Here's our summary of key economic events overnight that affect New Zealand, with news of more evidence we may be transitioning to a period of lower inflation, globally at least.
The latest US Fed survey of inflation expectations shows them retreating. For petrol, households surveyed expect them to remain at the current lower levels over the next year. That means overall inflation expectations are now 5.7% in the year ahead, down from 6.2% in July. House price growth expectations fell sharply, now down to just +2.1% and a two year low, and expectations of future credit access fell. Households however were much more optimistic about their future income and financial situations.
The latest update to the USDA World Agriculture Supply & Demand Estimates (WASDE) show that global wheat prices will remain historically high, but are falling from prior estimates. High harvest levels in Russia and Ukraine have stopped these prices rising further, they say. Coarse grain yields are slipping and prices rising they say. Rice prices are up on India's export ban and very much lower production in the US. They don't see much change in the beef or dairy trade.
There were two US Treasury bond tenders today. Both brought sharply higher yields. The 3-year bond came in with a median yield of 3.50%, and up from 3.14% a month ago. The 10-year bond came in with a median yield of 3.24%, up sharply from the 2.69% a month ago.
The recovery of the Japanese economy continues, probably best illustrated by the growth spurt in machine tool orders. They were up almost +11% from August a year ago even though this was a slight slip from July, this is a usual season pattern. This high-tech sector is back to pre-pandemic levels now. What is interesting is the strength in order from domestic clients (+16%).
China and Australia may have their high-profile squabbles, and China may have thrown its hand in with Russia. But China also knows Russia is an unreliable partner. In 2021, China bought 2.2 mln tonnes of Australian wheat and it cost them about US$500 mln. In 2022 they will buy 6.3 mln tonnes and it will cost them more than US$2 bln. China seems trapped into relying on Australian-sourced commodities, be it wheat or iron ore or coal. No wonder Australia is generating huge trade surpluses - China is paying up, despite the disrespect China perceives from Australia.
And in China, after last week's brush-by from Typhoon Hinnamnor (which temporarily closed a major container port (Yangshan), the weather tracking suggests Shanghai could get a direct hit from the next on heading its way, Typhoon Muifa.
In India, inflation rose in August to 7% and higher than expected, but that was just back to levels we had seen for the prior four months.
Indian industrial production growth was quite anemic in August however, coming in up just +2.4% when a +4.3% rise was expected. Both benchmarks were well lower than July's +12.7% rise from a year ago.
The UST 10yr yield starts today at 3.36% and +4 bps firmer from this time yesterday. The UST 2-10 rate curve is a little less inverted at -22 bps. Their 1-5 curve is little-changed at -23 bps. And their 30 day-10yr curve has flattened in a minor way, now at +76 bps. The Australian ten year bond is up +4 bps at 3.61%. The China Govt ten year bond is little-changed at 2.65%. And the New Zealand Govt ten year will start today at 3.96%, essentially unchanged again.
Wall Street has opened its Monday trading firmer, up +1.1% near the end of its Monday session. Overnight, European markets were all very positive led by Frankfurt's +2.4% rise and trailed by London's +1.7% rise. Yesterday Tokyo ended up +1.2% which set the scene for the others. Hong Kong and Shanghai were closed for their holiday. The ASX200 ended its Monday session up +1.0% and the NZX50 ended up +0.5%.
The price of gold will open today at US$1729/oz and up +US$12 from this time yesterday.
And oil prices start today +US$2.50 higher at just under US$87.50/bbl in the US while the international Brent price is up a bit less, now just over US$93.50/bbl.
The Kiwi dollar will open today just on 61.5 USc and back up +½c from this time yesterday. Against the Australian dollar we are little-changed at 89.3 AUc. Against the euro we are also little-changed at 60.7 euro cents. That all means our TWI-5 starts today at 70.7 and up +20 bps over the past day.
The bitcoin price is now at US$22,237 and another 2.7% rise from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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79 Comments
So it looks like debt getting eroded by 20% ish and sail on?
Cheers JA
Bezos rocket crashes after liftoff, only experiments aboard
Cheers JA
That set of statistics dosen't seem to show a world "transitioning to lower inflation".
Bond yields up. Indian inflation up. Australian commodities up. Weather problems in China. Where are the indicators of lower inflation to come?
They could repurpose the covid traffic light thing over to an inflation traffic light thing. And a daily briefing to keep us informed.
Good news on the hurricane front. "The Atlantic hurricane season is nearing its halfway point and so far no hurricanes have made landfall on the coast of the United States, contributing to the recent downward pressure on oil and fuel prices.
...this year the start of the hurricane season has been the quietest for 25 years. There were no Atlantic hurricanes in the month of August for the first time since 1997 and only the third time since."
https://www.reuters.com/markets/commodities/quiet-start-us-hurricane-se…
I wonder if we can attribute that to climate change. Not enough disaster in it to report nothing bad going on so far.
I would suggest the first 3 are all proxies for or lagging indicators of high energy prices, the last as a result of the virtually free energy we have burned through already. They may flatten as energy prices fall. Whether the energy prices should actually fall is a different story.
"The climate effect of our electric-car efforts in the 2020s will be trivial. If every country achieved its stated ambitious electric-vehicle targets by 2030, the world would save 231 million tons of CO2 emissions. Plugging these savings into the standard United Nations Climate Panel model, that comes to a reduction of 0.0002 degree Fahrenheit by the end of the century."
https://www.wsj.com/articles/policies-pushing-electric-vehicles-show-wh…
I listened to an interesting interview on ‘nine to noon’ yesterday. An academic from Otago University mentioned that a colleague of his published a report somewhere around 2012 that stated for us to offset the emissions from just fly-in visitors to NZ, not returning Kiwi’s, would require us to plant 15% of our total land area (they quoted the equivalent of Rakiura/Stewart Island) every year! The visitors that year were roughly 3 million. I guess we are heading back to that territory now. A very sobering and depressing interview.
It certainly confirms that we can’t plant our way out of our current emmissions dilemma. We have to seriously reduce our individual footprint. The depressing bit is that so do a significant chunk of 8 billion people. With many of them wanting our lifestyles. And why wouldn’t they? One other aspect I did not realise was that the Paris accords did not cover international travel by air. Due to the difficulty of which country to allocate the debt to.
Peer review: Rakiura accounts for approximately 0.65% of the land area of New Zealand, not 15%.
What is the world coming to when I have to question an academic on Radio NZ? Sad times indeed! Maybe it is my hearing.
No, I listened to the interview and you heard correctly. What the interviewee should have said was, an area equivalent to 15% of NZs current forested area needs to be planted every year and that is the area of Stewart island. Not 15% of NZs total land area. That doesn't diminish the fact 174000ha is a huge area needing forested every year,so the Hawaiian shirt brigade can pollute their way around the planet.
Thanks for that. I tried to re-listen to it but it seems to have been deleted.
No, it's still there. Just use search and type in Nine to noon. Then scroll down. :-)
And of course academics are always right - aren't they ? Better join PDK in his bunker mate. But wait, when comparing such pronouncements with outcomes (remember Y2K ?) there may be cause for hope.
I hate to break it to you but Y2K was a non-issue because of the massive amount of work that went in to circumventing the problem when the problem was identified. I had a relative working in IT at the time who laughs when people try and use this as an example of a non-event.
Two-digit years were expanded to include the century (becoming four-digit years) in programs, files, and databases. This was considered the "purest" solution, resulting in unambiguous dates that are permanent and easy to maintain. This method was costly, requiring massive testing and conversion efforts, and usually affecting entire systems.
A relative working in IT? The third world had no money to spend on the "problem" so just boxed on and the world didn't end. The acid rain/desertification/global cooling/population bomb for geeks.
"...'But we had no money to fix the problem. The World Bank gave us $14m but this just went on consulting fees and paying the hotel bills of their representatives.'
...Vivek Wadhwa, chief executive of US-based Relativity Technologies, who advised Terekhov, said: 'The problem in the West was blown out of all proportion. A lot of people made a lot of money.'"
https://www.theguardian.com/business/2000/jan/09/y2k.observerbusiness
Thanks for pointing out other serious environmental issues. Good thing acid rain was partially remedied by cleaning up smoke stack SO2 emissions. Desertification? Ongoing. Global cooling/dimming? Well it is on the negative climate forcing side of the ledger, however human released greenhouse gases have overwhelmed any cooling effects from aerosol pollution. Population bomb? Yep, consequences to follow. Surprised you don't mention the Montreal fixed ozone hole "non event"?
Shooting the messenger
so yesterday.
I'm sure I've told this before, but...
We owned a used 2012 Leaf for 2.5 years just as an experiment, to see what life would be like with an EV. It replaced an AWD wagon that owed us nothing. Over that time we covered 30,000km, and saved more in fuel and maintenance costs than we paid for it in the first place - the difference paid for the electricity used to power it. Maintenance costs were a couple of $99 services, and some new wipers. We charged at home overnight from a standard wall socket, and we never used a fast charger.
We still had another AWD wagon for long trips, or if our children needed to be in different places at the same time, but it moved so rarely I had to recharge its battery after it went flat.
When we moved out of town it was no longer feasible, and it had to be replaced with a diesel. We sold it to my in-laws at a knock-down price, so what we sold it to them for was pure profit. They are very happy with it, and it's still running perfectly nearly 3 years later. For those playing along, that's a 10 year old first-gen Leaf, still happily providing commuter service on its original battery. Not sexy service, mind you, but it's a commuter, who cares? It was a demon at the 0-50 traffic light drags though.
Buying one to save the planet is a noble gesture, albeit possibly futile, but economically an EV (at least a used one) stacks up over time.
And those first gen leafs are definitely not the best electric cars around. For most use cases, electric is way better, full stop. People just have to get used to things being ever-so-sightly different.
General Comment,
Interesting. I bought a 2017 Leaf about 18 months ago to do almost all our short distance driving-The Mount/Tauranga and we enjoy both the significant savings in running costs and the car itself.
I am under no illusions about EVs in relation to climate change. A lot of metal, minerals and energy energy is used to build them and they are only a small part of the answer.
How will paying road tax affect those economic calculations? Something like a 600% increase in operating costs IIRC
We sold the car to my in-laws for $4,500 - yes, I know, we were generous.
RUC charges for 30,000km, assuming they would be set the same as diesel. would have come to $2,280, so our "profit" from the experiment would have roughly halved.
As always, no counterfactual. So if we didn't go electric, we are likely to ADD quite a few million tonnes of CO2 to the atmosphere. Which means even greater temps. In that context, a slight drop is so much more preferable to a massive increase.
Not disagreeing with any of the figures put forward, but my question is what is the largest source of GHGs? Industry, fossil fuelled power plants? I've read somewhere that even air travel is not that big a chunk. I also note James Shaw in the media saying his focus now he's got his job back, is to get farmers to pay their share of the GW cost. Disappointing, as I would have hoped that he be a lot more progressive and be trying to get the government to reconsider nuclear power and some of the new technology green energy options that are emerging.
The incentives Shaw put in place with the cap and trade scheme are already doing the job. Mercury announcing a new wind farm today, Meridian are building wind, Genesis wind and solar, Contact geothermal.
Coal is too expensive thanks to the carbon price, everyone wants to go renewable. We just needs Onslow added in to cover the dry year problem and job done.
SMR Nuclear could be good for us but as I understand it this is new tech and not really rolled out yet. Classic reactors are just too big for our needs (we don't have anything that could back them up in case of failure so we would have a blackout whenever there is a fault).
Cheers for that. i think the new technology reactors hold a lot of promise, and agree the old models are too big. Some of the new wave technologies being developed to produce power look intriguing too, but not sure about the clutter they would create on the sea.
In the end though reducing population must be the ultimate goal. Too much of the current debate,actions and proposals are just more of the same denials. And places like China need to stop fossil fuelled power. A recent article indicated they were moving to build more coal fired power stations.
On the bright side, China is also building 150 new nuclear reactors.
Biggest chunks are from energy used in industry and offices, so basically our work/economy, roughly 30%. Road transport is about 12% of all human emissions, flying is around 2% but per person using it is probably the worst (which makes sense if you think about propelling people at extreme speeds, uses a lot of energy). Agriculture in total is about 20%, but the biggest chunk NZ needs to be concerned about is animal raring. It's only about 6% of all human emissions but almost 50% of NZ emissions. Transports something like 20%, but given electric cars and our energy mix (mostly renewable), is considered low hanging fruit for us, pretty easy to change over time and we just need to build a few more power stations to run them (like the new stations about to go live from Contact energy Tauhara, able to support almost 200k households). Putting in Onslow with a bunch of wind farms (like Castle Hill or off shore) and we could fairly easily wean ourselves off middle eastern energy and drop 20% of our emissions.
Hopefully the red seaweed science being done will make a decent impact on our ag emissions too, though this is a decade away still probably.
NZ animal rearing is not adding to global warming. It is just convenient politically. Just as it is convenient politically to ignore soil carbon in the ETS and vast swathes of farm shelter belts.
"Academics can quibble (it’s what we do best) about the exact factors, but the fact that this formula is vastly more accurate than the traditional accounting rule is indisputable.
...Even more strikingly, if an individual herd’s methane emissions are falling by one third of one percent per year (that’s 7/2100, so the two terms cancel out) – which the farmers I met seemed confident could be achieved with a combination of good husbandry, feed additives and perhaps vaccines in the longer term – then that herd is no longer adding to global warming."
https://www.nature.com/articles/s41612-021-00226-2#MOESM1
https://www.newsroom.co.nz/ideasroom/a-climate-neutral-nz-yes-its-possi…
Even if the methane emission don't reduce, my understanding is it is largely 'academic' anyway. As it is balanced out by it eventually breaking down into co2, which is then absorbed by plants, which are then eaten, which is then turned back into methane. So it's somewhat a closed loop.
You're very active recently, are your paymasters asking you to ramp up your efforts as there is an election coming?
Air travel is around 3% of emissions, but the water vapour and gases being pumped into the atmosphere mean the warming effect is closer to 5% of total.
The kicker of course is that something like 87% of people on earth have ever been on a plane, so that 5% is distributed among a small number of people.
A flight to the UK and back is about the same as driving an SUV for a year.
Come on Murray - it's not the technology that is the issue, I've spent an ocean of ink here explaining that.
It's the b---dy energy, is the issue.
And the supply of that is falling off a cliff.
Nuclear, if it were to take over all fossil-energised activity, would not last a century. But the waste your grandchildren would inherit, would.
That's essentially fraud.
Technology is the delaying tactic PDK. And it is not the energy issue (well, it is but that is not the root problem) its population. This is not even being discussed - ANY WHERE! So chasing newer forms of energy from natural sources will delay the issue and that is where people's mindsets are. But here's a point, and technology drawing energy from areas such as the air (wind turbines), the oceans (wave power generators) are drawing energy away from the atmosphere (it may be minimal bit the fact is still there) means there is less towards heating of the atmosphere. You like spouting physics facts, tell me it's not true! Using technology to capture more energy out of the environment is not a bad thing at all.
But, and you already know this, the research already tells us that what we are doing is not having the desired results, and is likely too little, too late anyway. And then there's the spoiler like China and the others or the worlds mega rich who just don't care about anything other than the measure of their own wealth.
Population/energy....energy/ population
Chicken or egg?....it matters not now
There also seems to be some implicit underlying argument that because no one solution achieves the total goal, that no solutions at all should be adopted. A hefty dose of https://en.wikipedia.org/wiki/Status_quo_bias going on.
Which is completely faulty logic, part of the Nirvana fallacy group, the perfect solution fallacy.
If reducing CO2 emissions is your goal then subsidising EV's is the most expensive way to do so. $30 billion a year to reduce projected temperature by 0.0002 degree F and a landfill of dead batteries. Madness.
The cheapest way would be to ban ICE private vehicles, is that what your suggesting instead? Your bosses will not be pleased ...
Aren't we going to run out of oil before then anyway?
Electric Cars = 23% Of New Zealand Auto Market, Tesla = 12%
https://cleantechnica.com/2022/09/05/electric-cars-23-of-new-zealand-au…
Wow, that's more than I expected. 44% if you include hybrids.
Is this a temporary artefact of the EV rebate scheme or is it the new normal?
One of those was mine. Thanks NZ for the $8,625. Sales will be similar if not even more pronounced in September. A big shipment of Model Y has arrived. At this rate, the $200m left in the fund will be gone before the election. A big middle class welfare misdirection.
Feel free to pay it back then Rexy...
As a Green voter, it's very annoying. If we have to do hand-outs (which we don't - we have a carbon cap and trade scheme to deal with emissions), we would have been much better off subsidising bikes and e-bikes.
A subsidy to those who can ride to work from those who can't? That sounds like proper Green Party policy.
Better than a subsidy to those who can afford a new electric car.
A bike subsidy would actually get cars off the road (helping those who can't ride themselves) and improve the health and wellbeing of those who receive it, rather than just changing the fuel powering the metal box they sit in. And help build the critical mass of active transport users we actually need to get away from our insane car obsession.
As I said, I'm not proposing subsidies, but if we really must throw money around this sounds much better to me.
TBH the subsidy should work in reverse and should have been greater on a used EV. If it was about bolstering the fleet, there were lots of better ways to do that (exempt them from FBT etc). Insane that I have to pay GST on an imported used EV if I bring it in myself but then apply separately for a piffling rebate, the value of which has been eaten by price rises in our market anyway.
But yea, if it's either/or I think the bike thing has some merit, but it's still only really going to be an option for people who realistically have the option of commuting by bike already - while those who have to drive would still be emitting one way or the other.
Does highlight how critical it is to move away from authoritarian NIMBYism that prevents intensification around viable transport routes too. NIMBYism driving sprawl makes transport on the whole less viable and expensive, congested and polluted in the future.
Yes, it is picking favourites. Just like the current scheme ignores those who can't afford or don't want a car.
If you think a bike subsidy scheme would be annoying for drivers, imagine being a bike commuter now and knowing that your tax dollars have subsidised the hunks of metal that threaten your life every day. Each 8k subsidy for part of an e-car could have funded several e-bikes or a dozen regular bikes.
Ah, so it's just a transfer to those who are already rich in time, have the flexibility to commute in such a way or who can afford to live close to where they work?
This is why rapid transit is the silver bullet that bikes can never be. It's the only real alternative to driving that would work for 99% of the people, if it actually existed in NZ. Funny how those 'hunks of metal' need to meet rigorous design standards these days, including to reduce injuries for cyclists and pedestrians - whereas bikes have literally nothing of the sort. From a purely risk based approach, I'd say it's the bikes that aren't fit for purpose.
GV - assumptions! Never make 'em.
Where we're going, 'work' in the recent sense, probably won't exist.
So many assume so much....
[subsidy to those] who can afford to live close to where they work?
25% of trips are less than 3km
50% of trips are less than 6km
75% of trips are less than 12km
And this is the big issue, replacing the top two of these with bikes/ebikes could drop our emissions 10% overnight. But nah, its easier to drive and pollute and people tend towards laziness.
Bikes are pretty safe - a cyclist dying makes national headlines. Car deaths only make the news if they are dramatic for some reason e.g. multiple fatalities. The risks of cycling are also counterbalanced by the health benefits, the same cannot be said for cars. In fact, the emissions are damaging to everyone's health.
Here in Christchurch, for those physically able to ride, an e-bike will in many cases take no longer than driving. I work at the Hospital and driving + walking from the nearest parking would double my commute time compared to a regular bike. Not for everyone, of course, but if we're throwing money around then the cohort that can afford to spend 80k to upgrade their car would be very low on my list.
If we're talking public transport, I'd absolutely prefer to see free and better quality public transport rather than these subsidies. I'd have to think about how this compares to bike subsidies, both are far better than throwing money at cars.
You are seriously comparing the safety of the two modes based on the number of headlines you've seen? That is laughable. How about we use some actual data from a study done by the Transport Ministry? You are 12x more likely to be killed on a bicycle that in a 4 wheeled passenger vehicle.
https://www.transport.govt.nz/assets/Uploads/Report/Risk-2015-intro-ove…
Oh yes, it's very crude. However, studies have found biking is a net-benefit to life expectancy as the guaranteed improvement in fitness outweighs the small dramatic risk of injury.
Regardless, the real take-away from the hazards of biking is we need to improve our cycling infrastructure and get more people on their bikes (number of people using a mode of transport is inversely correlated to the risk to an individual). More, safer cycling where the kids on bikes are kept away from the psychopaths driving half-ton boxes of metal while looking at their phones.
Exactly, you are more likely to die from driving than cycling. Not from the driving itself, but from the lack of physical activity.
100% agree and it is also more sustainable in terms of materials and energy use than building 2 ton vehicles to ferry yourself 5 km down the road to get a pie
A big middle class welfare misdirection.
Paid for by middle class big SUV purchasers.
Nice comeback. That's a big thumbs up from me.:-)
Are we already paying some form of carbon credits for ICE cars via a fuel tax/levy/excise duty or is that something Labour are hiding up their sleeve?
Carbon credits are purchased by the petrol retailer I believe, from memory they make up something like 10-20c per litre at this point. Not enough to really discourage driving.
Highly misleading as there was no stock for the prior 4 months (Apr-Jul). In those 4 months only 12 Teslas were sold. (Tesla's market share in NZ is 3%, still good!)
It'd be like saying BYD is outselling Tesla since on a monthly average they are higher than Tesla in NZ since BYD only been available for 2 months. (BYD average over the two months = 468, Tesla YTD in 2022 = 327)
The latest US Fed survey of inflation expectations shows them retreating.
What if the job is already done and Powellbot just doesn't know it yet? He doesn't even need to learn Chinese, just read a simple chart. Link
AS THE HARD DATA TURNS
They Are Finally Realizing the CPI Was Never the Economy
I wonder what, if anything is brewing for the upcoming CCP conference. Certainly with regard to the current less than stellar state of the China economy. A covid reset, with a possible loss of face for Xi? Probably not due to the mass death that would ensue based on the poor efficacy of their vaccine/s. Perhaps eat some humble pie and ask the USA for their better vaccines? Again a loss of face for Xi. Where will he/they jump? Probably BAU and hope for the best.
""China is paying up, despite the disrespect China perceives from Australia."
So is Germany: "
I'll re-word that somewhat "Germany is paying up despite the disrespect Germany shows Russia"
Here's another rewrite of a Reuter's effort. They are everywhere.
Care to describe what respect the Kremlin butchers deserve?
Are we expecting REINZ data for August later this morning?
There were two US Treasury bond tenders today. Both brought sharply higher yields. The 3-year bond came in with a median yield of 3.50%, and up from 3.14% a month ago. The 10-year bond came in with a median yield of 3.24%, up sharply from the 2.69% a month ago.
In case anyone missed it, during Wednesday's major selloff in oil and elsewhere 4w Tbill rates just "happened" to drop by 14 bps. Despite next rate hike being priced into it, rate fell all the way to current RRP as a reminder Link.
"transitioning to lower inflation"
Translation. Price still going up.
The acceleration is slowing
Thats the problem with the inflation metric isn't it, its a rate of change. If everything stopped going up tomorrow inflation would fall to zero but we would still be stuck with the high prices. Percentages are also compounding. Its an upward spiral that appears really hard to control.
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