Here's our summary of key economic events over the weekend that affect New Zealand, with news China is still struggling to get its economic expansion back on track, while the US may be reporting an economic stall in some measures but their labour market suggests their expansion is still building.
First, Chinese industrial profits retreated in July from June, down -11.8% from year-ago levels for the month to just ¥623 bln. Year-to-date they are lower now too. This data comes from a national official survey of "large firms" with annual revenues of over ¥20 mln (~NZ$5 mln) from their main operations, so actually it really only avoids the smallest of companies. This isn't a surprising result given the headwinds they face. But the same official data shows that the liabilities these firms face grew more than +10% in the year to July. The pressure from those headwinds is building.
And they have an even more serious crop problem. While there has been some new rain in parts of the south, it isn't enough and it isn't hitting most key agricultural areas. It is hard to overstate the impact this is likely to have on their rice and vegetable crops generally. China is facing a tough food supply problem. More rain now is probably too late to save most damaged crops.
Food production is one thing, electricity production is another and China's southwest is doing it hard at present. And that is having consequences for EV owners - some now can't use public charging stations.
And in China's northeast, two more local banks are about to be declared bankrupt. They aren't the first. But national banks are moving in to shore up the situation.
In the US and in a short, blunt speech at Jackson Hole, Fed boss Powell reinforced the American central bank is very focused on getting inflation back to its policy range and will tolerate the 'pain' that may cause. He essentially said the choice they face is some short pain now, or much larger and long term pain if they leave the pressures unaddressed.
Now the battle against excessive inflation takes priority over the short term economic expansion. His speech is a good example of why monetary policy decisions have been handed to technocrat experts, rather than left to politicians.
But perhaps inflation is retreating somewhat. The US PCE measure fell in July from June, but from a year ago it is up +6.3% in July, but that is less than the +6.8% level recorded in June.
The same data shows the American consumption impulse easing fast. In fact incomes rose faster than expenditures in July, and only for the second month in the past 12 have we seen that.
American consumer sentiment improved in August, driven by the expectation that future prospects are brighter. But overall, sentiment is still lower than year-ago levels.
And in the week ahead, we will get two jobs reports for the US, both of which are expected to show that their labour market remains resilient. The latest non-farms payrolls consensus estimate is for +300,000 jobs in August, a similar pre-estimate analysts had for July, and one that was beaten handily on the upside. With just three days to go, there seems little to now affect August estimates.
In light of a still-booming jobs market, more observers are questioning the official GDP data that suggests the giant American economy has stalled or contracted. The two sets of data seem unlikely companions - one is probably wrong. And a stock market readjusting after a long period of 'yield' valuation gains isn't a persuasive measure either.
Still, the now rather fast build-up of inventories is a worry, even if it may have been 'necessary' in these times of difficult supply chains.
Staying in the US, the first estimates of the annual crop inspection tours show that the soybean harvest should yield normal results, but the corn harvest is likely to come in -4% lower than earlier official USDA estimates. As corn is their largest crop, this will have global implications. The corn price rose on the news and it had only recently come off its all-time high.
The UST 10yr yield starts today at 3.03% and little-changed from this time Saturday, and after Powell's speech. Bond markets are satisfied they had priced in what the Fed is trying to achieve. The UST 2-10 rate curve is also unchanged at -35 bps. Their 1-5 curve is also stable at -18 bps. And their 30 day-10yr curve is still at +68 bps. The Australian ten year bond is down just -1 bp at 3.60%. The China Govt ten year bond is unchanged at 2.68%. And the New Zealand Govt ten year will start today at 3.87% and off its two month high.
The price of gold will open today at US$1739/oz which is up a mere +US$1/oz from this time Saturday.
And oil prices start today at just under US$93/bbl in the US which is unchanged from Saturday, while the international Brent price is still just at US$99/bbl.
The Kiwi dollar will open today at 61.3 USc and a tad lower than this time Saturday. That is still its lowest since mid-July. Against the Australian dollar we are down at 89.1 AUc and a 5 year low. Against the euro we are down at 61.6 euro cents. That all means our TWI-5 starts today at 70.5 but that is quite similar to this time last week.
The bitcoin price is now at US$19,996 and down another -3.3% from this time Saturday. It is struggling to get back to US$20,000. Volatility over the past 24 hours has been low at just on +/- 0.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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In the US and in a short, blunt speech at Jackson Hole, Fed boss Powell reinforced the American central bank is very focused on getting inflation back to its policy range and will tolerate the 'pain' that may cause....
Now the battle against excessive inflation takes priority over the short term economic expansion. His speech is a good example of why monetary policy decisions have been handed to technocrat experts, rather than left to politicians.
Monetary Policy Is All Talk All the Time, and Always Has Been
As Ben Bernanke recently admitted, “I think monetary policy is 98% talk and 2% action, and communication is a big part.” As usual, his math is off; it’s all talk all the time and always has been.
Spiralling energy costs force Belgian companies to shut down
“In the past, we spent tens of millions of euros per year on gas and electricity; at current prices, it is several tens of millions per month.”
And so there has been a semi blockade of Taiwan by the CCP following the Pelosi visit. Relaxed now one assumes. Otherwise two US Navy warships sailing through the Taiwan Strait might have been cause for consternation of quite some greater degree. Hasbro reputedly working on an extension of “Battleship” to be called “Provocation.”
"The bitcoin price is now at US$19,996 and down another -3.3% from this time Saturday. It is struggling to get back to US$20,000. Volatility over the past 24 hours has been low at just on +/- 0.8%."
This can't go on, even Elon bought. The young investors from all continents will have to go without a nutritious breakfast.
No one is talking about mass adoption, I'm just pointing out the inaccuracies within your initial post. It may be majority young male but the top 3 countries who've adopted crypto are in Asia, i.e its not white males and they are likely investing due to lack of faith in their own currencies.
Here are some roundish numbers 5300 and 9600. The number of rental listings in Auckland and nationwide.
Huge fall these last 4 weeks, nationwide 8 percent drop. Any reason. None specifically. More rental market activity bodes well for sales activity, in my experience
Yep quite right. I had stopped monitoring Auckland townhouses about 3 weeks ago, and after strong lifts to above 500 they have dropped back to about 440. Interesting.
I expect they will shoot higher again, though, there’s still lots of new builds to come on line over the next few months.
If you cant rent them then sell em
You feel that reality is setting in and some ever-bull property investors are now starting to head to safety. If some of you portfolio cant be rented and prices are falling and it all looks downhill till 2024, then time to sell and take some of the profits made over the last few years.
Just my opinion
The irony is that the bright line extension brought in by Labour may mean that now some investors may be feeling the pressure to sell and free up houses for FHB but they may elect to hang on so they can keep their sweet sweet capital gains they're hoping will bounce back
Net zero and the damage done.
"2.2 million households are expected to run out of savings by 2024, taking the total who face fuel poverty to more than 6 million."
https://www.thetimes.co.uk/article/energy-price-cap-rise-october-2022-o…
"The upshot is that the market is broken and it is governments and do-gooders who broke it. They broke it wantonly, recklessly, touting their saintly intentions, and now we are all reaping the consequences. "
https://www.telegraph.co.uk/news/2022/08/26/how-governments-cult-net-ze…
"Germany is facing its worst winter for 75 years. The impending catastrophe risks crippling its economy, sweeping away its government and bringing chaos to the heart of Europe."
https://www.telegraph.co.uk/business/2022/08/28/how-decades-complacency…
Exactly.
You want to punish Russia with crippling sanctions and proxy war? Now its Time to pay the bill. That anti Russian bandwagon always came with a price tag.
Cannot eat cake and have it too.
Still, if this helps push Germany etc onto a quicker path to sustainable resources then that's a good thing?
A little kernal of truth that builds to an incorrect conclusion. They had to back Ukraine, because if Russia succeeded taking Ukraine Moldova would be next and then Putin would be eyeing Europe. He has since stated he is trying to resurrect Imperial Russia, styling himself after Peter the Great, but is in reality Vlad the Destroyer. But it is not the war alone that is the core of Europe's problems. It is the effects of the pandemic, it is the poor, knee - jerk decisions in the face of global warming evidence to shut down ageing nuclear reactors in favour of fossil fuelled power stations fuelled by imported gas - from Russia when Russia's stability was already becoming questionable. So it all builds to a crisis. The most effective solution to Putin's adventurism would have been NATO and Europe combining to stop Putin in the first week. But the politicians were too afraid of the risk to act, too enamoured of their own ability to use diplomacy, even when no one was listening. And now as a result the risk is even higher.
Putin isn't stupid. He never had the ability to go up against NATO in any sort of hot war. In the Ukraine he has the locale advantage which abruptly changes not far from the Ukraine border. Declaring it was his intention to invade all of Europe is pretty reaching. With what weapons would he do so? How could he fight along such massive front lines? He would have to be an idiot to even try, which he clearly is not.
Agree regarding nuclear power, shutting down those stations to import fuel from Russia wasn't really thought through and emboldened Russia.
But then we are back to the same old NATO arguments, which shouldn't have pushed for Ukraine to join, should have not poked the bear. Understand your view is different on this, but the bear has been poked now.
Going to all out hot war with a nuclear state is rather dangerous. You can understand why they didn't want to do what you suggest.
I think Putin had correctly, identified NATO as being a paper tiger, all posture but no substance. Putin himself has stated he is trying to resurrect Imperial Russia, and that expansionist history is there for you to discover. And NATO did not set out to recruit Ukraine. Ukraine had applied to join, but had been rebuffed for around 10 years, as nationally they could not step up to the requirements for membership. So NATO were not poking the bear. But if you really believe your arguments, perhaps you could explain why Sweden and Finland have now joined NATO?
NATO stated quite clearly on their briefings that Ukraine was on the path for membership and was being treated as such. Sweden and Finland have now joined in solidarity with Ukraine, which is their perogative.
But if you think having one long NATO/Russia border all armed to the teeth on both sides is a solution for peace (which, of course, is what large arms corporations want cos it's good for business) well I have news for you. History tells us it's a great way for wars to start, to create huge and complex "if they attack you, I attack them" defense pacts which eventually result in massive wars. Again, the border states should have embraced playing man in the middle, much like we do with China and the rest of the West. Having good relations with both sides is the path to peace for them, at the moment Ukraine is paying a price for deciding to side with one over the other.
There was a wealth of warnings from Western sources that support the "why are you poking the bear" argument pre invasion. Hell even the far right Cato institute issued such warnings pre Ukraine invasion, as did many top level US right leaning diplomats and senators. Its a classic American thing to do "if everyone is armed to the teeth, everyone is safe" mantra espoused by weapon obsessed drongos in the US. And who benefits? Oh right, large arms corporations...
Did they join NATO out of solidarity to Ukraine, or out of a sudden awareness of the threat that Putin posed? Both countries had been somewhat staunch about NOT joining NATO for years, and indeed their armed forces are impressive. But I would suggest that they always believed that the defensive, not aggressive, posture held by NATO would be enough to discourage Russia from adventurism. If you persist is arguing that NATO was a threat, why do you think Europe felt there was a continued need to maintain NATO after the collapse of the Soviet Union? Putin has proven the threat that everyone else can see, but you seem to be denying.
As to poking the bear, you can also use that argument about the US and China. Supporting a country's independence and right to determine it's own path is not poking the bear or the dragon. It is just standing for what is right. Only an aggressor would argue that is is threat, and that is only because they are being prevented from being a bully. In the meantime Putin is in the process to destroying Russia because of what he is doing in Ukraine. Not so smart after all.
Taiwan isn't recognised as a country, even by the US. The US are continuing to poke the bear with China, for exactly the reasons they like to poke the bear in Europe. Next up, huge arms sales to Taiwan, rejoice! That will make the situation more peaceful. Meanwhile, multiple military and foreign policy advisors within the US are all telling the government not to poke the dragon, not to visit, yet again, with no success.
"The US is just standing for what is right" - ha haaa haaaaa, biggest laugh of the day. They are protecting their own interests, far gone are the days when the US were altruistic and stood up for what was right. The murder of children and the subsequent "nobody did anything wrong" investigation tells you all you need to know about America "doing what is right". Maybe you should wake up to the real world.
I notice you won't respond to arguments with evidence that the US government was told repeatedly by their own advisors to not poke the bear, rather telling ignoring the lead up to war.
I suppose you also believed all the "Saddam has WMD" bull dust trotted out by the US to justify their invasion of Iraq? Or the various other lies and spin they create to justify their horrific acts? But you know, we benefitted as part of the Western alliance, so I guess that clouds peoples judgement.
The appeasement of China is nothing more than a front. Biden has said it recently that the US would step up to defend Taiwan, so regardless of the diplomatic speak Taiwan is an independent country and more, it is a democracy which regularly rejects the option to voluntarily reunite with the PRC. So please can the BS that the PRC tries to maintain.
Irrespective of the reasons of self interest, supporting and defending a country's right to independence and self determination is the right thing. Are you suggesting otherwise?
And yes there were, and are many "Chamberlains" in the US political community who would accept appeasement over conflict. But then how well did that go for Neville Chamberlain? So you would be quite happy to throw Ukraine under the bus to suit your own ends? Perhaps you should tell the Ukranian people that. But I suspect you would not have the integrity or courage to stand to the convictions you espouse.
And finally no. I always felt the evidence that we were given over Sadam's WMDs was inconclusive. It seems unlike you, I am able to consider information a little more dispassionately. Perhaps being an analyst by trade helps.
Classic theglc, but its only now that people are finally working that out. The only option was to negotiate but I was called Putins best mate. The cost of this war has been staggering and its not over yet, in the end every single person is going to pay for it in some degree. I think it all could have been avoided and it would have made no difference to Ukraine.
I wish I'd noted the link but there was a German person, Chamber of Commerce/Industry spokesman if I recall who said must German industry be sacrificed for Ukraine. Consider it Germany's and other EU countries, bar one or two, contribution to the war effort. Cheap price to pay rather than war.
On a further note. To do with energy, Russian sanctions "India’s External Affairs Minister Dr S. Jaishankar said in a June conference when he took questions from an audience: “I am one-fifth of the world’s population. I am what today the 5th or 6th largest economy in the worldI feel I am entitled to have my own side. I am entitled to weigh my own interests, and make my own choices. My choices will not be cynical and transactional. They will be a balance of my values and my interests. There is no country in the world which disregards its interests.”" very long about 21 mins in. https://www.youtube.com/watch?v=2R1z5_KBHw4
NZ too small to tread a different path.
profile,
all good points, but I want to take you back to a recent post in which you put up a link to an article on global greening. Absolutely right as a NASA study showed.
"The vegetation cooling effect is large from the energy dissipation perspective, but only about 10%-20% compared to the pace of global warming. The cooling effect from greening is less significant in tropical forests with high leaf areas.
“This is a warning sign about climate change. We should be cautious that the rainforests, which are at the forefront of the fight against global warming, are reaching the limits of their capacity to absorb carbon and cool the surface.” commented Dr. Rama Nemani, from NASA’s Ames Research Center."
Of course, as you know, this greening is a direct result of the increased CO2 in the atmosphere.
Odd conclusion about whom broke what? More like growthist propaganda convincing gullible plebs the planet and it's resources are infinite and now we have hit that planetary limit, blaming anyone except who's most to blame. Growthists drunk with their own human exceptionalist propaganda.
Switching from US employment to NZ employment. The ChCh employment fair at the airport. 1000+ people line up for jobs. How can that be? We have 3-4% unemployment. Claim is jobs ads not working. A reason for that. The position description in job ads is usually set way above what's actually required, putting people off.
Electricity.
For example Transpower has the stated aim of getting female employment from X % up to Y %. So of course they will favour women. The thing is: they have to do the PC culling at shortlist time because after that it comes down to experience, competency etc ie too late to discriminate on irrelevant things.
And as far as all the corporate speak in job ads go: as a self motivated person the effect it has is to turn me off applying!
Most job ads are beige, not humorous, full of corporate speak, basically they want to put you to sleep. Also job agencies have made life difficult for many, you need to be shiny with a gold star cv.
I hire completely on personality, if I like someone, and they fit in with the current crowd, they get the job.
I'd put money on the US 'employment' data giving the wrong signal, and the other data being correct about their recession.
A report out last week revealed that up to 4 million Americans were unable to work due to long covid - if you take that number of people out of the workforce of course unemployment figures are going to be distorted. It amazes me that this is not being picked up upon by 'analysts'.
In addition the US Labour force participation rate, after blipping up, is now falling significantly.....(which backs up the above). It's not that they are creating huge numbers of new jobs - there is just a big bunch of people who are removed from the workforce.
https://tradingeconomics.com/united-states/labor-force-participation-ra…
The average retirement age in the United States is 62 for retirees, while the expected retirement age for current workers is 64. The full retirement age is 67 for those born after 1959. Baby Boomers retiring statistics report that 10,000 Boomers turn 65 each day. Baby Boomer retirement facts tell us 47% of boomers already retired.
That report of current and impending crop failures would be concerning except that they have substantial grain reserves as I understand it. I am not sure what sort of hedge this will be for food shortages in the near future. Shows good strategic thinking methinks. Unless it is based on some way of manipulating the global grain price for their benefit. I am becoming cynical in my old age.
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