Here's our summary of key economic events overnight that affect New Zealand, with news the never-ending car crash that is China's residential property development sector, took another bump today.
But first in the US, their inflation rate unexpectedly edged up to 3.2% in February, compared to 3.1% in January and above forecasts of 3.1%. The closely-watched core inflation rate slipped to 3.8% when it was expected to come in at 3.7%. And it will not have escaped the market's notice that the +0.4% monthly rise from January was the same as the prior month and the highest since April 2023. That means the recent pressure is building again.
These misses bolster the Fed's view that they need to be patient to get conditions where consumer inflation actually will fall into its target range before they start cutting rates.
The Redbook index of retail rates in the US rose +3.0% last week from the same week a year ago, and not quite enough to cover inflation..
There was a well-supported US Treasury 10yr bond auction today which saw a median yield achieved of 4.10% and that was actually not too different to the same auction a month ago where the median yield was 4.04% pa.
India's January industrial production came in lower than expected, rising +3.8% from a year ago when a 4.1% rise was expected , and down from +4.2% in December. The heady growth they reported most months to October now seems to have been exhausted, although expansions at the current lower level will still be looked on with envy by others. India's CPI inflation remained stuck at 5.1% in February.
India's car sales rose +9.5% in February from a year ago, also an easing from the +14% rise in January. Over the past year, 3.6 mln passenger vehicles were sold, a far smaller market than the US (18 mln) or China (22 mln).
China's property sector has taken another blow. State-backed property development giant Vanke had its investment-grade rating stripped by Moody's overnight who warned of potential further cuts, predicting credit metrics and liquidity will weaken because of falling home sales and funding uncertainties. Immediately, Vanke went into talks with banks (State-owned banks) on a debt swap that should help them stave off its first-ever bond default. Earlier this week they felt compelled to announce that they had made the most recent bond repayment. But the obligations ahead look daunting.
As expected, the German inflation rate eased to 2.5% in February, down from 2.9% in January and 3.7% in December. Inflation-control progress is coming fast in Europe's largest economy, even if it is at the expense of demand.
Not expected was a fall in British employment in January and a rise in their jobless rate.
In Australia, the NAB business sentiment survey reported that business conditions rose in February, signalling their economy has remained resilient in the new year but inflation is still a challenge despite slowing growth. Business confidence fell slightly however, as firms struggled to deal with the combination.
Russia's invasion of Ukraine caused wheat prices to spike. But that is over now with prices falling to a four year low and back to levels we had in the 2015-2020 period. Buyers rule. And now China is cancelling purchase contracts from the US - and at a rate faster than usual. This is because it can buy supplies cheaper elsewhere.
The UST 10yr yield starts today at 4.16% and up +6 bps from this time yesterday in a rising market. The key 2-10 yield curve inversion is unchanged at -43 bps. But their 1-5 curve inversion is less at -86 bps. Their 3 mth-10yr curve inversion is notably less at -122 bps. The Australian 10 year bond yield is now at 4.00% and up +2 bps from yesterday. The China 10 year bond rate is +5 bps higher at 2.36%. The NZ Government 10 year bond rate is down -1 bp at 4.65%.
Wall Street has started its Tuesday session with the S&P500 up +0.9%. Overnight European markets closed all up an average of +1%. Yesterday Tokyo ended its Tuesday session virtually unchanged. But Hong Kong added a huge +3.1% on the day. Going the other way Shanghai shed -0.4%. Singapore ended up a minor +0.1%. The ASX200 also ended up +0.1% but the NZX50 was down another -0.4%.
The price of gold will start today -US$13 lower than yesterday at US$2165/oz.
Oil prices have firmed less than +50 USc just under US$78/bbl in the US while the international Brent price is now just over US$82/bbl. These minimal changes come even after Russia suffers broad strikes on its oil refineries by Ukraine, as Ukraine tries to balance its resources deficit compared to the invader.
The Kiwi dollar starts today at just on 61.5 USc and nearly -¼c lower than this time yesterday. Against the Aussie we are soft as well at 93.2 AUc. Against the euro we have slipped to 56.3 euro cents and -20 bps lower. That all means our TWI-5 starts today at just on 70.3 and also -20 bps lower.
The bitcoin price starts today at US$70,562 and down -2.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.0%.
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64 Comments
It is rare that we agree, but on that we do.
The problem from here on in, is relentless scarcity of (and competition for) the remaining resource stocks. Inevitably there will be global-average inflation because of that (exacerbated by the injection of extra digits); interesting to see DC's multiple references in that light; some relative winners, some relative losers, a lot of poker - but the overall is inexorable; inflation is here to stay, ex recession.
I've been mostly retired for 8years so not as in the IR loop as I used to be. However I was interested to see that the Employment Court is still an anarchy unto itself (who can forget Goddard).
"The Court of Appeal has overturned a decision of the Employment court which was arguably the stupidest judicial decision in recent times.
Basically the Employment Court had decided that the minimum wage laws set a fortnightly minimum wage, not an hourly minimum wage and that part-time staff had to be paid a minimum wage of 80 hours a fortnight, even if they only worked one day a fortnight."
https://www.kiwiblog.co.nz/2024/03/the_worst_employment_court_decision_…
Very difficult to convince people of this - most tend to focus obsessively on the occasional negatives and ignore the enormous benefits (in outcomes and costs).
We will have the same problem in healthcare - are you happy for your X-rays to be interpreted by software in a fraction of a second, proven to have better results that the average Radiologist? You can be sure the headlines will only show the occasional missed diagnosis and the benefits will not be reported.
See also: self-driving cars.
I doubt radiologists are going to be replaced by AI but I think AI will help them become more effective. I can imagine a scenario where AI prioritises their workload with the most potentially serious and urgent cases first but I don't think it will replace the need for a real human to have eyes on the scan. Anyway, that's my 2 cents worth.
You could be right - a few Radiologists kept on staff for the cases that AI is not confident about, or for QA of the AI solution. It's not just them, although they are obvious candidates for automation. In my specialty automated workflows are here, and growing. It's quite interesting watching a vendor pitch software to a room of people whose jobs could be affected.
Like I say - we will move extremely cautiously. In healthcare it seems to be very difficult to have these discussions. If an AI solution is better 95% of the time and saves 50% of the cost, is that OK? What about the 5% that get worse treatment?
If an AI solution is better 95% of the time and saves 50% of the cost, is that OK? What about the 5% that get worse treatment?
What about the 95% that would get better treatment?
And what about the people that are missing out due to delays in the system and shortage of specialists?
If those were real numbers then it would seem pretty clearcut to me.
Duty of care over financial savings, I'm sure the duty of care would trump it in court if it were challenged. Lest they go down the route of putting a dollar figure to human life (which surely happens in the background based on service levels and risk assessment etc)
The term you are after is QALY - quality adjusted life year. How much is a year of good quality life, or two years of 'half quality' life etc. worth.
This is the basis of distributing healthcare until politicians put their fingers on the scale because a particular cause has good PR.
On an individual level if I didn't follow guidelines and caused harm because I wanted to save money for the department, I'm probably liable. On a departmental and national level this is the kind of decision that is made all the time.
Are you talking about the same healthcare system that says one person gets surgery because they have the right skin colour, while another person with greater medical urgency doesnt get surgery because of their skin colour? How old fashioned, expecting the health system to get equal outcomes for everyone.
Not sure on the back end of that but I know surgeons code the priority level of surgery requests based on a variety of factors which i’d be interested to know. Off hand id imagine there’s be impact on ADLs, keeping them from working and paying tax, other comorbidities and the relative level of complexity due to these, risk, expected lifelong cost (e.g early knee replacements will beed to be done again in a decade or so possibly adding pressure at that time on the system).
Surely AI could be used to weed out the vast majority of “normals” that occur with any of the medical tests. Or maybe even replace some of the duplication that we have built into our reporting to ensure safety - the last scan I had had 3 radiologists report on it, maybe we could have 2 radiologists and an AI take a look. Don’t worry about Drs being replaced, we have far too few of them; it might just be that we can stretch out the limited resource we have a little bit.
Its already being done.
https://www.theguardian.com/society/2023/aug/02/ai-use-breast-cancer-sc…
"The use of artificial intelligence in breast cancer screening is safe and can almost halve the workload of radiologists, according to the world’s most comprehensive trial of its kind."
The system is broke. Drug test a guy he fails.
Either fire him: He then gets a lawyer goes to employment court. Claims he has a prescription to use the drugs. That he is being treated unfairly. Employment court rules in his favour awarding 50k damages for loss of earnings and loss of dignity.
Or don't discipline him: He then has a major incident, Worksafe gets involved, find out employee responsible is on drugs. Employer new this so blame employer. Fine employer 50k for having an unsafe workplace.
And to your last point, if the police have their way the employer will soon be losing their home, assets etc under proceeds of crime legislation because the fact that somebody had an accident at the workplace means your business is built on a foundation of wanton criminality.
Losing of assets should be on the table for modern slavery offenses, not for accidents. I'd doubt they'd head towards accidents unless in the case of massive negligence and simply not bothering to try to keep employees safe (as much liability is judged these days).
... the Police have already tried this one on & failed.
That was an interesting case and a very interesting direction taken by the police.
I remember at the time it happened, a friend of mine in the industry said to me "When I heard what happened I knew exactly who would've been involved." This is hearsay from that friend, but the essence was that it was a cowboy operation and he'd be in great personal strife over it.
It will be interesting to see where the line is drawn, legally. How much health and safety law (or in other cases, labour law) you can simply ignore before it might be considered criminality for profit.
I'd like to think so too, but that current case that is before the court (High Court maybe?) of the business owner being pursued under proceeds of crime legislation is concerning insomuch that if it succeeds does it just lead to two outcomes:
1. Nobody will ever plead guilty to a worksafe prosecution again (because part of the police argument is that the guilty plea effectively means there was acknowledgement of criminality) so there's a whole new layer of legal cost and complexity baked in.
2. If successful, you can bet your bottom dollar the police will be pulling this stroke anywhere they can as it's easier work than chasing up property crime, violent crime, gang offenses etc, particularly referencing point one above. Slippery slope writ large, basically. Most police officers I know (and there are several in my family and more in my friend gorup) are good hard-working people who want to see society made safer, but at an institutional/administrative level they admit it being a case of lions led by donkeys, and priorities are skewed to whatever is easy e.g. relieving employers who have pleaded guilty to worksafe breaches of their assets is a path of less resistance vs pursuing violent gang members cooking up meth.
It seems clear that proceeds of crime legislation was intended to be used to pursue ill-gotten gains where there is no underlying "legitimate" business (e.g. no matter how many sandwiches they slap up for hungry kids to try and sway public opinion, gangs cooking up P and selling it is an inherently criminal enterprise with no lawful component).
If the local courier driver regularly speeds at 50 km/h through the 30 km/h roadworks in order to make his deliveries and then has a crash, does that mean his entire business and revenue is derived from criminal activity and thus his assets deserve confiscation? If you ask some Police, it sounds like they'd say yes.
I agree that actual modern slavery cases need aggressive pursuit, of course.
You can relax in the certainty that there will be no action taken to improve the employment court.
Judicial reviews, when they are done, are entirely without teeth, a sanction (meaningless) and nothing else.
Competency and the Judiciary are not related unfortunately.
"Perhaps a shot at the increasingly casual nature of min wage work."
That’s what negotiated & agreed on call payments are for: it's not the activist Employment courts job to extend the minimum wage law beyond the intent of Parliament to satisy their personal view of the “fairness” of the employment contract.
When efficiency comes with upward wealth redistribution, our recommendations frequently become little more than a license for plunder.
Just read this on Zerohedge and was about to post it here. It requires some attention.
But then I realise - it might get some comments - but what does it solve? It just gets buried in the comments and forgotten about while we carry on doing the same thing over and over again... insanity prevails.
I've been aware it's all been lies for a long time and the majority of people don't want to know the truth. Can't upset their pretty little illusions.
Unless we have a vision of something new we're still required to operate within it while it destroys itself.
Oil prices have firmed less than +50 USc just under US$78/bbl in the US while the international Brent price is now just over US$82/bbl. These minimal changes come even after Russia suffers broad strikes on its oil refineries by Ukraine, as Ukraine tries to balance its resources deficit compared to the invader. Hmmmm.
Exclusive: Russia producing three times more artillery shells than US and Europe for Ukraine
Poking the bear. For what? Hundreds of Ukrainian men dying every day. For what? Unless the collective west is prepared to do whatever is necessary to push Russian troops out of Ukraine. Then they are just postponing the inevitable. A negotiated peace and some new lines on the map.
Exactly what I have been saying pretty much from the start Westie, however things are going to get much worse for Ukraine before its forced to concede and the map is redrawn. There is simply no way Ukraine can beat Russia, the war is only ongoing due to billions being poured in from all over the world and that's going to end with Trump, the USA is going down the toilet so fast I think its not recoverable.
...in the US, their inflation rate unexpectedly edged up to 3.2% in February, compared to 3.1% in January and above forecasts of 3.1%. The closely-watched core inflation rate slipped to 3.8% when it was expected to come in at 3.7%. And it will not have escaped the market's notice that the +0.4% monthly rise from January was the same as the prior month and the highest since April 2023. That means the recent pressure is building again.
I just don't understand the rate cut hypothesis. It appears to me rates in most countries are pretty close to where they should be given the level of inflationary pressure within the economy.
China's property sector has taken another blow. State-backed property development giant Vanke had its investment-grade rating stripped by Moody's overnight who warned of potential further cuts, predicting credit metrics and liquidity will weaken because of falling home sales and funding uncertainties.
"Beijing says property developers in deep trouble must go bankrupt" Unsurprisingly, no bailouts for the wealthy in China, and less moral hazard as a result. Socializing losses and privatizing profits is a capitalist thing Link
There was a well-supported US Treasury 10yr bond auction today which saw a median yield achieved of 4.10% and that was actually not too different to the same auction a month ago where the median yield was 4.04% pa.
Last week it happened that God and the United States Treasury managed to underwrite a record issue of Israel Government bonds to continue the war against the Arabs in Gaza, West Bank, Lebanon, Syria, Iraq – and Iran if necessary.
The war financing comprised $2 billion of five-year bonds, and $3 billion each of 10 and 30-year bonds.
The US Treasury guarantees bond holders that if Israel defaults on repayment of its obligations, the US will pay instead. Notwithstanding this, the Israelis were obliged to offer an extra 1.35%, 1.45%, and 1.75% more in interest over the going rate for US Treasury bonds for the same length of term.
The Reuters news agency headline on March 6 celebrated “Israel sells record $8 billion in bonds despite Oct 7 attacks, downgrade”. The propaganda agency based in New York quoted Israel’s Accountant-General as claiming the bond placement “results showed an “unprecedented expression of confidence in Israel’s economy by the world’s largest international investors”.* Link
A comprehensive critique of the RBNZs recruitment for the DEI position
This is why the Govt should just sack everyone hired in the last 6 years (except for those replacing someone in a job that existed prior to 2017). 90% of those new jobs will be something to do with Labour's race based ideologies and therefore producing nothing of value.
Far too bigger call sorry. I know many in the public sector who are great at what they do and contribute to the betterment of their roles and departments. The woke culture within govt from the last 6years can begone and replaced with pragmatism and realism however.
https://surplusenergyeconomics.wordpress.com/2024/03/07/272-peak-almost…
"... here in the UK every generation appears to be very discontented...…
those in their 20s can’t find decent-paying jobs, or afford to buy a house;
those in their 30s bought a house at ‘price-max’, and they are now crippled by mortgage payments and can’t start a family;
those in their 40s have a house and children, and they are crippled by mortgage payments and the cost of raising a family;
those in their 50s are supporting their adult children financial and beginning to consider retirement, but the state pension age is edging away from them;
those in their 60s are discovering pension depletion – the ‘tsunami of crushed pension expectations’..."
...politics used to be about sharing the bounty of growth, but is now about allocating the pain of de-growth.
Can imagine this will flow through to NZ as younger generations get sick of being on the hook for supporting the oldies living and healthcare costs while also being denied reasonable housing and living conditions by the combination of NIMBY entitlement and welfarism to prop up rental yields and prices.
At the same time as our old age property speculation companies knock on government doors for more subsidies while seeking to consume as much of our elderly folks' assets as possible.
I can solve these issues, make them go away forever. Have written about it before and spoken at length to people I thought could be relied upon to initiate action however they’ve turned out to be too thick. We need to move soon on it. Compulsory euthanasia at 70 years of age. For everyone. No exceptions.
So much concern for the symptoms but no thoughts on the cause?
They suffer from the same issues as we have, unbridled immigration leading to over subscription to incompetently run and inadequately resourced social services and infrastructure, and a destruction of labour value. When you have no interest in competency and want to live in a dream world of equality and unearned equity this is the result.
The USA is in deep shit, I was sent this and watched the whole thing, sure its 60 minutes but it beats the crap on TV. https://www.youtube.com/watch?v=zRZ1LrT3nas
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