Here's our summary of key economic events overnight that affect New Zealand with news China may be going off the boil somewhat, but the rest of the developed world is in a full 'shortages everywhere' situation.
In New York, business activity continued to grow at a solid clip in the State, according to the Fed factory survey there. New orders and shipments expanded strongly, and unfilled orders increased in May. Both input prices and selling prices rose at a record-setting pace. Firms said they were optimistic that conditions would improve over the next six months, and expected significant increases in both employment and prices.
April housing starts in Canada came in lower than expected and much lower than for March. But it is at the end of a frenetic 'up' period, so an easing isn't necessarily negative.
House prices in China rose almost +6% in April in their major cities from a year earlier, and that is a fast pace for them. In second tier cities the year-on-year rise was more than +11%, and fast enough to cause policy-makers some concerns.
China's industrial production grew a hot +9.8% year-on-year in April, but that was a slower expansion that the March +14% expansion (although that was affected by the pandemic-affected base).
Electricity production was up +11% in April (and an increase of 11.3% over April 2019) so this is evidence the pandemic impacts are now behind them. However, over the two years, this suggests the real recovery is relatively subdued.
China's retail sales growth data feeds into that feeling. Retail sales were up +34% in March (pandemic base affected) and a +25% year-on-year gain was widely expected for April. But it only came in up +18% and that is considered a big miss. Excluding price factors, the real volume increase was only +16% in one year, and only +2.3% over two years, confirming the weakness of the retail bounce back.
The bounceback in Japanese machine tool orders was very strong in April, continuing what we saw in March. Of course the year-on-year gains are distorted by the base effect, but from April 2019, the 2021 data is +16.5% higher, so the gains are very healthy indeed.
Japan also reported producer price data for April and that revealed a +3.6% rise year-on-year, well above the March +1.2% and also above the +3.1% expected. One component is eye-catching - export prices are up +8.2% year-on-year.
Very high demand for intermediate goods just isn't going away. The new week has started with prices for key commodities rising again, especially for iron ore and copper. And the latest edition of a key logistics manager survey suggests strongly that shortages and high prices are here to stay for at least the next year. This 'shortages everywhere' situation feeds on itself as firms order early and heavily to try and beat the rush.
In Australia, their Federal Government is getting deeper into the reverse mortgage business. Their existing “Pension Loans Scheme” was broadened in last week’s budget to allow retirees from July 2022 to borrow upfront AU$12,000 for singles and AU$18,000 for couples, effectively drawing on the equity in their home. The expectation is that this will 'unlock' up to AU$½ tln in home equity for retirees.
The latest global compilation of COVID-19 data is here. The global tally is still rising, now 163,181,000 people have been infected at some point, up +537,000 in one day, still largely driven by rises in India and Brazil. A fast-spreading Indian variant is now a new and dangerous risk. Global deaths reported now exceed 3,382,000 and up +10,000 in one day. Vaccinations in the world are also rising fast, now up to 1.475 bln (+23 mln in one day), and in the US almost half of their population (47.9%) have had at least one dose as they struggle to keep up the pace of vaccinations. Now more than one third have been fully vaccinated (124.8 mln people). The number of active cases there has fallen to 5,980,000 with fewer new infections than recoveries recently and steady progress.
On equity markets, the global risk appetite is pulling back and a more cautious tone is around as markets meander at or near record high levels. Wall Street has opened lower, currently down -0.3%. Overnight, European markets were down about -0.2%. Yesterday the very large Tokyo market closed down -0.9% but Hong Kong closed up +0.6% and Shanghai closed up +0.8%. The ASX200 ended its session up a minor +0.1%, and the NZX50 Capital Index ended up +0.3%.
The UST 10yr yield starts today at 1.64% and unchanged from this time yesterday. The US 2-10 rate curve is at +148 bps and little-changed. Their 1-5 curve is also little-changed at +78 bps, while their 3m-10 year curve is still at +163 bps. The Australian Govt ten year benchmark rate is up +1 bp at 1.72%. The China Govt ten year bond is up +2 bps at 3.17%. But the New Zealand Govt ten year is down -2 bps at 1.89%.
The price of gold starts today up a strong +US$22 from this time yesterday at US$1867/oz.
Oil prices start today slightly firmer at just over US$66/bbl in the US, while the international Brent price is just over US$69/bbl.
The Kiwi dollar opens today at 72.1 USc after an overnight softening. Against the Australian dollar we are lower at 92.9 AUc. Against the euro we are down at 59.4 euro cents. That means our TWI-5 starts today at 73.7 after the across the board retreat.
The bitcoin price is now at US$42,847 and down another -9.1% from this time yesterday. Over the past week, the bitcoin price has fallen -23%. In New Zealand dollars it is now below NZ$60,000 for the first time in 100 days. Volatility in the past 24 hours has been extreme at +/- 6.3%. The bitcoin rate is charted in the exchange rate set below.
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71 Comments
https://www.newshub.co.nz/home/money/2021/05/first-home-buyers-fatigued…- -corelogic-report.html
It is too little too late.
Using polite word like FHB fatigue where actually it should be after FHB has being screwed and left to die as is evident from ground reality that house prices have gone beyond ....and this is after the reintroduction of LVR and so called housing policy by government ...and they say that market is cooling........
This is yesterday's Auction - after introduction of LVR and governments housing policy :
27 Carole Crescent, Pakuranga Heights is sold under the hammer tonight at $1,681,000 ( CV 1 million).
Trying to increase supply by increasing land/house price in multiple is only helping developers and speculators and helping FHB is a farce.
Mr Orr still enjoying and satisfied as mission accomplished by going with least regret policy to support the ponzi.
Price rise speed will decline but rises will continue
Simple reason: as prices silliness corrects, sellers less likely to sell. So, less for buyers to choose from. Which drives price up on anything OTM
Also, buyers now starting to think "Am I over-paying" not, "Will I miss out"
Also, lastly, inflation rising faster than wages means erosion in ability to save for deposits.
Not a good prospectus
Corner site it's going to have a dozen sausage flats squeezed onto it and flogged off to idiots for a million plus each.
All this huffing and puffing about standards of living is stupid. After a decade of mass immigration, GDP is up, "diversity" is up and house prices are up and those are the only KPIs that matter.
It is a total mystery why people want to live out their days in Auckland let alone Pakuranga.
People have to live somewhere. I have lived in and owned one of these shoe-box apartments and it is actually comforting to know that no one will be moving you on and you can have some stability.
Having said that I moved my family from Auckland so we could have a higher standard of living but I am mindful that not everyone has that choice.
FHB as a breed if not already, will soon be extinct in NZ and people in power should realize that they need FHB to whip. Can bend the cane but should not bend it to level that it breaks and FHB is at breaking point to be extinct.
Dangerous time where likes of Robertson's and Orr's are allowed to get away with supporting and promoting one community over other by their action ( inaction is also an action).
History is witnessed whenever
such extreme occurs, end is bad.
While appreciating that New Zealand is not Canada, nor Orr Macklem these are their latest housing stats.
https://creastats.crea.ca/en-CA/
Interesting NZ graphs - might make a few think.
https://surplusenergyeconomics.wordpress.com/
How about an article David?
pdk,
Possibly the best link you have put up. I have not yet read it all, but will certainly do so. In #197, this is said; "Indeed, even the maintenance of current fossil-based prosperity has become impossible". I would amend that to read 'will become impossible at a date which is not yet known.'
Of course we will run out of extractable oil/gas, but we have not yet reached that point and it is my belief this point is further off than you think. The article then says; "The best available evidence points to an outcome which is at neither end of these extremes". I agree.
[ Personal insults and smears removed. Don't do it. Ed ]. I recently left NZ because of what they have just done to house prices. I could not afford to buy and could not accept paying the disgraceful rents. How Jacinda can show her face in public after providing us hope that she would lower house prices and do ten times the opposite is beyond me. Do these people have zero shame?
Hi, How easy it is to remove personal insults but can do nothing to people who are not only insulting but also adversely impacting the lives of average Kiwi by their action.
Killing the dream / aspiration is the biggest crime committed by Jacinda Arden and her likes.
... and we thought democracy is the way out....... Elected Government can create havock as much as dictatorial regime only difference is that they can do it for three years and do it in a subtle manner but unlike dictator who has bad ending, elected %:@$& retire in comfort.
Couple of points
India infections (new per day) now at 50% of world total.
Meanwhile new daily infection has fallen (as reported at least) from 919k at peak to 537k today
Deaths peaked at 14500 per day, now 10k per day.
Second, on economic recovery: yes we can only compare to 2019 and yes things are rebounding strongly.
But we should rationally regard this as a rubber ball reaction with supply lines and inventory being restored and stocks built up again, hence greater than normal activity rises and indexes rising accordingly.
So, all this "record" this and the other is essentially meaningless re the reaction to huge increase in debt and lack of ability of economies to service that debt, which has massively increased.
Bond market and consumers will not wear what is coming.
Australian Pensions Loan Scheme looks interesting. It is only a monthly top up payment rather than a lump sum. Interesting though that the government is not simply leaving it to the private sector. What is often overlooked in NZ that retirees that end up in hospital care, dementia or other, will contribute all of their capital save about $230K, towards that cost. But if all of that should have been siphoned off and spent via a reverse mortgage the government foots the bill.
Jeffrey Gundlach has some good insights into inflation/risks:
https://youtu.be/mcC1SB2tXmY?t=438
There seem to be more and more people coming out and saying that they simply don't buy the 'transitory' stance the Fed is taking...but guess time will tell.
Question for the bond gurus out there....why would anyone be buying (or holding bonds) at present if inflation is (per latest US inflation data) multiple times higher than the yield on any bonds, and with the risk of higher future OCR that will drive the price of the bonds down, who in their right mind would be buying these other than central banks? The situation just seems insane.
And if its the state (treasury/central bank) who ends up holding larger and larger quantity of these bonds via bond buying programs, and interest rates rise, isn't this going to cause bigger and bigger problems down track as the government will be forced to raise tax to cover the rising servicing costs of holding those bonds (and higher interest payments)? It seems very counter intuitive.
Because they believe other expected real yields are also negative (positive real yields carry risk).
Try any Hussman blog from recent months:
https://www.hussmanfunds.com/comment/mc210502/
UST are also the collateral of choice for a lot of things and as they are in USD they can be liquidated for USD as needed or at more favourable exchange rates.
See Audaxes links above. Outside of the press and us US no one is really believing or finding inflation.
But even Jeffrey Gundlach (the bond king) is saying the opposite of that. So who is wrong?
https://markets.businessinsider.com/news/stocks/fed-ignoring-runaway-in…
Who knows, we will find out eventually. I would think the outcome will be complicated and mixed so everyone ends up "wrong".
I would personally disregard anyone who choses to frame QE as money printing.
I don't think the outcome will be decided by economic fundamentals. Goverments and central banks will step in and pick winners and losers.
The idea that interest rates will rise in any meaningful way is nonsense. Just keep in mind my 2013 prediction made on these pages, that interest rates will fall. It is the trend that counts, not the peaks and troughs. We are sitting near the top of the trend channel, so you can expect them to top out and decline, probably in the second half of this year. There may well be a crisis that triggers the drop. The bond market knows this and they are great value at the moment. Buy at 100:1 leverage, what could go wrong?
Probably the better Chris Trotter article this week.
Fascinating deconstruction of Tova's media darling work.
At its core the miss reporting of He Puapua.
Seems Bindside reporting a better name for TV3.
& Collins taken as collateral damage...
https://bowalleyroad.blogspot.com/2021/05/the-tv3-poll-journalism-or-pr…
This is how it works now. If a potentially damaging report like He Puapua makes it into the public arena, do not under any circumstances attempt to inform the public accurately and dispassionately about its contents. Instead, brand any publicly voiced misgivings about the report’s recommendations as “racist”. Give maximum coverage to accusations and recriminations arising from politicians’ responses to the report, and highlight the alleged divisiveness of their attempts to question or challenge its findings. Then, commission a poll, the entirely predictable results of which can be used to discredit the report’s critics: most particularly the leader of the political party most heavily invested in challenging its officially sanctioned version of reality.
It’s a game played out every day in Moscow and Beijing. The only serious distinction between the players there, and the players here, being that ‘there’ they know that the name of the game is “Propaganda”; while ‘here’ they still think it’s called “Journalism”.
Just my opinion & supported by the polls...
Couldn’t be bothered reading anything to do with National at the present.... and not interested in anything until a complete clean out at board level.
Seven house Luxon sounds like he’s just going to parrot the same old claptrap too.. the world has changed and good on Labour for their leadership. Great to live in a democracy!
Interesting how much the purchasing power of the USD has declined
https://wolfstreet.com/2021/05/12/its-getting-serious-dollars-purchasin…
Elon Musk has been back on twitter stirring up the bitcoin fanatics.
"Bitcoin is actually highly centralized, with supermajority controlled by handful of big mining (aka hashing) companies.
A single coal mine in Xinjiang flooded, almost killing miners, and Bitcoin hash rate dropped 35%. Sound “decentralized” to you?"
"Hey cryptocurrency “experts”, ever heard of PayPal? It’s possible … maybe … that I know than you realize about how money works."
I just find it quite funny...and you look at the comments from all the pro bitcoiners saying things like the 'SEC is going to pay you a visit' for these tweets!
Are they confusing bitcoin with a publicly listed company? One that generates earnings that people invest in and is regulated via GAAP/IFRS versus something else that people gamble at like a casino - yet they can't see the difference.
Ditto BTC holders - let him keep spreading his misinformation and attempts to fly to Mars
Recently released research report from Galaxy Digital has calculated the energy consumed by the Bitcoin network and then compared it to other industries, including the banking industry. It found that Bitcoin consumes 113.89 terawatt hours (TWh) per year, while the banking industry consumes 263.72 TWh per year.
So you are comparing banking for 7 billion electronic money users for all their transactions for distributing 99% of the resources of the world, vs 25 million Bitcoin users where 99% of transactions is zero-sum casino type betting, buying and selling Bitcoin with bank currency. Apples and Oranges don't you think?
According to the report, oil fields currently generate about 40 percent of the world's energy. However, they also frequently produce methane as a byproduct, whose greenhouse effects are 25 times as environmentally damaging as those of an equivalent quantity of carbon dioxide.
"Bitcoin mining offers a solution,” the report suggested. “Companies like Great American Mining, Upstream Data, and Crusoe Energy Systems are building infrastructure to capture this methane at the wellhead and use the otherwise-wasted gas to mine bitcoin. This means that oil producers can ensure a 24x reduction in emissions compared to venting that methane into the atmosphere.
But keep it up team..hold tight to your FIAT
seems to me Musk must have been rapped over the knuckles for his hypocrisy in buying Bitcoin with Tesla Money.
The Tesla Brand is around renewables, sustainability and an emission free future, in contrast Bitcoin mining is burning coal and increasing emissions, especially in China
Now i see Sir Chon is telling us to vaccinate up...
https://www.stuff.co.nz/national/300308009/covid19-gaming-billionaire-a…
Now theres a good reason to be sceptical
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