Here's our summary of key economic events over the weekend that affect New Zealand, with news inflation's impulse seems to be easing worldwide.
In the week ahead, the big international data will focus on the Q3 Chinese GDP result on Wednesday. In the US, the data will be second tier this coming week, although Q4 earnings reports will be released in a swelling tide. We will get some European CPI data and the same from Japan.
Locally, we could get REINZ December data this week too depending on how fast agencies got their reports in over the holiday period.
Over the weekend, China's new yuan lending for December came in well short of what was expected. Beijing is clearly having trouble getting funding out of its large policy banks. The December +¥1.17 tln was marginally higher than in November but well short of the expected +¥1.4 tln. In their context ¥1.4 tln isn't large by historic standards. And the +10.4% rise from a year ago is very low by Chinese standards - in fact a record low expansion on that annualised basis. This may be a factor.
China's exports rose from US$292 bln in November to US$304 bln in December, a +4.0% rise and a bit more than expected. They were up +2.3% from the same month a year ago. But the good December result - aided by a depreciated currency - masks that for all of 2023 exports dropped -4.6% from the record 2022 level.
Helping the December result was that producer prices fell -2.7% in China, quite a different pressure than the virtual no change in December 2022.
And as expected, consumer inflation was negative - that is, deflation - with prices -0.3% lower in December than the same month a year ago. This was slightly "less worse" than expected, and is the third month in a row of year-on-year deflation. But that is their longest deflation streak in 14 years. Overall food prices rose +0.6% in the month to be -2.0% lower than a year ago. But beef prices are -6.0% below year ago levels, lamb -5.7% down, and milk down a lesser -0.9%.
The Taiwan election result delivered a tough outcome for the winner, the China-sceptic DPP candidate. Lai Ching-te won by a comfortable margin though with less than half the vote, but his party lost control of parliament on which the president-elect will have to rely to pass legislation and spending.
Indian industrial production momentum fell away in November. It was up +2.4% from a year ago, marking the lowest reading since March last year, following a downwardly revised +11.6% growth in October. Analysts had expected November to expand by 4%. Output decelerated sharply across all key sectors. Meanwhile consumer inflation ticked up slightly in December, up to 5.7%, above the November 5.4% but less than the expected 5.9% rate.
American producer prices unexpectedly fell in December from November but only by a tiny amount. That means that their producer prices were up only 1.0% in the year, up from a rise of +0.8% in November on that basis. A year ago US PPI was rising at a +6% rate. This latest PPI data was less than expected.
The January edition of the USDA's WASDE report forecasts lower American beef exports in 2024 and higher imports from Australia and New Zealand. The American milk production forecast is lowered too. (See page 4.)
We should also note that for all states and the US Federal Government, it will be a holiday tomorrow, Martin Luther King Day. American stock and bond markets will be closed. (Interestingly, some Southern states still combine this commemoration with the birthday of the Confederate general, Robert E. Lee.)
In Australia, they set their milk price for dairy farmers at AU$9.44/kgMS once a year in June. That is a mandated, government policy. Since then international prices for dairy products have dived significantly. In New Zealand, our June price was NZ$8.75/kgMS. But as prices retreated it has been eased back to NZ$7.50/kgMS. However the Aussie price is still AU$9.44/kg. That makes Australian dairy products very expensive locally, makes exporting from there near impossible - and it encourages imports. In fact because we have full access to the Aussie market under CER, our exports dairy to have surged, for some products by more than +60%. More is to come. Some local Australian dairy facilities are in threat of closing, some already have. It is all a lesson in the folly of a government-mandated price "to protect farmers". It will end up hurting them more. It is clearly much better to have market signals all the way down the supply chain.
The RBNZ reported that the total value of our housing stock as at the end of September rose by +$27.6 bln from June to $1.59 tln. That was the first quarter-on-quarter rise since December 2021, although a year ago this value was $1.63 tln, so it is still some way down on that basis and still -$172 bln lower than the peak in December 2021. Over that time we have been building new houses, aggressively in some places (Auckland), so that data shows the per-dwelling value down more than -13% from that peak, nationally, a retreat of -$118,000 per dwelling.
Infometrics reports supplier cost increases at supermarkets remained higher than a year ago in December, but there was continued moderation in the annual pace of change. In fact there was no change from November. The Infometrics-Foodstuffs Grocery Supplier Cost Index shows an average +4.5% increase in what suppliers charged Foodstuffs supermarkets for goods in December compared to a year ago.
We should also perhaps note that the December volcanic eruption in Iceland has surged and spread overnight. Live coverage here.
The UST 10yr yield starts today at 3.94% and down -2 bps from this time Saturday. A week ago it was at 4.03%. The key 2-10 yield curve is inverted by -21 bps. Their 1-5 curve inversion is little-changed, now by -85 bps. And their 3 mth-10yr curve inversion is marginally more inverted, now by -145 bps. The Australian 10 year bond yield is now at 4.08% and up a mere +1 bp. The China 10 year bond rate is now at 2.52%, unchanged but still near its lowest since 2002. The NZ Government 10 year bond rate is another -5 bps lower at 4.67%.
The price of gold will start today up +US$6/oz from Saturday at just on US$2049/oz.
Oil prices are holding under US$73/bbl in the US. The international Brent price is still at just over US$78/bbl.
The Kiwi dollar starts today at 62.4 USc unchanged from Saturday. And it is unchanged from this time last week. Against the Aussie we are also unchanged at 93.4 AUc. Against the euro we are firm at 57 euro cents. That all means our TWI-5 starts today just on 70.9.
The bitcoin price starts today lower, now at US$42,921 and down -0.8% from Saturday. Volatility over the past 24 hours however has been low at +/-0.6%.
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48 Comments
I think that UK thing is only considering their current dietary consumption (which includes all sorts of crap) and doesn't include wastage considerations.
If push came to shove, I think they could radically change their diet and food production systems, stop wasting so much food and be able to feed the population.
https://impact.economist.com/sustainability/project/food-security-index/
Simple decision based on the tourism increases they saw after the Lord Of The Rings trilogy and subsequent hobbit films that they bowed to the studio to give tax relief to after threats of pulling out. Geographically we do have a vast selection to choose from in terms of filming.
Indeed:
Not only did we not stop them. attacking Israeli ships but now they are saying they will attack OUR commercial ships too. Also we spent 500 million to 2 billion dollars for this outcome. Another mess we have gotten ourselves into thanks to Israel who did not lift a finger against them. Link
The information in the article on Australian dairying and the subsequent discussion here in the comments section are based on a serious misunderstanding as to how the system works.
The Australian Government does not set farm-gate prices. Nor does it indicate in any way what it thinks might be an appropriate minimum price.
But the Australian Govt does mandate that each processor must set a minimum price for the season at the start of the dairy season. Alternatively, a processor can commit at the start of the season to a different minimum price for each month of the year.
Farmers can shift from processor to processor. So, if a processor sets its minimum prices below competitors, then farmers will immediately shift to other companies. Hence, companies tend to align closely with each other as to minimum prices.
Milk production in Australia is declining. Hence, processors are competing strongly for supply. Most of Australia's milk is consumed within Australia with the export industry declining as it struggles to compete at the farm gate for supply.
KeithW
I know the traders at big banks read this page, and you all should be ashamed of yourselves.
Screw the little guy for as long as possible, draw out the garbage HFL narrative that was based on nothing, I hope smaller banks continue to crush your market share. Pathetic.
I'm not an accountant however I would have thought the definition of final "profit" should be after allowing/provisioning any planned local operations reinvestment.
IIRC the Oz banks profit transfers are one of NZs largest annual outflows in our balance of payments.
That's right, if there is re-investment into NZ business, its accounted for way before profits are calculated. Big investments (like BNZs shiny new building in Wellington) would be capexed under a project budget spread across multiple years way before profit is calculated.
Now what to replace it with ? And not to bin the enormous amount of data and peliminary engineering that was done for it .
"More roads" Brown is not up to the job, hopefully Auckland Council will come up with some solutions.
And lets not forget NZ First held it up for the first 3 years.
Yep, it will be the standard National playbook. Cancel everything that isn't road funding, then build some more roads with terrible ROI (here's looking at you Transmission Gully). Captured by the roading lobby. But Waka Kotahi will be loving it, they really only care about roads, building more means bigger budgets for them. Cycle lanes are too low cost and low maintenance (resulting in lower budgets for them over time) and public transport options mean working with too many other parties that get to share in the funding.
National will reverse the order so their base can work it out, although Tainui have something to say about it impinging on their treaty rights.
Was watching the cricket with someone last night and they mentioned the use of Kirikiriroa as the name for Hamilton. They said "Why can't they just use the original name?" I just laughed at them
I asked "Who discovered New Zealand?" "Abel Tasman". I kept on laughing at them.
Plan Change 78 is providing massive upzoning for apartments around train stations. And that links to the CRL. I think that’s enough for the isthmus. There will be massive potential for apartment development near train stations over the next 20-30 years.
the north west needs addressing, and I think National are planning to address it?
That's Wayne Brown the mayor. Some of what he says makes a lot of sense.
I'm talking about Simeon Brown, the transport minister.still waiting for something he says to make any sense.
Light rail is an easy target, and it ended up been a mess. Easy to can it.
Coming up with a viable alternative is the challenge.
Costs are out of control everywhere. Private and public.
I was working in a farm shed the other day, commented how nice it was. Should be, ended up costing $ 240 k, was the reply.
I would have guessed 80 or 90 k.
If the inquiry is genuine, and non partisan, I think will have some very interesting findings.
Ditto to the Let's Get Wellington Moving project which was a huge longstanding waste of time and money, but hey they still lowered the speed limit and put a pedestrian crossing on the arterial route to and from the airport which is greeeat for rush hour traffic and those in the eastern burbs.
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