Here's our summary of key economic events over the weekend that affect New Zealand, as much of the world and its central banks appear to be going into a 'watch and wait' mode on inflation.
That's watching and waiting of course while inflation in many part of the world seems to be kicking up strongly, along with house prices.
In New Zealand this week on Wednesday we will get another reading from our central bank on how it is seeing inflation and other matters as it has its regular Monetary Policy Review. No change is expected to either the 0.25% Official Cash Rate or the $100 billion large scale asset purchase programme, but Governor Adrian Orr's comments will be scrutinised for any change in the bank's view.
Major bank economists expect the RBNZ will put the Government's recent property investor crackdown, trans-Tasman bubble, slowing growth and higher inflation expectations aside, and take a breather before changing monetary policy. So, watch and wait in other words, even though signs of inflationary pressure are building.
One place where inflation's perhaps not so generally prevalent yet is China, where their consumer inflation rate for March showed no sign of resurgence there for households. Food prices are falling because pork prices have retreated sharply after their ASF-boosted gains. But interestingly, lamb prices are holding, retaining an +8% year-on-year rise whereas beef prices are retreating along with pork. Milk was one of the few food prices to rise in March. But factory prices are rising fast.
Across the water in Taiwan figures for March show their total exports expanded 27.1% year on year to US$ 35.89 billion; total imports rose by 27.0% from a year earlier to US$ 32.23 billion. The trade balance was a surplus of US$ 3.66 billion.
In March 2021, compared with the same month of last year, exports of electronics rose 24.5%, information, communication and audio-video products rose 38.9%, base metals grew 21.4%, plastics & rubber rose 39% and exports of machinery grew by 29.3%.
Back in China the authorities are continuing to come down hard on e-commerce giant Ali Baba. Over the weekend they slapped it with a record 18.23 billion yuan ($2.8 billion) fine, which was the equivalent of about 12% of the company's profits last year. Remember, Ali Baba founder Jack Ma had launched stinging public criticism of the country’s regulatory system in October. Then in November regulators did an abrupt u-turn and torpedoed what looked set to be a record-breaking stock market listing for Alibaba's financial unit Ant Financial, which operates the Alipay smartphone payment service.
The State Administration for Market Regulation, the competition watch dog launched the probe into the e-commerce giant in December, charged Alibaba with abusing its market dominance. The watchdog said its investigation concluded that Alibaba had hindered online retail in China, affected innovation in the platform-based internet economy, hurt the lawful rights of merchants and damaged consumers' interests. Alibaba said that it "accepts the penalty with sincerity and will ensure its compliance with determination".
There's reports that China’s competition watchdog is adding staff and other resources as it ramps up efforts to crack down on anti-competitive behaviour, especially among the country’s powerful companies.
Back on the inflation theme and back in the USA, US producer prices increased much more than expected in March, according to official US stats, resulting in the largest annual gain in nine-and-a-half years. The PPI increased 1% in the month, which was double the expected rate, and also double the February figure (0.5%). On an annual basis the PPI moved up 4.2% - the biggest increase since September 2011.
Such prices will almost inevitably fuel inflation though the US Federal Reserve - like our central bank the RBNZ - is currently expressing the hope that these inflationary pressures will be short term only and will fade away. Time will tell.
Goods prices accounted for more than half of the increase in March. They rose 1.7% - the largest increase since the index began in December 2009. A big factor was an 8.8% jump in petrol prices. The indexes for diesel fuel, residential electric power, industrial chemicals, steel mill products, and processed poultry also moved higher. In contrast, beef and veal prices fell 4.3%.
In an interview with CBS' 60 Minutes programme over the weekend, Fed chair Jerome Powell said the US. economy is at an “inflection point” with expectations that growth and hiring will pick up speed in the months ahead, but some risks remain, particularly any resurgence in the coronavirus pandemic.
The latest USDA assessment of world agricultural trade shows they expect the US to get a lower supply of beef from Australia, and along with changing domestic dynamics, the price of beef is expected to rise. (pgs 31,32) They also see rising exports of US skim milk powders in response to global prices rises.
Across the border in Canada their central bank is warning that while strength in the housing market is contributing to Canada’s economic recovery from the pandemic, it may also be intensifying housing market imbalances and household indebtedness. In an analytical note released over the weekend the Bank of Canada said the evidence suggested "vulnerabilities" have increased in recent months. "In particular, house price growth and mortgage indebtedness have risen amid an increasingly strong housing market. The Bank of Canada will continue to monitor these developments closely and will provide further updates in the next Financial System Review to be published in May 2021."
Remember, in Canada there have been recent sharp house price rises in Toronto and Vancouver. Bearing that in mind, Canada’s financial regulator is proposing a tighter mortgage stress test. The Office of the Superintendent of Financial Institutions (OSFI) is proposing that the new benchmark to determine the minimum qualifying rate for uninsured borrowers would be either the greater of a range of rates submitted by lenders plus 200 basis points or 5.25%, according to a letter to lenders.
Meanwhile, Canadian Imperial Bank of Commerce Chief Executive Victor Dodig urged policymakers to focus on measures to boost the supply of homes amid calls for them to intervene to cool a surging housing market. “Part of the short-term aberration you’re seeing here is low interest rates, lots of liquidity, but not enough supply,” Dodig said. Does that sound like anywhere else you can think of?
And this all comes as Canada there's further signs of economic recovery with employment rising faster and unemployment falling much faster than expected in March. The labour underutilisation rate fell 1.9 percentage points to 14.7%, the lowest level since February 2020.
Employment rose 303,000 (+1.6%) in March, and was within 1.5% of its pre-Covid February 2020 level. The unemployment rate fell 0.7 percentage points to 7.5%, the lowest level since February 2020. Both full- (+175,000; +1.2%) and part-time (+128,000; +3.9%) employment increased. Self-employment rose for the first time in three months, up 56,000 (+2.1%), but remained 5.4% (-156,000) below its pre-Covid February 2020 level. Total hours worked rose 2.0% in March, driven by gains in several industries, including educational services, retail trade and construction.
Putting all this in some perspective though, there were 1.5 million Canadians unemployed, up 371,000 (+32.4%) compared with February 2020. Compared with February 2020, there were 296,000 (-1.5%) fewer people employed in March 2021, and 247,000 (+30.4%) more people worked less than half of their usual hours.
In Britain they are mourning the death of Prince Philip, who has died at the age of 99.
Elsewhere in Britain there's a theme becoming very familiar around the world. House prices are surging. The culprit for the latest surge in the UK is seen as the extension of a property purchase tax cut over there last month. Mortgage lender Halifax said house prices rose 1.1% in monthly terms during March, the biggest increase in six months, after a flat reading in February. In annual terms, prices rose 6.5%, the strongest reading in four months and taking the average house price to a record high £254,606, Halifax said.
In Australia, their central bank has released is latest Financial Stability Review. It is focused on risks from their residential property boom, but says its banks could cope with any shock.
To end the week in China, the prices of iron ore and coking coal staged a small rally, undermining the expectation that prices are past their top and likely to fall. Complicating matters in China is their new-found drive for cleaner air, with some large steel mills in their rust-belt regions being shut. Their iron ore stocks are high, but the other mills in other regions are now scrambling to stock up for the rise in demand they have suddenly got. That is pushing steel prices up, and along with it iron ore and coal prices.
The latest global compilation of COVID-19 data is here. The global tally is still rising, now 135,617,000 have been infected at some point, up +1,312,000 in two days. Global deaths reported now exceed 2,931,000 and +21,000 in two days. Vaccinations in the world are still rising fast, now up to 755 mln (+21 mln) and in the US half of their population (177.3 mln have had at least one dose) have now had this protection as they achieve a very fast rollout. The number of active cases there rose to 6,877,000 and up +6,000 overnight as new hotspots emerge with problematic variants. In NZ another worker at a central Auckland MIQ hotel has tested positive for Covid - a close contact of the hotel security guard who tested positive last week.
The UST 10yr yield is down -1 bp at 1.66%. The US 2-10 rate curve is marginally steeper at 150 bps. Their 1-5 curve is also a little steeper er at +81 bps, as is their 3m-10 year curve at +165 bps. The Australian Govt 10 year yield is unchanged at 1.73%. The China Govt 10 year yield is stable at 3.24%. And the New Zealand Govt 10 year yield is also unchanged at 1.72%.
The price of gold starts today at US$1744/oz and off its recent high, but with a small gain for the week.
Oil prices are little-changed from this time Saturday, now just under US$59.50/bbl in the US, while the international price is now just under US$63/bbl.
The Kiwi dollar opens today marginally softer at just on 70.3 USc. Against the Australian dollar we are unchanged at 92.3 AUc. Against the euro we are little-changed at 59.1 euro cents. That means our TWI-5 is still at 72.7.
The bitcoin price will start today at US$59,837 and up +2.5% from this time Saturday. At one point between then and now it reached US$60,588. Volatility in the past 24 hours has been moderate at +/- 1.9%. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».