985.
Meanwhile the EU told member states to cut gas usage by 15% until March as an emergency step after Russia warned that supplies sent via the biggest pipeline to Europe could be reduced further and might even stop.
In Australia, the Westpac-Melbourne Institute Leading Economic Index declined by -0.2% from a year earlier in June, after a -0.1% fall a month earlier and pointing to the third straight monthly retreat.
Australia is about to renew its commitment to its 2-3% flexible inflation target and that could underpin a doubling of the official interest rate in coming months. A renewed focus on that is getting wide support, as a review of the RBA's performance gets underway.
Even though there are currently no direct flights from Bali to New Zealand, the Government is stepping up protections against the Foot & Mouth Disease outbreak there with enhanced border monitoring and controls. Australia faces a grave risk from this outbreak, and via there this is where our FMD risk will come.
The UST 10yr yield starts today at 3.03% and up +2 bps from this time yesterday. The UST 2-10 rate curve is unchanged today, now at -20 bps and their 1-5 curve is slightly less inverted at -3 bps. Their 30 day-10yr curve is now at +116 bps and a little steeper. The Australian ten year bond is up +2 bps at 3.58%. The China Govt ten year bond is down -2 bps at 2.79% and a one-month low. And the New Zealand Govt ten year will start today up +7 bps at 3.81%.
On Wall Street, the S&P500 is up an insignificant +0.2% in their Wednesday trade. Overnight, European markets were all down about -0.3% but essentially holding yesterday's gains. Yesterday Tokyo ended up +2.7% in their Wednesday session. Hong Kong was up +1.1% and Shanghai was up +0.8%. The ASX200 ended its Wednesday session up +1.7% and the NZX50 was up a lesser +0.3%.
The price of gold will open today at US$1701/oz in New York which down -US$10 from this time yesterday.
And oil prices are down -US$1.50/bbl at just under US$99/bbl in the US, while the international Brent price is now at just over US$102.50/bbl.
The Kiwi dollar will open today little-changed at 62.2 USc. Against the Australian dollar we are a little firmer at 90.5 AUc. Against the euro we are also firmer at 61.2 euro cents. That means our TWI-5 starts today at just over 71.1.
The bitcoin price is virtually unchanged from this time yesterday, up by +0.1% to US$23,553 but another one-month high. Volatility over the past 24 hours has been moderate at just under +/-2.9%.
There will be no video version again today due to staff unavailability.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
66 Comments
Hopefully all bad data and news that we are reading day after day ends soon (has peaked) otherwise this recession will soon turn into depression.
Physics trumps emotion.Every time.
https://surplusenergyeconomics.wordpress.com/
'Hype springs eternal, and nobody is yet prepared to recognize that economic growth, previously powered by fossil fuels, has gone into reverse, because fossil fuels are becoming costlier to supply, and no alternative of equal economic value is available.
There are limits, though, to the capability for self-delusion. Risk will reach its apogee when investors, lenders and the public tumble to the reality that discretionary consumption has entered an irreversible decline, and that the economy, just like millions of households, is struggling to ‘keep up the payments’ required by an increasingly financialized system.'
I think a good physicist would tell you there is no shortage of energy at all, the big yellow thing in the sky gives us untold. We are just currently too stupid (or corrupt) to know how to extract and store it.
Exactly! That's where fossil fuels came from. We have a huge energy surplus. Neccesity is the mother of invention and pressure on current methods will accelarate alternative energy harvesting technology.
To replace current energy usage with solar power requires building solar panels equivalent in area to the current entire built environment (all cities, roads etc). Plus the energy and materials to build the panels. Plus storage for night time use/intermittency.
We could change our lifestyles and use less power.
just saying
Hahaha .
Yea can't see people doing that. My biggest problem with believing that over population is our biggest problem is that it's not over populated countries using the most resources. The western world is addicted
Ever heard of technical progress to make things ore efficient over time?
That's not how it works though is it. We make things more efficient and then just use the efficiency up. Cars are a good example, engine efficiency has got much better but we just go and build bigger heavier cars.
The solution is to use less and become more efficient.
This has a name - Jevons paradox - Wikipedia
Not always... my 1.4 turbo skoda is way more efficent than my 1.8 1985 subaru, and my e-cargo bike an order of magnitute more efficient again
Not everyone owns a SUV, and for those that do, they can just trade back down to a more practical car when their status symbol is too expensive to run.
Plenty of European nations haven't upsized their ambition, in the Netherlands my 1.4 skoda is just larger than average.
https://www.statista.com/statistics/425331/eu-car-sales-average-engine-…
Yep, I was talking about New Zealand. Other countries get it, we don't. There is no reason why our per capita emissions should be as high as they are, it's because people here just keep going bigger and bigger, and more and more, much more like the US than Europe. In fact New Zealand's attitude towards cars is very similar to US attitudes towards gun control. Everyone looking in goes what the hell are you doing, but inside the bubble people are like "it's my god given right to buy a small tank to take the kids 800m round the corner to school and pop into the dairy"
Build off planet to eliminate the space and intermittency problems. The energy required for initial investment is high, but the big yellow thing in sky means the potential (energy return)/(energy invested) is in the millions.
Read all about it here (I also recommend reading all the series of posts)
Why does the author assume we'd need to send energy down to Earth?
Beaming energy at a planet suffering from global warming is silly. We need to offshore our production to somewhere emissions and energy scarcity are not factors.
Who said energy from the sun was limited to solar. It's the origin of most forms of energy except perhaps tidal or nuclear
As far as area is concerned, it is alot less than that. Otherwise agree.
Global demand is about 200TWh. Assuming 10% efficient panels would generate about 200kwh/year in a sunny location then you would need 1,000,000 square kilometers of panels. This is a land are 4 times the size of NZ.
Agreed. We're indeed to stupid. I saw a documentary about Germany's failed green energy policy last night.
They have installed loads of solar panels on farms and industrial buildings sitting idle (for more than 2 years) as they're short of people to do a final certification, which grants the owner permission to flick the switch and start using the energy. The paper forms of the simplified certification process spread out to 15-20m2 floor space.
Further, Germany prefers paying Switzerland & Austria to take excess renewable energy rather than making their own hydro pump stations financially viable. It's the only country where a hydro station taking excess energy has to pay twice, taking the energy (to pump water uphill) and again when generating energy. This situation has been known at least 10 years but no one seems interested in fixing it.
To add insult to injury, they're deconstructing loads of wind turbines because they've run out of their accredited life span. No one bothers to refurbish, renew those and the replacement units installed are less than 50% of what they lose.
Saudi's struggling to pump more due to technical issues. they must be close to 50% used and it will be the easy 50%
From people I've met who worked there, much of their oil brought itself to the surface. Caused a few problems too. Also remember footage from the 1991 Gulf War with large pools of oil on the surface. Everyone assumed they were the results of the Iraqi's sabotaging the well heads, but got told that many of those pools were naturally formed from subterranean pressure.
No, they've been water-cutting for years. 12 mbpd in, 9-10 our from memory. Started with water-table, had to swap to sea water; corrosion and separation are the headaches.
As the pressure was relieved yes they would have had to do that sooner or later. One of the established methods to bring the crude up is pumping water into the wells so the pumps don't have to lift it too far, but initially the crude was under pressure without any intervention.
So from an investment point of view, what do you think pdk, where or how fast are 'we' transitioning to this 'peak realisation' to be followed at some stage presumably by 'peak fear'? What you say may well be very inevitable but how imminent is this rate of decline from an individual's perspective?
1. Cash up and 100% prep now - Very imminent. Why did you ever contribute to KiwiSlaver!
2. Buy (invest) in acreage property off the beaten track, because that will come in handy - and you know, people will still respect property rights.
3. Invest in gold, commodities and essential equities - divest non essential consumption securities. We still have some reasonable time here, well, from an individuals perspective.
4. Mate, keep contributing - your KiwiSaver is fine for at least 20 years!
Aye, those are the questions.
I prefer to retain a cohesive national organisation/leadership and democracy - but the current incumbent crop are not my pick to lead (by default, they are of the old).
I think the problem is retaining rules (monitoring and penalty-application require a degree of complexity - meaning surplus energy). Social mandate will be key; ignorance and belief, the enemies.
I think we will go through a morph period, where triage will be a major factor. We will retreat to local (3 waters will be local folk grubbing up local pipe, repairing the joint). We will need to co-operate, not compete. There will be an exodus, city to food-production land. That's within our borders; at them we will probably need to repel.
I am prepped by default - it was a lifestyle choice when I realised - 45 years ago - that growth was a doomed proposition (as is showing up, as predicted, now). But I don't think I can/will repel borders in micro terms; I prefer to welcome others and teach them skills. We will need to multiply that skill-base, many times over. We will have to 'go with existing technologies' (Lord Rees) rather than believe in future inventions, and we'll have to be beyond the belief that lab-proven, scales (lab meat has inputs of energy/materials, doesn't scale). As someone pointed out upthread, we will be on solar energy, but not as the techno-optimists believe. Fossil fuels were compacted over aeons; real-time solar is much more dispersed (closer already to entropy). Even firewood is concentrated yesterdays' sunlight, not real-time.
Investing? The best place (and it's free) is in real bonds with others. We could get by without others while we had massive surplus energy (we just bought the stuff the work supplied and we could otherwise hermit); we won't be able to as supply dwindles. People around you with complementary skills. Best investment going.
Thanks for the in depth reply, especially your last two paragraphs. Decision making though for a thirty/forty something with a family and still in paid urban employment becomes somewhat murkier - well from my pov anyway.
I read an earlier link you posted and especially enjoyed this excerpt from it:
if we blow up or degrade the biosphere so it can no longer sustain us—nature will merely shrug and conclude that letting apes run the laboratory was fun for a while but in the end a bad idea.
That comes from Wright's Short History of Progress - a good read.
:)
Definitely not even close to the end of the bad data:
Goldmans CEO reckons inflation hasnt peaked and even when it does it will run high for some time. So rates will keep rising.
Putins team are talking about prolonging the war and stopping gas to Europe, the west doesnt seem to have sufficient storage of energy to get through winter so if the supply is constrained we should expect price rises again.
China is in economic trouble with a lot more bad news to come.
NZ OCR will rise and house prices will fall further. inflation here will stay the same- ish so OCR has a way to rise.
Opportunity now - is in climate change technology, solar, wind and electric vehicles... EU and the rest of the world are in a rush for clean energy that they can make in house. Ditto local clean-energy food production. When house market and tourism comes back the drivers will be very different. We will all now want low energy solutions fo travel, heating, transport, food production.. etc.
Australia faces a grave risk from this outbreak, and via there this is where our FMD risk will come.
Interesting that the FMD particles seemed to come from China. I'm straying in to conspiracy theories here but if China wanted to give Aus or even NZ a shot across the bows or cripple our meat exports then introducing FMD would do it... I often wonder how common this sort of biological economic warfare is. It would be very hard to prove as deliberate or even where it came from. If I've though of it you can bet that other govts will have too...
/tin foil hat
agree and China will also wonder how they got Swine flu
Boffins were born to fiddle. A different strain but research has it that the herpes simplex virus is adaptable to counter if not overcome certain cancer, melanoma for instance. An absolute ignoramus in this sort of field myself, but just imagine if things went the other way and an easily transmissible virus suddenly emerged piggybacking cancer with it.
China needs protein. Introducing FMD in our markets would shoot them in the foot.
Your theory would be more likely to apply to Chile
Foot in Mouth Disease?
Look no further than the Leader of the Opposition.
Hindsight's funny. I reckon parts of National is looking back on Simon Bridges with some wistfulness. The great white saviour is lifting the ratings but it's more correlated with realisation that Labour isn't the great red saviour everyone thought it was.
Come on PDK, that's pretty low-effort for you m8.
When your lucks-in? Something about Arderned cash? Can only work with the material.
:)
60% of pork consumed in NZ is imported. The UK 2001 Foot and Mouth outbreak started when a pig farmer fed poorly prepared swill to his pigs that contained contaminated foreign meat. I hope our border screening is as thorough as the Aussies. I understand that a lot of kitchen scraps go to pigs. Are we confident that all NZ pig keepers (including lifestyle blocks) are following correct protocols with their pig feed?
Nope, and that's one of the most likely methods of entry, second only to travelers.
"Broadly speaking, there is still room for improvement in NAIT compliance." Simon Andrew, director of MPI's M. bovis programme. 05/07
If the FMD bomb goes off in Australia we are screwed. The people with the most to lose don't seem to understand the gravity of non compliance.
FMD is only to be feared because it will be used as a trade barrier. You can farm through FMD, and other countries have been/are doing it, for as long as FMD has been around. Once stock have had it they won't get it again, and while they may be unwell for a bit, it is not usually fatal.
Who can we trust with Chinese news and accurate statistics?
https://www.youtube.com/watch?v=irRWfOkSuJE
Even though there are currently no direct flights from Bali to New Zealand, the Government is stepping up protections against the Foot & Mouth Disease outbreak there with enhanced border monitoring and controls.
Hopefully it can be successfully kept out. I recall the UK eradication program was brutal.
I travelled to the UK in that period (around 2001/2); flying into a couple of places over the funeral pyres of millions of dead sheep. It cost billions (of GBP). They did take it very seriously, it came less than a decade after the Mad Cow outbreak.
kiwikidsnz,
It was mostly cattle. They refused to learn the lessons from an earlier outbreak and caused a huge amount of unnecessary suffering. As to the UK's GDP, the effect was minor as farming constitutes such a small percentage of the economy which is dominated by services-such as money laundering for Russian oligarchs. Much of the famed City of London is little more than a tax haven.
German producer prices rose at a +7.2% annual rate in June from May, far less than the year-on-year +33% rise - and a clear indication the heat is going out of their producer price pressures.
I'm in Europe now and I have been watching the german TV news today. They are very seriously concerned about the upcoming likely gas shortage. They have some extra gas from Norway and the Netherlands but even with strict saving they think they will be 25% short of gas, come wintertime!
Is there any mention of Germany's backflip on Nord Stream 2 ? Or has it already been memory-holed?
What good is a pipeline? It gas you need. Russia won't supply on existing lines, a new line won't help. Russia will keep dripping it in nord stream 1 to keep them begging. No point in a total shut down, then EU moves on and u lost your leverage.
When Olaf Scholz reneged on the Nord Stream 2 deal (two days before the invasion started), Germany sent a pretty clear signal that it had no qualms about instumentalising the gas contracts as a political weapon. So you're right, the games will definitely continue in that regard. Nord Stream 1 is out for scheduled maintanance though - the delay in restarting and reduced capacity appears to be due to Canada refusing to return a turbine Russia sent them for refurbishment. The 'Russia to switch off gas' headline is convenient but inaccurate.
The turbine excuse is just that, an excuse. Now that they have returned it, suddenly there is two more that need taking out for refurbishment. Yeah right.
Olaf Scholz reneged on the Nord Stream 2 deal (two days before the invasion started),
Germany reneged after Putin moved troops into Ukraine.
It was before the main front of the invasion, but after Putin recognised the whole of the Donbas as an independant nation and moved troops in.
https://en.wikipedia.org/wiki/2022_Russian_invasion_of_Ukraine#Escalati…
Back a few weeks the Russians asked for gas payment in Roubles, because if it was paid for in Dollars the USA seized (stole) those. But the slanted headline here was that Russia was just cutting off the gas.
So now that we realise that Covid is not going to kill 40'000 Kiwis like originally projected and people are getting over it, we're trying to scare the masses with a new one "Foot in mouth" is the flavour of the month. I suppose it's the new thing of the 20's, being scared of that invisible virus, bacteria or whatever...
C'mon Yvil, that 40k was a potential if we did nothing (thought it was higher?). We didn't do nothing, the Government responded and whether you like their response or not the number of deaths was greatly reduced. There is plenty to criticise but try not being so emotive and be a little more rational?
I think Yvil is rightly pointing out that keeping people afraid is the new normal, and a big problem...
The unintended consequences of COVID-19 vaccine policy: why mandates, passports and restrictions may cause more harm than good
https://gh.bmj.com/content/7/5/e008684
I agree there tends to be an element of offensive BS in Government comms. tjhey tend to talk down to us. They are pushing another booster at the moment but being vaxed and boosted, i still caught COVID despite not going places other than the supermarket and gym (I know, both lousy places for avoiding virus's). But the booster formula has not changed despite multiple new variants out there. So i will not be getting either a mRNA or NovaVax booster until and unless they are updated for the new variants. The Government comms is much like a broken record and is at least a little bit disingenuous and misleading.
Yvils waaay down the rabbit hole with COVID. Just ignore that we vaccinated 95% of the population and just ignore the original versions of the virus was more deadly and that our hospitals weren't prepared etc etc. And pretend everyone is living in fear, classic right wing rabbit hole stuff, he will call everyone sheeple soon and start spouting about the illuminati.
We should be more concerned about this aye Yvil...
Get rich quick scheme': $16m paid to an Auckland motel for emergency accomodation
https://i.stuff.co.nz/national/politics/129327338/get-rich-quick-scheme…
Indeed!
Carefull Yvil..your MSD motel profits might be in jeopardy if FNM breaks out. Farmers will be getting all the tax payer funds and you will get nothing sir (Willy Wonka)
??? huh ???
In order to build back better, the whole system needs to be bought down by a controlled demolition. I think that’s been tried before somewhere ! I don’t see any evidence that our great leaders are working to strengthen our system and empower its citizens!
Yes, a controlled demolition is needed, but all we will get is an uncontrolled demolition with the 'powers that be' trying to put out the fire with gasoline,' as the song says.
I suppose it's the new thing of the 20's,
I dunno where you have been the last few decades, but people were scared of foot-n-mouth long before covid came along, or did you mean 1920s?
A 1924 outbreak in California resulted not only in the slaughter of 109,000 farm animals, but also 22,000 deer.
The CCP has rolled out the tanks to protect the most important facet of modern communism - the bankers.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.