Here's our summary of key economic events overnight that affect New Zealand with news rising activity in the world economy is driving up prices.
The latest US consumer sentiment survey for early June is generally positive, especially among middle and upper income households. And especially for future economic prospects rather than current conditions. Rising inflation remained a top concern of consumers.
This coming week, all eyes will be on the Federal Reserve as it meets, and reports on Thursday (NZT). Their attitude to inflation will be the big talking point.
Yesterday we noted that the USDA sees falling corn inventories worldwide. A key reason is that China is buying up big - and that is causing infrastructure clogging in their ports. Corn imports quadrupled in the first four months from a year earlier, while millet (sorghum) imports jumped five times in April from a year ago. Barley shipments are up too despite none now arriving from Australia. These port unloading delays add to rising raw material costs that Beijing is struggling to control.
They aren't managing to take the top off high prices for iron ore or coal either. Both rose again this week. And shipping costs turned up as week over the past week. Congestion at China's ports is having a ripple impact globally, but especially in the region. This backup is worse than the March 2021 Suez Canal blockage, and will take longer to clear some say.
Not rising however were vehicle sales in China in May. They sold 2.1 mln units in the month, down slightly from in April and -3% lower than for May 2020. This outcome ended a 13 month run of rising sales. But China is still far and away the largest market for vehicles, a quarter larger than the US. Meanwhile, the Chinese government has ordered car manufacturers to make sure 95% of every vehicle is recyclable by 2023.
China has passed a law to punish companies that respect laws in other countries that curb exploitation in their supply chains. It's new anti-sanction law also applies in Hong Kong, likely another reason some companies may decamp. It was a Chinese law that was developed in secret, and only announced yesterday once it had been passed.
In Germany, wholesale prices were up almost +10% in May from the same month a year ago. This is unusually high for German industry and they are hoping that, because the key driver is the cost of fuel (+47%), it will pass soon.
The Russian central bank raised its key interest rate by +50 bps to 5.5% overnight. It said more hikes would be needed to rein in high inflation, which is now running at 6.2% pa and is expected to shift higher. The rouble, which has lost two thirds of its value in the past ten years, fell another -1% in the past week but bounced slightly on the central bank move.
On Wall Street, the S&P500 is up +0.2% in mid afternoon trading and heading for a minor +0.4% weekly gain although that will be another record high. Overnight, European markets were up +0.8% across the board. Yesterday, the very large Tokyo market closed essentially unchanged but that locked in a -0.9% fall for the week. Hong Kong ended yesterday up +0.4% on the day to limit the weekly fall to -0.5%. Shanghai recorded a -0.6% retreat in Friday trading dragging the weekly change to a -0.2% dip. The ASX200 ended its Friday session up just +0.1% for a small weekly rise of +0.2%. And the NZX50 Capital Index was up +0.3% on the day which was also the weekly gain.
The UST 10yr yield starts today with its yield fall arrested, unchanged at 1.45%. The US 2-10 rate curve has flattened less, now at +131 bps. Their 1-5 curve is little-changed at +70 bps, while their 3m-10 year curve is stable as well at +145 bps. The Australian Govt ten year benchmark rate is up +1 bp at 1.47%. But the China Govt ten year bond is up +3 bps at 3.15%. But the New Zealand Govt ten year is down another -5 bps at 1.65%.
The price of gold starts today at US$1877/oz, and down -US$22 overnight.
Oil prices are still rising and start today +50c firmer at just over US$70.50/bbl in the US, while the international Brent price is just under US$72.50/bbl. These are now two year highs. And more oil rigs are starting to be brought back into production.
The Kiwi dollar opens today at its lowest in two months at 71.2 USc with an overnight fall of -¾c. Against the Australian dollar we have fallen less, to 92.5 AUc. Against the euro we are down to 58.9 euro cents. That means our TWI-5 starts today at 73 and -70 bps lower than this time last week.
The bitcoin price is now at US$36,799 and up a very minor +0.8% from this time yesterday. Volatility in the past 24 hours is moderate at +/- 2.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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38 Comments
Inflation has to be and will be high for number of reasons.
It is just how successful fed is in convincing the market that this high inflation is for short term only.
Keep it in mind that their definition of short term will keep on changing like earlier were comfortable with 2% inflation than 3% and now even 5%.
Apologies, this is not a captioned subject, but perhaps worthy weekend discussion. The protest in Kaikohe covered last evening Prime news, was a united community and magnificent. A telling display of the division in NZ being created and stimulated by this government and its bureaucratic fiddlers and meddlers. In particular the impressive gentleman who said something like “ councils are there to provide services for the people, not tell people how to live.” This is a countryman I would be proud to stand alongside, any time, any day. This is the voice of strong commonsense NZ desperately needs in local government and parliament. Northland, well done and we all need to get ourselves up on this bandwagon before it is too late.
Totally agree with you on this. Our CCC has been taken over by the bike brigade, SPOKES and they keep pushing their agenda. Our inter-city (as well as just outside the CBD), is a mess as bike paths everywhere, little parking for customers, and traffic has slowed to a snail's pace. Great for cyclists I guess, but if you want to shop, have a meeting, meet someone for lunch, the CBD is the place to avoid.
How about a bit of reality?
We need to retire vast amounts of human-acquired space, to accommodate biodiversity. We are an overshot species ourselves, and the reconciliation of tht won't be pretty either.
But a Mother of SIX - SIX - who claims to be a greenie - joins a crowd who claim affinity with nature, but who give away telling couplets like 'native scrub' when describing the land (which of course, they want to 'develop').
We're all the same eh? Irrupt ourselves to extinction. And yet a serious clique still think a free market and unlimited growth will solve all issues.
China has passed a law to punish companies that respect laws in other countries that curb exploitation in their supply chains.
Anti-Foreign Sanctions Law a toolbox, deterrent: Global Times editorial
I wrote about this extensively when quoting a brilliant article by Irina Alksnis a couple of years ago. Recall this:
However, to hear this simple advice--not to mention following it--the United States need to stop, at least for an instance, and silence themselves. To stop shaking air with statements, declarations, demands, and threats, which come across as either strange, or outright silly because of their obvious inability to ever become a reality. But it is precisely, it seems, what the US is not capable of doing. As a result--the continuation of never-ending declaratory carousel: Moscow, Assad must go! Russians, we will provide for freedom of navigation in Kerch Strait! Russians, we will punish you for support of Maduro. But the most insulting for Americans is that only Russia can understand them. Because we remember the pain behind those words. Link
China is very much aware that now the Global South “accounts for almost two-thirds of the global economy compared to one-third by the West: in the 1970s, it was exactly the opposite.”
This coming week, all eyes will be on the Federal Reserve as it meets, and reports on Thursday (NZT). Their attitude to inflation will be the big talking point.
Because Central Bankers Have No Clue What Else To Do
QE strips collateral, forcing bank dealers to adjust in ways that unilaterally propose a reaction to serious harm to systemic monetary condition and operation.
Inflation hit 5% in the latest official CPI numbers higher than expected. And of course, there are still many arguments that it is a combination of base effects: in other words, it’s a year-over-year measure, and no one was spending money last year at this time; as well as transitory forces, as we shift back into the economy coming online.
The Russian central bank raised its key interest rate by +50 bps to 5.5% overnight. It said more hikes would be needed to rein in high inflation, which is now running at 6.2% pa and is expected to shift higher.
MOSCOW, June 11. /TASS/. Russia is in the group of countries that will be the first to restore their economic growth to the pre-pandemic level, Head of the Bank of Russia Elvira Nabiullina said at an online conference following a meeting of the regulator's board of directors.
"Already now, if we do not take into account the restrictions on oil production and international passenger transportation, the output in most basic industries has not only returned to the level at the end of 2019, but also exceeded it. Russia is in the group of countries that are first to reach their pre-pandemic level of output," she said.
Nabiullina noted that in many sectors of the economy the growth of demand is now outstripping the growth of supply, therefore, companies need more time to introduce new capacity and recruit staff.
Professor Werner:
Using diverse tests and methods, we analyse correlation and statistical causality. We found no empirical support for the much-asserted negative correlation between interest rates and growth nor any consistent support for statistical causation running from interest rates to economic growth. Instead we found that interest rates follow nominal GDP growth, and are positively correlated (as argued by Werner, 2005). These findings imply that traditional monetary policy is flawed. They also provide a new basis for the debates about interest and resource constraints. Link
This is what Milton Friedman called the interest rate fallacy, and it indeed refuses to die. We can tell what monetary conditions are in the real economy, as opposed to financial liquidity, though the two can be linked, by the general level of interest rates. When money is plentiful, interest rates will be high not low; and when money is restricted, interest rates will be low not high. The reason is as Wicksell described more than a century ago:
[The natural rate] is never high or low in itself, but only in relation to the profit which people can make with the money in their hands, and this, of course, varies. In good times, when trade is brisk, the rate of profit is high, and, what is of great consequence, is generally expected to remain high; in periods of depression it is low, and expected to remain low.
When nominal profits are expected to be robust, holders of money must be compensated for lending it out by higher interest rates. Thus, the same holds for inflationary circumstances, where nominal profits follow the rate of consumer prices. During the Great Inflation, interest rates weren’t low at all, they were through the roof well into double digits and higher by 1980. At the opposite end in the Great Depression, interest rates were low and stayed there because, as Wicksell wrote, the rate of profit was low and was expected to be low well into the future. High quality borrowers were given as much money as they could want while the rest of the economy was deprived of funds; liquidity and safety being the only preferences in what sounds entirely familiar. Link
So the process has started.
Good on Russia, if the emergency is over should try to bring normalcy as soon as - Emergency cannot be forever. Even patient are shifted in ICU in emergency and as soon as emergency situation is over is shifted back but here Reserve banks wants to keep economy in ICU forever as whenever they will try to shift, bound to have knee jerk repurcurssion and ......
What data is Mr Orr talking about when he mentions that latest report indicates that housing market is cooling.
https://www.oneroof.co.nz/news/39612
All news / data comming out suggests that ponzi is still on rise but Mr Orr .. .and no one dares ask him the source or what data is he referring to.
richard
"All news / data comming out suggests that ponzi is still on rise "
Not sure what data you are referring to either . . . REINZ and especially CoreLogic data is considerably delayed from time of sale and purchase agreements are signed and included in data. Those signed post 23 March will only start to clearly appear in this month's REINZ data (due this week?).
However, note that B&T auction data posted on this site does however indicate that the market is cooling. Also note that B&T "May's sale prices on the other hand were virtually unchanged from April, with the average selling price declining by just $43, from 1,114, 054 in April to $1,114,011 in May".
In support of your contention that the market is currently still reasonably strong, property listings are well down (at the end of May stood at 14,263 which is 51% below average for the past ten years and 71% below the level of May 2011) suggesting that there is no glut of properties coming onto the market nor remaining unsold so not likely putting downward pressure on the market.
Note that RBNZ seeing a cooling in the market does not necessarily mean a fall in the market - they, and Robertson and Treasury, all see some rise of in the market over the next year albeit fairly small.
If you ever wanted to see the use of a Fake Because there it is.
James Shaw says he has confidence Prime Minister Jacinda Ardern can deliver on climate change - because if she doesn't, she'll literally be breaking the law.
https://www.newshub.co.nz/home/politics/2021/06/climate-change-minister…
And why can, when your whole political life has been based upon will.
There is a good chance that the PM has lost the interest in "Life or Death Climate Change". Facebook friends will be stinky too.
You must be right. How else could the PM, in Churchillian mode, impose on all of us the ordinary folk do do our bit when at the same time sanction the construction of a wide bodied jet airport on unspoiled natural landscape in Central Otago. Precisely how much concrete and other industrial components, diesel fumes and on and on goes into that, which ordinary folk then have to compensate for in their ordinary lives. And what is really strange about this is the invisibility of the loquacious Mr Shaw and his ever vigilant Green party on this subject. Many directives about SNAs issuing forth from Northland to Southland, but conveniently not a square metre in all of this Tarras Landscape that would concern a very large airport. Go figure.
And here is Bryce Edwards showing the Yeo Cartoon from the ODT. - The PM & the PR spin circle.
https://mobile.twitter.com/bryce_edwards/status/1403436118373146624
Cartoon in the ODT today by
@ YeoCartoons
. And related columns this week by
@ avancenz
http://bit.ly/VancePR
https://bit.ly/ArdernPRrnz
https://bit.ly/OIAreformRNZ
Best of the Spin Doctors
https://youtu.be/jAlQ1cR6X9Q
And we have worked example.
https://www.rnz.co.nz/news/national/444568/thousands-sign-petition-deno…
Prime Minister Jacinda Ardern says she was not consulted on a film about the Christchurch terror attacks, intended to centre on her response.
Use the work consulted, because the word "knew", or "promoted", promised them full VIP access".
Those words would be incorrect, false and fake.
Only a PR operative would "spitball" the word "consult". And then further narrow its meaning to "consulted".
# stinkystuff.
Mind you this would be enough for most to most folk canceled.
https://www.hollywoodreporter.com/movies/movie-news/jacinda-ardern-film…
Jacinda Ardern Film Causes Backlash In New Zealand, Accusations of “White Saviorism”
There is no defense for these accusations, are there?
They Are Us is being billed as an “inspirational story” that follows Ardern as she helped rally the government and citizens behind her message of compassion and unity and ban assault rifles in New Zealand. The title of the film comes from Ardern’s powerful speech describing the victims of the attack.
How are they going to fact check the usefulness of the gun buyback (compulsory state acquisition), recent gang PR and FBI investigations & arrest, all offer great context.
Well somebody knew something
Meanwhile, a spokesperson for the New Zealand Film Commission told Newshub while there was no indication the production would seek contestable financing from it, they understood They Are Us intends to apply for the New Zealand Screen Production Grant - part of the Government's screen incentives scheme.
https://www.newshub.co.nz/home/entertainment/2021/06/they-are-us-produc…
There is a choice of 3
# new disney princess
# beatification of Cindy
# stinky
This makes it interesting.
Is it too late to stop, has the horse bolted?
Christchurch Mayor Lianne Dalziel says plans for a movie on the mosque attacks in the city are a travesty.
https://www.rnz.co.nz/news/national/444605/mosque-attacks-film-mayor-sa…
Check this chart out - US home builders super bullish, while the buyers couldn't be more bearish.
https://cms.zerohedge.com/s3/files/inline-images/bfmD575_0.jpg?itok=JbX…
Makes me consider whether recency bias is at play in the US where the scars of their bubble bursting still lives strong in the minds of buyers there - seeing prices rising this quickly is setting off alarm bells for them (yet here its doesn't even appear to register as being a problem!)
Some other quite interesting charts in this article where inflation is causing buyer sentiment to drop across the board....strange yet interesting times:
https://www.zerohedge.com/markets/hangover-arrives-explosive-inflation-…
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