Here's our summary of key economic events over the weekend that affect New Zealand, with news that after more bellicose threats, Trump has backed off hitting Iran as he had signaled, another TACO twist. The region isn't quiet, but the threatened escalation by the US hasn't happened, not yet anyway. The oil price hasn't really eased back yet on this lull and is holding most of last week run-up towards US$100/bbl again. Trumps policy twerking has everyone unnerved.
Away from that and looking ahead locally, this week will feature the big data dump of the June quarter RBNZ series. We will especially be watching household deposit growth, which stalled in May.
In Australia, it will be all about Wednesday's CPI release (expect a small rise to 4.1%) and Friday's PPI (expect a rise to 3.5%).
In the US, the spotlight will be on the Thursday Fed meeting. Analysts expect no-change at 3.75% even though CPI inflation was at 3.5% for June and rising, remaining well above the Fed's 2% target. Even their PCE inflation was running at 4.1% for May. We will get their June update on Friday. In the meantime, financial markets are pricing in more of a chance of a hike - if not at this meeting then two by the end of the year.
There will be a lot of other US data out this week, including a Q2 GDP update, and the Conference Board's sentiment survey. The week will also feature some Big Tech profit results.
In Japan, all eyes will be on Friday's central bank decision, especially on how they intend to respond to their currency problems. But no change from their 1% rate is anticipated.
In China, it will be all about a big set-piece Communist Party meeting. There will be a lot of interest to see if big new stimulus is announced there. Their PMI's may signal how urgent that is.
Over the weekend in Japan, CPI inflation stayed low in June even if it did rose to a six month high. It came in at 1.7% in June from 1.5% in May, its highest since December. The pickup was largely driven by a slower decline in electricity and fuel prices as government energy subsidies were scaled back.
Japan's private sector expanded to a five-month high in July via a sharp rise in manufacturing production and an improvement in their factory PMI which was driven mainly by the sharpest increase in manufacturing orders for five years.
The July PMIs for India came in notably lower than for June as private sector growth receded and inflation pressure, especially for fuel, intensified. This is putting them in a tough spot with spreading social unrest. Their factory PMI dipped only marginally but their services PMI registered a notable easing.
In the US the first of the July PMIs shows that business activity growth rose modestly but to an eight-month high in July although that isn't an especially high benchmark. However selling prices rose sharply and at their fastest rate for nearly four years. Input cost inflation was at a 14 month high. Their factory sector expansion was little-changed however from June with new orders little-changed. It was their services sector that expanded more, albeit modestly
US new home sales were little-changed in June but maintained the modest level they have had all year. That makes then -5.6% lower than year-ago levels.
Canadian producer price growth fell back slightly in June from May but are still +12.4% higher than year-ago levels. Raw material input costs by manufacturers were up more than +20% from a year ago.
Meanwhile, the Russian central bank trimmed -25 bps from its key policy rate, taking it to 14.0%. A year ago, this rate was 21%. They have CPI inflation officially at 6.0%, although this seems an unlikely level.
In the EU, eurozone business activity has risen for first time in four months in July amid renewed expansion of new orders. Their factory PMI inched up, and their services PMI inched up too. But to be fair, these higher levels are not significant and the expansion is minor compared to other global regions. But at least it isn't a contraction. The German versions of these PMIs was generally better than the overall set. German consumer sentiment didn't budge however.
In Europe, their ugly heat and worrying fire season isn't easing. In fact a new wave of extreme heat is forecast over the next few weeks. It is part of an accelerating trend that will likely extinguish European glaciers far faster than anticipated just ten years ago.
Australia also got better new factory order levels in July, the first increase in new business in five months. Improved demand conditions underpinned a stronger expansion in output, led to upgraded recruitment activity and enabled greater protection of profit margins. This data confirms the good labour market data released yesterday. But overall Australian growth is likely to remain sluggish.
Sydney, Melbourne and Canberra house prices actually fell in the June quarter, an unusual but necessary shift to make their housing more affordable. It takes serious political bravery to turn a frothy market where gains just fell from the sky.
Bitumen prices are surging again on the closed Hormuz and Red Sea shipping lanes. They are back to levels that we had in mid-March and which lasted to mid-June. Interestingly, urea prices are staying low as are potash prices (minor rises) but sulphur prices never fell after the March spike. Naphtha (used for plastics manufacturing) is rising sharply again.
The UST 10yr yield is now just on 4.68%, unchanged from this time Saturday but up +13 bps for the week. The key 2-10 yield curve is now at +35 bps (unchanged). Their 1-5 curve is now at +29 bps (-2 bps) and the 3 mth-10yr curve is at +91 bps (+1 bp). The China 10 year bond rate is still at 1.72%. The Japanese 10 year bond yield is now at 2.81%, up another +1 bp and a new 30 year high. That is up +11 bps for the week. The Australian 10 year bond yield starts today at 5.09%, up +6 bps from Saturday and up +17 bps for the week. The NZ Government 10 year bond rate is at 4.82%, unchanged from Saturday, up +14 bps for the week and it highest since May 2024.
The price of gold has held at US$4052/oz, virtually unchanged from Saturday up +US$49 for the week. Silver is now just on US$58/oz, down -50 USc from Saturday, up +US$2 for the week.
Oil prices have risen back +US$1.50 from Saturday at now just over US$90.50/bbl in the US, while the international Brent price is now just on US$98.50/bbl and up +US$2. A week ago these prices were US$82 and US$88/bbl respectively. Hormuz transits have almost halted entirely There have been no crude tankers and only 1 cargo ship exiting over the past 24 hours (0 dark with transponders off) and none entering for new loads (0 dark). The Red Sea is also now effectively blocked at Yemen although a small handful of ships are still getting through (less than 20 each way). Still almost 800 vessels are waiting for things to calm down.
The Kiwi dollar is unchanged from Saturday at just on 57.9 USc but down -50 bps for the week. Against the Aussie we are still at 82.9 AUc. Against the euro we are holding at just over 50.9 euro cents. That all means our TWI-5 starts today at 61.8 which is unchanged from this time Saturday but down -50 bps from a week ago.
The bitcoin price starts today at US$64,673 and up +0.7% from this time Saturday and up +1.0% from a week ago. Volatility over the past 24 hours has been low at just on +/-0.5%.
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40 Comments
"remaining well above the Fed's 2% target."
They don't need to panic and slam the brakes on as they have a much more sensible (IMO) central bank mandate:
- Price stability:
Aiming for a 2% average annual inflation rate over time.
- Maximum employment:
Helping the job market reach its highest healthy level.
- Moderate long-term interest rates:
Keeping borrowing costs balanced over time
I particularly like the third point. What is the point of price stability if there is no interest rate stability? It makes it very hard for households and businesses to function when the cost of debt keeps changing radically. OCR went up 900% in 2 years.
This should be interesting;
"
- Moderate long-term interest rates:
Keeping borrowing costs balanced over time"
What exactly does that mean?
I put my question in before you'd finished Jim, but the point remains. On some levels prices and interest are connected, on others they are not. Prices are about resources, interest - money.
There are whole swathes of the business arena that are only about moving and making money. They don't make anything - no physical products, just move money around while charging exorbitant fees.
Stable interest rates make sense for mortgage borrowers, but in a time of constrained resources and compounded problems because of political shenanigans, is it realistic to expect them?
Their mandate acknowledges that there is a balancing act while ours says inflation is the only thing that matters.
This is the exact scenario where the other 2 points matter - our RBNZ are about to create 6%+ unemployment in a pointless attempt to keep CPI from temporarily getting to 4%. Is 4% really that bad? Would they still do the same if unemployment was at 20%?
Inflation makes everyone poorer except asset holders and lenders who are able to extract a return in excess of inflation. Inflation should be the only goal of a country's central bank. You can see the impact of USA letting the inflation rate increase without addressing it as interest rates rise anyway as lenders factor in wealth destruction caused by inflation. Not addressing high inflation is burying one's head in the sand and having only hopes and prayers for the future.
But addressing inflation without addressing what drives inflation:
It used to be called scarcity
is ditto.
Why does the dog whimper when the PM comes on RNZ? This PM says we need to go for it with the data centres, nah, other businesses and consumers won’t take another hit in power prices. He’s a funny man isn’t he?
As a kid, I recall the cheap power we had then, allowed a bit of processing in NZ. You know, factories, mills. Well China did for most of the factories, and, imo, blinkered thinking has done for the mills. All those dividends from the power companies when they should have been building capacity. National and Act, the parties of business? Along with their coalition partner, the parties of the lobbyists.
We really have the Government we deserve.
It's quite a concerning position from Luxon. Is he trying to build a local tech hub, or just aligning NZ to a technocratic globalist agenda?
Feels like he's a puppet for global corporate alignment. Less so for driving national self reliance.
Without AI we will be significantly less productive than other countries. We'd have no jobs but at least power may be a few cents cheaper.
That comment has been challenged.
Seems to be 'on repeat'.
Productivity is input/output (real) and therefore you need a feedstock. If you're aiming for 'gains', you need to be more energy-efficient. That's it - as every engineer would know.
AI can theoretically make some systems more energy-efficient. The question is: how much energy does AI require to do that? And the answer, increasingly, is: More than it returns.
Atop that, is the bigger trend of a lessening elite purloining more and more of the energy flows. As per Southland. At the expense of the populace - as always.
You like your Goole and the others. Maps etc etc etc. (Interest.co?. Maybe. I don't know)
These run on data centers, and they get bigger with the new stuff.
If you don't want data centers, throw your phone in the rubbish. Do it now.
You don't need the data centres to be in NZ in order for NZers to access AI. AI is not like tomatoes you buy from the farm gate.
Many organisations can't send data offshore, particularly government. Also if it's an essential service it can't go down if we get cut off.
Hard to know how government plan to use AI in NZ without a data centre.
That means we are creating even more dependency upon other countries, are we still not learning?
Both straw-man arguments - and no, obviously we aren't learning.
Who says we need the complexity? Is anyone dying?
I suppose there's plenty of electricity available now since all those timber mills shut down due to high power prices
Tell that to my electricity bill.
Better tell your electricity bill to gird its loins once that data centre starts up
"As a kid".
Sinking baseline syndrome? With 28% of the population not being born here, there is disappearing collective knowledge of what we had before the neoliberal growthist cult on steroids took over.
"This PM says we need to go for it"
What ever the potato party is offering, it's still ahead of the offering in the Phillipnes, India etc. Votes....
When the USA bombs Iran, Iran bombs the Gulf States (well mainly USA bases there). When the USA stops Iran stops.
Brilliant. The Gulf states will be rethinking hosting USA bases. But of course will have to be very polite about it. Very polite.
Structurally, the USA can't win this one.
Been a few others too as described your last sentence.
"The US can't win"?
Sure they can. The US don't do facts any more. The truth is what you wish it to be.
So we have a situation in the ME where the bombing has stopped but where Iran now controls the SoH and the Red Sea. (also has the same regime, and enriched uranium and no more foreign checks).
I wonder who won ?
Trump will say Iran were begging for a deal.
"begging"
Iam so sick of listening to this BS from the POS TUS. How stupid would anyone have to be to take his truth social posts seriously? Apart form Wall St of course.
About 33% (his still loyal fanbase) are this stupid.
Maybe nobody, yet.
The Yemeni's apparently hit a Saudi pipeline and some port infrastructure, and a new refinery (one has to be careful as to verification - the western press seems to be ignoring) and the Ukrainians have hit an Iranian tanker in the Caspian. Add in the damage to Russian production, and we are staring down the barrel of 20% reduction in oil flowing globally, plus reserve stocks near depletion.
Not hard to see financial collapse via lack of energy underwrite, nor is it hard to see a descent into all-in war. All with the backdrop of a planet we're voluntarily frying. And a fixated belief that economists are the go-to for advice...
No other life form calls us sapient. Perhaps they have a point...
I can't figure why the damage to Russian oil isn't affecting global oil supply. While refining has been severely damaged I guess production is still full steam and crude is still getting out to China, India etc?
What is your opinion PDK? Why are we not seeing greater disruption in the global economy to this ME and Russian situation? The SPR issue is getting closer to a reckoning. All the market manipulation in the world can't gaslight plebs into believing an empty tank is full, when they have to get out and push?
Still-depleting reserves - plus deferral (maintenance deferral first, project second - increasingly permanent).
And a lengthening of time-to-pay
And a growing despair as Wilkins Macawber spreads through the suburbs (he's already hit the slums).
I suspect there are some intelligent European leaders who are sh--ing themselves; wildfires up their rears, disintegration in front, a war pending and energy leaving them. Watch for much blaming of 'others'.
"Watch for much blaming of 'others'."
That'll be why the Euro hard right are making gains.
"Add in the damage to Russian production, and we are staring down the barrel of 20% reduction in oil flowing globally, plus reserve stocks near depletion."
The real supply reduction could well be a lot more than 20%, PDK.
And to think that there were 2 commenters this weekend (and here they are again in this current thread) who were cheering on the neo-NAZI Ukrainian administration, and especially the attacks on Russian energy production and supply assets.
Your point re the meaning of "sapient" is spot on... these psuedo-intellectuals who parrot the CIA/War Department propaganda almost verbatim, have zero clue as to who humanity's real enemy is.
In essence they end up unknowingly as hegemonic recruits who greatly increase the chances of WW3 escalating into a nuclear apocalypse, which is precisely what a lethally/highly resourced element within the creationist/fundamentalist bloc desire.
They are so dense, that they end up cheerleading the Western-centric hegemonic forever-war policies, as well as for the destruction of much of the global economy, along with yet another massive plutocratic wealth-heist from the working classes.
Funny how it's Putins fascist regime neo nazis seem to gravitate to. Again proving your brain rot!
https://www.youtube.com/watch?v=vrTnFC4gzys&list=PL5xMqzfPRE7DBqQA--Ejx…
Cast is an apt word. As in a little tin soldier, or a sheep. In each case, deeply bound in an inescapable posture, with no wits about them, to consider quite how that got to be.
And so one by one the strawmen/pseudo-intellectuals arrive on the scene, to hold one another's hands, and offer nothing to the discussion other than childish insults and projection.
Dr Oberg had you guys down to a tee - I remain amazed that you haven't tried attacking his credentials.
You accuse me of "brain rot" and then offer up that link as some kind of evidence! - laughable.
And you still have zero clue that you actually cheerlead the continued self-destruction of the West when you parrot these destructive memes.
Dr Jan Oberg describes the affliction of your ilk - one of inventing enemies that never existed in the first place, and then assisting in a much more serious self-destruction of the Western world, as a result of swallowing this CIA/MIMAC inspired propaganda hook-line-and-sinker.
THE TRAGEDY OF THE WEST'S SELF-DESTRUCTION - the one you miss.
Swedish peace and conflict researcher Dr Jan Oberg describes NATO's current tactic as "the theatre of the absurd - one which has no relationship to empirical analysis and serious politics."
https://www.youtube.com/watch?v=t_OLhQDeaKA
At ~25:00 - paraphrased -
"What comes out of this is that you have a NAZI-centred periphery where the elites are the same in different parts of the world, and they have more in common interests together, than they have an interest with their citizens - see Johan Galtung's Structural Theory of Imperialism in which imperial control can persist without direct military rule.
This also applies within NATO. Their elites are more loyal with each other and the benefits they get from it, than they are with the citizens of their country and their best interests.
There is a word for that in war time, and a word for it in peacetime too -"TRAITOR".
You can be a wartime traitor, more loyal with the foreign powers, and you can be a peacetime traitor. Its the same thing, just the time is different. And the crime is bigger if you are a traitor as a quisling, as it was called in Norway, and if you are that in wartime.
But I have a moral problem with those (in Stockholm) who are more loyal to Washington, than they are with my family and the Swedish people's best interests. I have a problem with them ethically and morally, and they would never dream of talking to me, a peace researcher, about anything.
They would talk with people who are Russiaphobes and who confirm only their own views that we must arm. In Sweden today you cannot find money for a serious research on finding some sort of peaceful solution, peace research, reconciliation, forgiveness, etc.
We (at the independent Transnational Foundation For Peace) can do it because we are people-financed, and people appreciate what we do, but you couldn't do this as a director of a state institute - they are all producing basically the same stuff, and that is why they have not made a study of economic militarism - they know that that would be difficult to get financed. And so serious state-backed, research on achieving freedom? - forget about it.
LENA ... "We see with the proxy war in Ukraine, where any dissent is silenced, but it seems to be that, the silencing is actually taking on a more and more aggressive posture in the EU - could you walk us through what you are observing?
OBERG... The WW2 quote... "If you sleep in a democracy, you risk waking up in a dictatorship." And that applies to the intellectual world today too, or the research world - I am not saying we don't have intellectuals, but they are outside the academic circles.
I think that what you are pointing to is caused by the fact that the West, which is 12% of humanity is burned up - we are the last empire - that empire is getting weaker and weaker, and more and more desperate, and it cannot tolerate different views.
The weaker you are, the less tolerant you are - the US is a kind of patriarch on its death bed, and the children around the world do not obey. The Chinese do not obey, Africa doesn't obey - people are seeking other finance systems now.
What we try to do backfires. Nothing is going well for the Western world at the moment, and so you get more and more intolerant, and those of us who might have blown off a few truths at some point, we are hated and never used.
It is intellectually, philosophically so fascinating - how do we live together on this Earth with our conflicts, without killing each other? - which I think is a reasonably good question.
And all this intellectualism is off - how? By people who say - just give us 5% of GDP and we will solve all the problems. Now these guys are not serious, they are not intellectuals. They are not thinkers, in any kind or sense of the world.
But worse, they have a media and research priesthood - and I talk about MIMAC (the Military Industrial Media Academic Complex) - these elites sell this nonsense, and the main tool is to tell us we are endangered, your life is threatened, the future is very dark, but if you give us money then we will save you...."
We could go down with grace - we could reach out to others - demilitarise, talk with those we have real problems with instead - but what we do is, we don't destroy China or Russia, or Africa, or the ME, or Iran the 6000 year culture, we choose to destroy ourself. What is going on in the Western world is self-destructive.
And the RoW will increasingly say - OK, these guys do it their way, we do it our way, and in the long run they will sit and say how stupid is the West that we loved and looked up to, and were inspired by.
Look at China - tell me there's not inspiration from the West - I mean, lots of things they have done are directly inspired by the West. Russia too - it is not a socialist/communist country anymore, its a Western-inspired capitalist country.
And yet still we see enemies everywhere.
In a way we had won, and now we are losing everything. It a unique tragedy in Western history, and that is what makes me sad, but at least the RoW makes me happy - they will survive.
And the West will survive too, but it will not be a nice place to live the future. We will be like a museum - a quaint place you can go to see what things once looked like.
That is very sad, as we have tremendous resources in the West if we wanted to redeploy them, and to convert them to something constructive, instead of destructive.
LENA.... "Does the Trump admin deliberately seek to destroy Europe's role in global politics - is destruction the goal?
Oberg.... "Its a very mixed bag, Lena. The US needs Europe, but it does not need a strong Europe. It doesn't want a strong Europe. This didn't start with Trump. It started with the Biden admin saying we are going to blow up Nordstream, and that meant economic warfare.
Europe has always stupidly believed that the US was here for us. The US is here for.... the US, and the idea of NATO has never been to protect Europe. The project called NATO is a US project, to secure that in the event of a war, that it will be fought in Europe and not on US soil.
That is what is termed "forward defense", the idea of deterrence - American nuclear weapons in Europe - it is to have the fight here, and that is why they have the ballistic missile defense, and the base in Greenland, and why Trump is interested in Greenland.
And the Europeans have been sitting down since 1949 and believing that this was a beneficial thing to assist the survival of Europeans - I mean this is just laughable - it belongs in the world of fiction (black comedy).
And of course there is the CIA and its influence on media (what you continue to swallow Palmtree), everyone is paying for the message - media warfare is almost as important as military warfare."
Colin you fall into the trap of spouting half truths while ignoring history.
In the back wash of WW2 the allies established occupation forces in Germany. Of the Western allies, they left the countries occupied by Germany to re-establish their own governments, as well as the Germans (I understand there was a little rejigging of borders in places?), the Soviets did not. The either remained as occupying forces or established puppet governments subservient to the Soviet powers in Moscow. This is the threat Europe remembers. It wasn't a CIA plot or driven by some shadow conspiracy in the west. It was Joseph Stalin and his mates snatching power and announcing to the world they wanted the rest.
You didn't watch the link did you, Murray.
This is precisely why you remain ignorant and continue to parrot these false narratives and to cheerlead the Russiaphobia machine alongside the CIA, MI6, the global MIC, the Western Lamestream Media, and the vast majority of Western Academia.
As such you are beyond help. Which is why I rarely respond to the pseudo-intellectual tripe that you habitually post on this subject, which is always in the tone of some kind of divine authoritative oracle.
I assume that you are blinkered enough to fantasise that the Russian Federation is still a communist country, when it hasn't been since December 25, 1991 - thats going on 35 years ago.
This of course, suits your style because it goes along with using the commie false label, and continuing to obfuscate the identity of the Russian Federation with the long-gone Soviet Union.
As Oberg points out, your ilk is extremely dangerous, and precisely the type of "thinking" (sic) that could so easily lead Europe into an existential nuclear war.
Just think, you have arch-warmongering crooks like the recently deceased Lindsay Graham, Pete Hegseth, Ursula von der Leyen, Kaja Kallas, Keir Starmer, and Friedrich Merz, to name just a few, singing from the same hym book, and beating the very same war drums.
I failed to mention Oberg's most damning comment on the direction of the the West, and your (Palmtree) parroting of these destructive memes.
...paraphrased...
At 45:00 Lena asked - are European leaders misunderstanding basic economics, or are they deliberately presenting an incomplete picture to the public - IOWs, are they deliberately lying?
Oberg.... "Lena, the main thing is, both are very bad. If you are ignorant about the basics of economics and are a politician today in the Western world, that's catastrophic.
And if you know that basis, and then deliberately lie about it, and say it (militarism) will have great effects for the civilian economy to make huge investments in the weapons factories, great spin-offs for society and all of that - I don't know which is worse.
And I don't care which is worse - both things are beyond believable in a democracy, and an enlightened society. And what makes me perhaps even more pessimistic about the future, is that you have so many scholars and media who repeat the same nonsense and never ask questions.
You see, the moment you don't have that, you don't have a vibrant society, and you don't have democracy anymore - when research and media explorations, free-thinking is disappearing and is substituted by rhetoric - by you know, peace is war, and war is peace, freedom is slavery, etc, then it's gone.
What we were so proud of in Europe and had all the reasons to be proud of will be gone.
And that is how NATO membership for Finland and Sweden is possible, and how America has built 40+ military bases in Scandinavia in two years.
I can't tell you whether the leaders are ignorant or they are lying, or both, or whatever. Those who lead Europe's 450 million people should not behave the way they do. The decline of the West, and it becoming more and more desperate, is the main explanation."
"America has built 40+ military bases in Scandinavia in two years." Basic lie. The US has not built bases, it has access to existing bases.
And so the US securing access and funding upgrades to 47 Nordic military bases, 17 in Sweden, 15 in Finland, 12 in Norway, and 3 in Denmark, is somehow not a problem, Palmtree?
This is the country that has an estimated 800+ bases on foreign soil, and even this figure conveniently omit bases and other assets in complex host locations like Iraq, Syria, and Kosovo.
Meanwhile China operates 1 official base in Djibouti, 1 defacto access base in Ream Cambodia, and 1 low profile facility in Tajikistan.
Russia has a total of ~10 overseas bases including 2 core bases in Syria, and within the post-Soviet hubs of Armenia, Tajikistan, Kyrgyzstan, Belarus, and disputed territories such as Transnistria, Abkhazia, and South Ossetia.
If you add in the official US military budget, along with the peripheral agencies and its global defacto activities, then it exceeds all of entire combined spend of the rest of the world.
And yet you and Murray defend this obscene military expenditure and activity as some kind of noble security network, when it produces precisely the opposite effect, and places humanity on the cusp of major wars on multiple fronts?
Fascinating conversation between a pom and a paddy.
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