Here's our summary of key economic events over the weekend that affect New Zealand, with news China seems to be moving into a classic liquidity trap situation.
Chinese banks extended ¥679 bln in new yuan loans in July, the lowest reading in three months and well below ¥1.08 tln a year earlier. The level also disappointed investors which were expecting an expansion similar to last year. But the ongoing property crisis weighed on consumers mood and government bond issuance has slowed. Low interest rates, a fast-rising M2 money supply, and banks willing to lend but clients unwilling to borrow, and savers saving harder, is a classic liquidity trap.
In Malaysia, they reported an economic expansion in the June quarter that was more than expected, charging up at an almost +9% annualised rate and impressive even if it is off a lowish base.
India has reported positively on their June industrial production levels, a fourth consecutive month of outsized gains.
EU industrial production data was released for June and that also brought a positive surprise. It grew +3.2% in the whole EU from a year ago, very much better than the +1% expected. UK industrial production rose +2.4% on the same basis.
In the UK, their economy contracted in the second quarter from the prior one as households facing soaring inflation cut back on spending, and programs to contain the pandemic were wound down, signaling tough times for an economy that is expected to enter a lengthy recession.
In Russia, their economy also contracted but more steeply in the June quarter as the economic consequences of its war in Ukraine took hold. Their economy shrank -4% from April through June compared with a year ago. It is the first quarterly gross domestic product report to fully capture the change in the economy since the invasion of Ukraine in February, when Western sanctions shut Russia off from much of the global financial system, and many countries severed trading relationships with Moscow. It was also a sharp reversal from the first quarter, when the economy rose +3.5%.
In the US, the latest sentiment survey, this one for August and by the closely-watched University of Michigan series, indicates rising optimism. But to be fair, it is only off its deep low for current conditions. However, the year-ahead economic outlook rose substantially and that is probably significant - and may indicate consumers are turned off by the silly 'steal' political shenanigans.
The July USDA WASDE report paints a much more relaxed picture for the international grain situation. Despite the European war, they now think most regions will have production increases, especially for wheat. Corn and other coarse grains might become a bit tighter they say, but the rice trade will have plenty available even if slightly lower than last year. They also see slightly higher dairy prices, and higher beef prices, but few supply issues.
We should also note that the annual shindig for central bankers at Jackson Hole in Wyoming will be held at the end of this month, a time for navel-gazing about monetary policy directions. This year it seems likely that QT (quantitative tightening, or the draining of the QE reservoir) will be a major subject).
In Australia, new home sales plunged -13% in July from June, swinging from an almost +2% gain in June. The sudden slump is being blamed on the recent increases in the cash rate, with builders reporting fewer enquires and visits to display sites.
The UST 10yr yield starts today at 2.84% and very little different from week-ago levels. The UST 2-10 rate curve is more marginally inverted today, now at -41 bps and their 1-5 curve is also fractionally more inverted at -29 bps. Their 30 day-10yr curve is now at +65 bps and slightly flatter from this time yesterday. The Australian ten year bond is down -1 bp at 3.40%. The China Govt ten year bond is unchanged at 2.75%. And the New Zealand Govt ten year will start today up at 3.52% and up another +19 bps from week-ago levels. Don't forget we have a full RBNZ MPS on Wednesday this week to deliver another +50 bps rise.
The price of gold will open today at US$1804/oz which is up +US$2/oz from this time Saturday, and up +US$28/oz in a week, up +1.6%. It is also the first time above US$1800 in seven weeks.
And oil prices start today unchanged at just under US$91.50/bbl in the US, while the international Brent price is now just under US$97.50/bbl. A week ago these prices were US$88.50 and US$94.50/bbl respectively, so a +3% weekly rise.
The Kiwi dollar will open today at 64.5 USc which is more than +2c higher than this time last week and its highest since early June. Against the Australian dollar we are holding higher at 90.6 AUc. Against the euro we up at 62.9 euro cents. That all means our TWI-5 starts today at 72.7, our highest in more than three months. It is a +2.4% appreciation in a week.
The bitcoin price is up +0.7% from this time Saturday at US$24,248. Volatility over the past 24 hours has been modest at just under +/-1.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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47 Comments
Mike Turner squirms when he showed in CNN interview.
Arkansas Governor appears as a man of reason, in CNN.
Senator Rand Paul and Rubio appeared in Fox, slanging the FBI raid.
Trump lawyers appearing in Fox are young and pretty, 3 of them, and don't know if any of them attested to compliance with earlier subpoena.
Newsnation is coming up in my YT.
Two men have died, one attempting to break into FBI office and another crashing into Capitol barricade and shooting himself, their intentions unknown.
Does it help in raising voice now after the damage has been done.
Where were all the experts when Rome was burning and our very own .....was playing violin...and not to forget, so called experts and media was supporting by clapping.
https://i.stuff.co.nz/business/129552188/anz-believes-reserve-bank-may-…
“absolutely certain” that inflation has peaked. That’s good to know. If only my wallet knew that too. Our household spending, including, annual insurance, rates, power, petrol, is up 15.3% compared to same period last year. There is no exceptionally differing expenditure item(s.)
I can't say much about Foxglove's increase of 15.3%. CPI is 7.3%. Someone gets a 5% pay rise. Looks like they're going backwards.
But let's say that person spends 40% of their pay on the mortgage, and it's fixed for 5 years. The remaining 60% of their pay goes on consumer goods/insurances etc. 7.3% x 60% = 4.38%.
Inflation has peaked as much as a genie has peeked out of a bottle. In their attempts to bring the genie which they released back into the bottle, our beloved Reserve Bank will likely smash the bottle. Glas splinters will be flying all around and many will be cut, whilst the RBNZ gets drunk by the high percentage in the bottle.
Cheers!
Looks like the sanctions on Russia are having a limited effect. Perhaps they are more effective in restricting their military capabilities which does not show up in GDP data. Not sure. Unfortunately the whole situation in Ukraine seems to have been ‘normalised’. Just like any other regional conflict. The only real way to support the Ukrainians is more weapons and ‘boots on the ground’ as the Americans say. There is certainly no appetite for the latter.
The geopolitical unrest and uncertainty created by the war pushes up the price of key commodities. These commodities being oil, natural gas, fertiliser and wheat amongst others.This keeps Russias current account nice and healthy and allows them to limp along economically.
The same unfortunately can not be said about Ukraine which faces economic and social oblivion in the near future without serious amounts of aid.
Thanks to those who replied to my question on Friday about re-hiring an ex employee who left in bad terms. I since found out where she had most recently been working and I decided to call that business for a reference. The owner told me " My lawyer forbids me from discussing the case, so I cannot help you out". That's all I needed to know, most of you were right, as most advised me not to re-hire her, thank you.
The employer that has employed a lawyer has made a mistake right there. They are in the business of creating conflict. Cheaper and less hassle to just pay her 2 months pay to go away, and chalk it up to experience. And give them a written reference that on the face of it looks OK but clearly says between the lines "give me a ring".
In my experience it is easier to pay a specialist a few grand to sort a serious employment issue out. It may cost you 50 grand otherwise. There is a lot of procedure to follow and fish hooks to know about with employment disputes. On top of this most employers want to be focused on core business issues not pain in the ass employee issues.
Thanks Beanie, I agree on the principle of 'not creating conflict" but the employer has little choice if the employee gets the legal proceedings into action first. These legal proceedings are free to the employee, whereas the employer has to pay a legal employment specialist to fight the allegations. A few (minority) nasty but smart employees know this and use it to force the employer into a "non deserved" settlement.
It's actually easier if they have gone to one of those 0800sacked type outfits. They work on a commission and are therefore keen to get a quick resolution without drama. And when you fill them in on both sides of the story (there is almost always fault on both sides, usually the boss hasn't followed the letter of the law out of frustration dealing witha bad employee) they are agreeable to a fair settlement. They don't want to waste time flogging a dead horse.
It's a different kettle of fish though if it is a senior manager that has retained their own lawyer in pursuit of big money.
Uhh, mostly past tense now. I don't have anyone on wages anymore. At one point I had a few dozen spread across a couple of businesses. Then I wised up and worked out bigger isn't necessarily better.
I don't know what you do but sounds like you might be at a crossroads. If you're short staff maybe you need to assess how much work you're doing. It might be you just take on less, but make that the work you'd rather do instead of the work you have to do. Pretty hard making decent coin being all things to everyone.
Hard times ahead for the Chinese property market?
https://www.scmp.com/business/china-business/article/3188781/fifty-mill…
What's more interesting is how China's property market has been able to defy gravity for so long. People have been writing articles about ghost cities for years, Evergrande has been in crisis for at least 2 years, at the start of the pandemic there was rioting in lots of cities when developers started lowering prices for apartments still to be built.
The current solution in China is that everything that fails & is worth saving reverts to CCP ownership. Until the Chinese people themselves physically respond to how they've been conned, nothing changes. Most of them know they're being conned but get beaten up or killed if they do anything about it. But it will happen one day. The people outnumber the CCP & the PLA 10-1 but the big boys have all the guns.
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