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Dairy prices dip again; US factories expanding faster; Chinese factories less so; huge hack at major global beef processor; EU inflation rises; UST 10yr slips to 1.62%; gold slips and oil firm; NZ$1 = 72.6 USc; TWI-5 = 74

Dairy prices dip again; US factories expanding faster; Chinese factories less so; huge hack at major global beef processor; EU inflation rises; UST 10yr slips to 1.62%; gold slips and oil firm; NZ$1 = 72.6 USc; TWI-5 = 74

Here's our summary of key economic events overnight that affect New Zealand with news worldwide, factories seem to be in overdrive.

But first, the latest dairy auction has brought lower prices again, now the fifth fall in the prior six auctions. This one fell by almost -0.9% in US dollar terms and -1.0% in New Zealand dollar terms. Since the large +14% rise three months ago overall prices have fallen -5%. Butter retreated by -5.4% today from the prior auction and was the biggest mover. But most other changes were small with SMP up +0.5% and WMP down -0.5%.

In the rest of the world, the data is all about factory PMIs.

In the US, their factory PMIs expanded faster. The locally-watched ISM one starred with a strong result, bolstered by very high new order, and order backlog readings. The prices measure is still reflecting high stress although it wasn't quite as extreme as for April. The Markit one was equally expansionary and reached a new record high. This one reported "soaring cost pressures". (But there was one data item that was soft: employment.)

Interestingly, in the Dallas Fed factory survey their fast expansion slowed somewhat in May, but input prices and wage pressures accelerated further in the month. Perhaps this is an early sign those raging cost increases are working to take the top off their factory boom.

But the US LMI logistics managers index is still reporting above average expansions and the strains of this growth are being felt in sharply higher prices for everything.

Elsewhere in the US, a major cyber attack on their largest beef processor has severely disrupted meat markets there. But it is an attack on the global operations of this huge Brazilian company so plants in Brazil, Canada and Australia are also affected. The attackers are said to be Russian.

In Canada, their factory PMI is reporting a much more modest expansion, but output prices rose at quickest rate in this survey's history.

An even more modest expansion was reported in the private Caixin survey in China, which barely matched the tame official version. But at least new orders, including new export orders, did rise.

In Australia, the factory expansion looks more like the US than China. New business growth and price pressures both hit new records. A separate local PMI also shows the same strong expansion, but while it notes extreme input cost pressure, output price rises are more restrained.

And staying in Australia, their central bank left all its settings unchanged in its regular monthly review of monetary policy.

In the EU, CPI inflation in the 19 countries sharing the euro accelerated to 2% in May from 1.6% in April, driven by higher energy costs, to its fastest rate since late 2018 and above the ECB's aim of "below but close to 2%".

Wall Street opened its post-holiday session strongly but all those gains have slipped away by early afternoon trade. European markets closed about +0.8% higher. Yesterday, Tokyo closed-0.2% lower, Hong Kong closed +1.1% higher and Shanghai closed up +0.3%. The ASX200 ended its session down -0.3% but the NZX50 Capital Index ended up a creditable +1.3%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 170,837,000 people have been infected at some point, up +385,000 in one day. India seems to be getting relief with a falling infection rate. Global deaths reported now exceed 3,552,000 and up +8,000 in one day. Vaccinations in the world are still rising but at a slower pace, now up to 1.94 bln. In the US half of their population (51.1%) have had at least one dose. More than 40% of Americans have been fully vaccinated (137.1 mln people). The number of active cases there has fallen to 5,640,000 with fewer new infections than recoveries recently and steady progress.

The UST 10yr yield starts today up +4 bps at 1.62% as Wall Street is back from holiday. The US 2-10 rate curve is a little steeper at +146 bps. Their 1-5 curve is at +76 bps and little-changed, while their 3m-10 year curve is steeper at +160 bps The Australian Govt ten year benchmark rate is up +4 bps at 1.68%. The China Govt ten year bond is unchanged at 3.10%. However, the New Zealand Govt ten year is down another -6 bps at 1.75%.

The price of gold starts today at US$1902/oz, a dip of -US$5 from this time yesterday.

Oil prices start today +US$1 firmer at just over US$67.50/bbl in the US, while the international Brent price is now just over US$70/bbl, and that is a two year high.

The Kiwi dollar opens today at 72.6 USc and small softening overnight. Against the Australian dollar we are down more than -½c at 93.5 AUc. Against the euro we are soft at 59.3 euro cents. That means our TWI-5 starts today at 74 which is actually the same level it was a week ago.

The bitcoin price is now at US$36,157 and a -2.0% slip from this time yesterday. Volatility in the past 24 hours has still been high again at +/- 3.1%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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39 Comments

More cyber attacks. I wonder how many victims publicly state they don't pay ransoms, then quietly do. Some big victims must be paying to make it worthwhile for the hackers. The Waikato DHB CEO declared 2 weeks ago that it would take about 3 days to fix.

Edit: It is reported by Security Brief NZ that over half of ransomware victims do pay. Younger people are more likely to pay, older people less likely to. Of those that did, 17% didn't get their data returned by the hackers.

Foolish to believe if you paid a ransom that the criminals would bother to fix the problem they caused.
Indeed they probably don't have even developed methods to fix it.

In many cases the request for the ransom is to stop the criminals releasing embarrassing company data, or patient data in the case of a Hospital. Nasty situation.

Data on this is understandably sketchy but leading security research firms say between 10% - 20% of firms that pay a ransom get their data back. Some of the earlier ransomware actors did provide decryptors to those who paid the ransom, a few even had 24/7 online support to assist their victims to load and run the tool and recover their data. Presumably they expected to increase the likelihood a victim would pay, if it was known that they have decrypted previous victims who paid up. Now these tools have proliferated in the seedier parts of the internet and any group can pick some up and run it on some targets, probably with no intention of ever decrypting.

Also the fix is often that they have password protected entire drives. So they just give them the password and everything can be opened again without issue. It is very, very common for companies to just pay: https://www.corporatecomplianceinsights.com/ransomware-attacks-spike-org...

3 days becomes 3 weeks.

Lets crowd fund the DHB an AS400.

And some training for staff not to click on random email links

Definitely. Dont underestimate how clever the scammers are. The emails look legit.
Middle management in a fairly large company I know recently received an email from the HR manager one Friday afternoon telling them there is a new system for logging staff leave requests. The wording in the email was typical of the HR manager. A quarter of them clicked on the link and typed in their password...

It's amazing how many attempts are laughably awful, and how we almost come to rely on this. I imagine that high-quality attempts will fool an awful lot of people.

Very easy to make a link look legit - intеrеst.co.nz for example. But if you look closely at those e's they're cyrillic (Russian) alphabet characters. Paste it into your browser to see the result. The drupal plugin interest use for comments sanitises cyrillic characters which is good practice. The onus SHOULD be on IT to protect it's users, not relying on users to understand the bones of complex tech to safeguard internal systems.

Perhaps the reserve bank has cracked it.
Never had enough horsepower to contain the exchange rate - that has proven to be a loser for other central banks.
But their constant reminder that they can/will flood our market with the LSAP and heaps of cheap money must be having an indirect affect on the attractiveness of our dollar.
And the occasional government policy u-turn to add instability is not hurting either.

The best news: David Norman is leaving Auckland Council's Chief Economist Unit.
Even better news would be that he is going nowhere near RIMU.

It sounds like OPEC+ is crimping crude supply now they are satisfied that US frackers are trigger shy. Well timed as well as we enter the northern hemisphere summer.

13
up

The English language teaching sector as a whole contributed about $700 million a year to GDP

Another ticket-clipping sector built on helping low-value migrants with their IELTS test to get a score that meets Immigration NZ requirement.

The export education sector is built on assisting international students put in the bare minimum effort it takes to gain permanency in NZ.

https://www.rnz.co.nz/national/programmes/morningreport/audio/2018797985...

> The export education sector is built on assisting international students put in the bare minimum effort it takes to gain permanency in NZ.

Some is. Definitely not all though. And it's a real problem that people struggle to distinguish the two.

Public perception towards a sector like tertiary education is doomed to sour when their key spokespersons take to the media to argue their value in a society based solely on their export earnings and direct contribution to GDP.

They're not doing themselves any favours in that regard I agree. Still you could try to appreciate the distinction.

You're talking about the high quality Post Grad Diplomas in Golden Lucky Visa Studies from the Empire College of Big Zealand I presume.

Thank you for demonstrating my point so precisely.

Your point being it is difficult to discern between the international student market that's purely a ticket clipping visa exercise, and the one that's providing high quality graduates for the NZ economy. It really is. I think the Uber/Cryptocurrency double major is a step in the right direction.

An industry that has been ripe for creative destruction for quite some time. The use of technology in language training has been booming and disrupting. You could argue the same about the whole education industry.

My young relative at university experience is she is treated as second class to the paying students.
It seems the institutions take taxpayer money and then sell that same resource. For a few fatter salaries and other perks.
Stop it.

You said this before and I still don't understand. Could you please explain in what sense she feels her treatment is second class?

It *should* be the case that all students are getting the same programme, and that those who pay the higher fees are in effect subsidising domestic students.

a. Her experience is she struggles to get the attention the fee payers get.
b. Who is subsidising who? You think the fee payers are subsidising. But is it?
How do you know the funds go to more production. It seems to go to increased benefits for the institution. Staff wages and travel etc.
c. *Should be* Yes. But she tell me she does not get the same attention. Seems the taxpayer subsidises the 'industry' but the students we pay the tax for don't benefit.

a. Is unfortunate and really shouldn't happen. In fact I find it almost impossible to believe that front-line staff have knowledge of fee status, unless of course we're just talking about people "seeming foreign" here.

I'm not sure about your contention for b. How would you go about funding production without paying wages for additional staff?

".....I find it almost impossible to believe that front-line staff....." s
Staff are told to look after them because it's good for the institution. You know, marketing.
Even dedicated staff / departments to support those students.

13
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I struggle to accept the description "export industry" when in effect substantial numbers of students come to NZ solely for residency and are subsequently followed by partners/arranged marriages from home countries. To my mind its an arm of this (and previous) government's population growth strategy. The NZ public has never been given the chance to vote on this. Has the government ever conducted a detailed survey to assess where all these students end up (other than in the low paid service economy)?

Next election, those that feel strongly about this forced population growth, need to make their position clear and withhold their vote from those parties who insist on making their position on continuing BAU, core policy.

Dairy prices dip AGAIN! 5 falls out of 6 auctions! Wow we must really be in the mire almost Fcked up by now, yeah right. Most know the forecast 21/22 payout to dairy farmers is an all-time-high 8 dollars. The June 14th fielddays will be interesting for attendance and sales even though many will stay away because of limited accommodation in Hamilton with motels full of beneficiaries.

The limited acc issue really is the kicker. I know of several companies that are having to put people up in Air BNB's 40min to an hour away just because there is nothing else available.
The rates actually make it attractive for people say, living alone in a 2 or 3 bedroom house, to ship off to a friends place for a week and rent out their whole house short term. Easy money for a slight bit of inconvenience.

Hey Interest team, do you know that the Blaroken add banner that pops up sometime is advertising a scam site?
https://www.quora.com/Is-Blaroken-com-a-legit-clothing-website-or-anothe...
Don't know if you control what gets displayed, but might be worth hitting your advertisers up about.

I think there was a bare knuckle fight yesterday between the Climate Change Commission and some farmers, reported by RNZ news. Like the NZ Rugby there will be a need for leadership replacement
https://www.rnz.co.nz/news/national/443837/climate-commissioner-warns-fa...

This was similar to the question I asked the other day. Our total emissions are less than 1% of the worlds GHGs, while China is the biggest, and India and the US not far behind. China has turned itself into the world's factory, manufacturing almost everything, and is moving aggressively to control or limit other countries efforts to rebuild their own manufacturing capabilities. But when will people say they will no longer buy from China, because they are destroying our atmosphere? It seems we are very slow to learn some lessons, if we do at all.

Well, the west is turning away from China but not explicitly because of emissions. A possible reason is China delivers a acceptable plan for emissions, not excuses.
Will some countries put a trade barrier in the way of our agricultural exports? Yes, for example the UK is talking about a border carbon tax on underperforming countries.
https://www.msn.com/en-gb/money/other/british-industries-could-be-protec...
We have to play the game of 2030 emissions goals now, not 2050,or face recriminations.

Love how the rest of the world bashes China for its emissions - but forgets that we happily moved our factories to produce the crap we buy everyday. Pot calling Kettle - Black. (Made in China)

Exactly. If the production is for us, they are our emissions

Well if there is a climate Emergency you would think there would be government campaigns not to buy crap you don't need....instead we get the message to help our country you need to go out and spend.

Time to stop reporting emissions per capita - it will always favour those with higher populations. If it was one rule for all rather than picking gross emissions for some and net emissions for others there may be more buy in.
Given our land mass perhaps we should be aiming for a population of 20million.

A scroll through this table suggests it is small populations with large exports that show high per capita emissions including oil producers.
https://en.wikipedia.org/wiki/List_of_countries_by_greenhouse_gas_emissi...
Perhaps we should assign emissions to the consuming nations, not sure how that would work out but we are good consumers so the emissions charges could end up as a tax paid by all like GST
Further reading
https://www.stats.govt.nz/methods/about-consumption-based-greenhouse-gas...