Here's our summary of key economic events overnight that affect New Zealand with news the housing shortage distortion is spreading.
US existing home sales volumes slipped again in May on a lack of inventory for sale, and that demand pushed up median prices very sharply to US$350,300 (NZ$500,000) which is +24% higher than a year ago and driven by fast rising prices for single family homes. The April to May price rises are a faster pace of increase (+32% pa). This is a market that has gone Kiwi-style, one that they see more closely over their norther border in Canada. Expect a renewed surge in house-building.
The Richmond Fed factory survey also turned in a rising indicator, driven by shrinking inventories, growing order backlogs, and lengthening vendor lead times. Many firms there are reporting skill shortages. And they are also reporting high growth rates of both prices paid and prices received.
In testimony before Congress today, Fed boss Jay Powell said US job growth should pick up in coming months, and temporary inflation pressures should ease, as their economy continues to recover from the effects of the pandemic. This confirms the Fed's view that the inflation we see is temporary. While markets are nervous, they basically are buying this view.
There was another large US Treasury bond auction overnight, this one for their two year Note. They raised US$69 bln of which the Fed took US$9 bln. The remaining US$60 bln received a massive $152 bln in bids. But bidders expected and got higher yields. The median yield this time was 0.22% pa and up from 0.11% at the equivalent event a month ago, one that was similarly popular.
In China, their media is going all out to celebrate the 100 year anniversary of the Chinese Communist Party and virtually deify Chairman Xi. Even economic news is being distorted to tell the 'glorious story'. But in its shadow, the central bank "reformed" the way banks calculate deposit rates, setting new ceilings which will lower lenders’ funding costs. Many SOE banks lowered their deposit offers by up to -50 bps as a result.
Also not in the spirit of celebration, some international analysts are downgrading their China 2021 recovery estimates.
Taiwanese consumer confidence took a dip in May as the pandemic made an unexpected return. But while this measure isn't back to its pre-pandemic levels, apart from this stumble it has been on track to do that.
EU consumer confidence however does seem to be making its way back to 'normal' - which for them means there are still more pessimists than optimists. But the June result has that deficit at its lowest since 2018 and well above pre-pandemic levels in 2019.
Global foreign direct investment (FDI) flows are expected to bottom out in 2021 and recover some lost ground with an increase of +10% to +15%, according to UNCTAD’s World Investment Report 2021. But this review shows New Zealand had FDI inflows of NZ$6.0 bln in 2020, equal to the record set in 2019. New Zealand firms invested NZ$1.3 bln offshore in 2020, also a record high. The same data set shows that we have NZ$131 bln invested here and our firms have invested NZ$29 bln in offshore opportunities. (Given our national balance sheet shows assets of $5.7 tln, having only $131 bln of foreign investment here seems trivial.)
We should also note that last night, New Zealand paused quarantine-free travel with NSW while they get the Sydney's Bondi cluster under control, dangerous because it involves the Delta variant.
Wall Street is rising with the S&P500 up 0.5% in afternoon trade. Overnight, European markets set the tone with a +0.2% rise on most exchanges, except London which was up +0.4%. Yesterday the very large Tokyo market bounced back strongly and was up +3.1%. Hong Kong was down another -0.6%. But Shanghai managed to post a +0.8% rise. The ASX200 ended with its own strong +1.5% recovery from Monday, while the NZX50 Capital Index ended with a +0.3% rise.
The UST 10yr yield starts today down -1 bp at 1.47%. The US 2-10 rate curve is a little steeper at +124 bps. Their 1-5 curve is a little flatter at +78 bps, while their 3m-10 year curve is basically unchanged at +143 bps. The Australian Govt ten year benchmark rate starts today at 1.55% and a +1 bp rise. The China Govt ten year bond is unchanged at 3.12%. And the New Zealand Govt ten year is now at 1.83% and that is up a sharp +8 bps.
The price of gold starts at US$1779/oz which is down -US$5/oz from this time yesterday.
Oil prices have eased back slightly in the US at just on US$72.50/bb, while the international Brent price is little-changed at just on US$74/bbl.
The Kiwi dollar opens today back up at 70.2 USc and another +¼c overnight recovery. Against the Australian dollar we are up to 93 AUc. Against the euro we are also firmer at 58.8 euro cents. That means our TWI-5 starts today at 72.7 and on the way back to where it was a week ago.
The bitcoin price is now at US$33,020 and up +1.7% from this time yesterday. In between it got as low as US$28,815 but that was relatively brief. Volatility in the past 24 hours has been extreme again at +/- 7.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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66 Comments
NZ is officially number one in housing ponzi :
https://nz.finance.yahoo.com/news/housing-bubble-gfc-015923191.html
Confirms : Only economy in NZ is Housing Economy.
Tourism finished, Hospitality dead except those running on government generosity to house homeless, Internation Education dead, Agriculture - even farms are eyeing Capital gain than money from actual farming......Housing Economy Only Economy.
Lockdown imminent for Wellington?
https://www.stuff.co.nz/national/health/coronavirus/125524093/covid19-p…
Crypto != BTC. BTC is the greatest store of value in history. Crypto (or rather blockchain) is the greatest financial innovation in history.
No other asset in history has ever crashed more than 80% three times, only to come back every time and make new all-time highs. Each time Bitcoin persists through FUD, crash, etc., it gains value as the ultimate resilient hard asset.
This why the people who understand it HODL.
Records You Might Have Owned That Are Now Worth a Fortune
BOB DYLAN // THE FREEWHEELIN' BOB DYLAN (1963) ...
THE BEATLES // THE BEATLES (WHITE ALBUM) (1968) ...
DAVID BOWIE // DIAMOND DOGS (1974) ...
SEX PISTOLS // "GOD SAVE THE QUEEN"/"NO FEELINGS" 7-INCH (1977) ...
HANK MOBLEY // BLUE NOTE 1568 (1957)
BRUCE SPRINGSTEEN // “SPIRIT IN THE NIGHT” 7-INCH (1973)
THE BEATLES // YESTERDAY AND TODAY (1966)
Once upon a time vinyl was the greatest ever medium for sharing music, and the VHS cassette the greatest ever medium for sharing moving pictures in history
Vinyl is wildly popular today. NFTs will hopefully kill the recording industry in favor of the artists and the consumer. Early days.
[US] "Expect a renewed surge in house-building."
Good luck with that one if it's anything like sourcing materials here in NZ. A couple of months ago there was an 8 week wait period for any significant quantity of plywood, I don't know if it's changed since then. I'm also about half-way through my 16 week wait for an engineered (but straight-forward) trailer. And let's not mention the timber price rises that certainly doesn't make building any cheaper. Oops, I just did.
The potential harm from that traveller to Wellington is significant. While the authorities are "advising" the people on those aircraft to quarantine, I see nothing mandating it. Are the authorities uplifting all those travellers and putting them in quarantine? While some are indicating that it is inevitable that the Delta variant will get into the communities here, I feel we still need to do all we can to ensure it doesn't if at all possible. So far the evidence is that it spreads so easily, and is more virulent than other variants. This one event, puts us very close to another total lock down.
Agreed. The risks are very high. This makes me feel that the Government is playing a little fast and loose with the travel restrictions when it should just clamp down hard, until the Aussies get it nailed.
I do wonder though if Scarfie's invulnerable immune system can stand up to the Delta variant? Perhaps he should test it?
At some price-point, oil is unaffordable. I'd suggest that the inexorable increase in debt tells us we're already above that point.
Because to repay that debt, needs cheap work done in the future, and you don't do cheap work with expensive energy.
For 10 years I've been hammering this; that we would no longer be able to afford ourselves. And now we're into the period where would has become can.
But growth is normal, right?
Sigh.
BANK PROFITS HIT QUARTERLY RECORD HIGH
From the article "... Kensington said while there had been strong mortgage lending growth, this had been offset by reduced corporate, commercial and consumer lending"
So banks export record profits to Aus by pouring more fuel on the housing ponzi and reducing lending to productive business.
Why on earth do we allow this madness to continue?
TJ - excellent question. David yesterday, claimed they 'pay tax' in this country.
The reality is that they provide no service (we could trade-inter-software ourselves, and the 'money' is keystroked into existence), as parasitic, and hoover real wealth (the results of real activity) from NZ. There is some similarity between NZérs and penned animals. The reality is that they take more than they 'pay'.
PDK. My 'pay tax' comment was only to distinguish them from Visa and Mastercard who are serial tax evaders and who piss me off with that evasion while profiting handsomely in their activities in New Zealand. They get a free ride compared to other MNCs, banks and tech companies, even though they may be the worst offenders.
You misunderstand. First the RBNZ still has dividend restrictions in place, even if they are less than the total blockage in place last year. So there is limited "exporting" of profits at present. Second, you are jumping to conclusions on the Herald headline. The real situation with bank profits (and a number or other key data) is here. Yes quarterly profits are up, and through strong mortgage demand but also because of the writeback of the heavy provisioning they took at the start of the pandemic.
But I can see how the Herald headline would reinforce a deeply held bias.
OK David I accept that your figures show the Herald headline is misleading in terms of "record" profits, however my point was Banks are still fueling the housing ponzi rather than lending to business and this is, in my view, NZ's biggest elephant in the room.
I do not have a deeply held bias, just an observation that with the most overvalued housing market in the developed world, according to Bloomberg, we should not be continueing to allow the banks to pump ever more credit into that bubble.
US existing home sales volumes slipped again in May on a lack of inventory for sale, and that demand pushed up median prices very sharply to US$350,300 (NZ$500,000) which is +24% higher than a year ago and driven by fast rising prices for single family homes.
America's Largest Landlord Just Got Bigger: Blackstone Buys 17,000 Houses For $6 Billion
https://www.nzherald.co.nz/business/aucklands-asb-showgrounds-goes-into…
ASB Showgrounds goes into liquidation.......so can build more houses as more money .......
Holy moly, we use space so badly in this country, just look at google maps for the area around this. Hectares and hectares of carparks, probably taking up more than half the space around the whole zone.
They could easily put in a large parking building near the main road, build 7-10 story apartment blocks and increase the amount of housing in the area massively. No problems with public facilities there as there are massive parks on their doorstep.
Blobbles
There are multiple story carparks all over Tokyo where I worked as a business consultant for over 30 years. One of my clients, Nissan Diesel, at the time was headquartered on the 55th floor of the Sunshine 60 building and we could look out of our windows to a carpark on the 38th floor of a building nearby. Other clients included Takanaka Komuten Taisei Kensetsu and Shumizu Kensetsu, some of the biggest construction companies in the world. They and their much smaller local construction companies would throw up a multi-storey carpark in days or weeks. Not surprising when they are very simple structures mainy consisting of some prefabricated and bolted/welded RSJs and perforated steel planking. Ah, but then, they dd not have to deal with the RMA etc. that we are blessed with in Godzown.
Exactly, easy to build even to a really high standard. Pretty much just have to pay for the plans from somewhere else and start. Not in this country though, 18 rounds of consultation later having to had to change plans dozens of times to appease neighbours you would end up with a tiny 3 story carpark that can store 50 cars and cost $3b. If the government is involved, halve the number of carparks and double the cost.
This is what Energy Policy failure looks like.
Businesses are being hit by massive rises to their power bills as dry weather and a natural gas shortage wreak havoc in the electricity market.
https://www.rnz.co.nz/news/business/445347/businesses-face-six-figure-p…
Further evidence that each extra EV imported now will be powered by coal.
For the imported coal works as the additional baseload EVs need as the renewable prove unreliables again.
Expect EVs to drive coal use for 10 to 20 years until scale hydro or clean nuclear is commissioned.
Enjoy the GenLess adds on YouTube, showing EVs plugged in over night being powered by coal.
https://douglasmurray.net/ardern-isnt-as-lovely-as-shed-have-you-believ…
While
RNZ also spoke to the chief executive of a large commodity business, who did not want to be named, who said he thought he got off lightly when its new contract only rose by 43 percent.
Note my comment above - which HT ignores.
Energy will get 'more expensive' and will do so exponentially, from here on. It's because we're trying to do more and more, in the face of this:
https://www.researchgate.net/figure/The-Net-Energy-Cliff-As-EROI-approa…
http://euanmearns.com/eroei-for-beginners/ (check out figure1)
Those who don't want to acknowledge Limits - for whatever ideological/peer/vested-interest/fear reason - will blame some 'other' (who, in turn, may well blame the first lot; it's funny if it weren't so tragic) for the 'terrible prices' of energy. But get used to it; it's the basic essential for life, the basic essential for work, the basic essential for staving-off entropy. It is already in military/strategic contention (would be interesting to se the EROEI ratio for US Middle-East activity versus tankerfuls) and will be ever-more so.
RNZ have no idea what is happening big-picture, and apparently no mechanism for redressing that situation. They are becoming less and less a credible source, as the Limits to Growth encroach.
These issues are psychological, mental if you will, you can see it manifesting as such too.
The NZ generation fleet is being run down, no sinking funds (add network constraints too). No new baseload generation planned for. None delivered really not much since Clyde Dam.
If we remember resources are artifacts of technology, you see taking out transition gas, no thought of hydro expansion, being blind to nuclear, this is now making coal seem of value and giving it strategic value (national security level) too.
I agree major hydro projects are very difficult at the moment, but hydro generation has still grown in the last few decades thanks to small projects and optimisation of existing plants e.g. turbine upgrades. Geothermal has been the big baseload contributor recently, and new generation is being built right now by Contact.
With a little luck and hard work we'll get Onslow moving, which will buffer a huge amount of additional wind generation. Wind seems to be the cheapest option right now with everyone scrambling to build new farms. Coal is expensive to use and getting more so thanks to the rising price of carbon.
It is worth remembering that the current high use of coal is almost entirely driven by below average hydro generation this year. The government cannot be blamed for the weather.
https://en.wikipedia.org/wiki/Electricity_sector_in_New_Zealand
Agreed, and confirm renewables are unreliables. The over build of capacity needed in order to have baseload is large, more so for wind & solar (let alone the network load/balance issues).
But thats what the energy policy, energy security, as strategic management of the generation fleet is all about.
& looking forward to California:
https://mobile.twitter.com/leslibless/status/1406827596831133697
California just told everyone to not charge their electric cars due to power shortage.
- read the comments for lols!
Resources are not technology. Let's just keep it simple.
That gas was in-ground, in finite quantity BEFORE humanoid evolution. Being once-off, when its gone, it's gone. It will, if continually burned, run out. Regardless of the pipelines etc.
Our so-called renewable electricity, took the effort that was Twizel - remember the years of machinery? I grew up watching it - and Manapouri.The oil they burned is GONE. Never to be had again, whatever the technology. And the system is getting older - its called entropy. Which needs ever-more energy to stave off. You are welcome to use more-efficient technology to do the repair-work, but the physics of transmission are unalterable. And there has never been more aging infrastructure, either in NZ or on the planet. Nor has there ever been less in-ground stocks of ANYTHING.
What we are running into is a compound problem, where the shortage of Fossil Energy (it qualitatively turned a corner in 2005-6, quantitatively seems to have been 2018) is starting to bite; coupled with increasing numbers of people want more each, coupled with the best-option-first tendency, which in itself is a compound problem.
Can we have no more of that technology nonsense, please? It's a bit like I politely tell the god-squad to go away when they visit - we're just past that. Technology can facilitate extraction, processing, consumption and disposal, it can even reconfigure atomic structures - but it cannot create one particle which didn't already exist. Nor can is substitute for energy.
https://dothemath.ucsd.edu/2012/09/blow-by-blow-pv-system-efficiency/
"The bottom line is that we’re discharging the Earth’s natural energy storage battery (the fossil fuels) and must replace storage with storage, if we want to continue our journey.
In any case, storage is costly—in energy, resources, and economically speaking. I pointed out in one of the first Do the Math posts the daunting scale for building a lead-acid battery big enough to satisfy the whole nation (not enough lead in the world, and a total budget-breaker even if lead were available)."
Not enough lead, eh? Luckily, I can tell him to build them out of technology.
Good luck at Intermediate, next year. I can see the report-card now: "is working towards...". Let's move on, eh?
Huntly coal power plant has an efficiency of 37%. An EV will convert 77% of source electricity to motion including transmission losses, charging losses and motor losses. So an overall efficiency of 28%. A petrol car runs at about 20% efficiency.
So running an EV from coal-fired electricity produces 30% less emissions than a petrol car.
Energy efficiency is one thing.
Emmission are another thing.
Your second paragraph does not follow.
Here is Engineering Explained talking of density, range & efficiency.
https://youtu.be/oJL9MasBFvM
NZ History Curriculum. Two articles in NZ Herald today (sorry behind paywall) that gave this (2003) immigrant a history lesson about the 70s and 80s.
1. Richard Prebble on the Dawn raids
2. Robert MacCulloch: Climate crisis policies are all about power
Are our politicians too young? Can they make decisions effecting the next 50 years if they have little knowledge of the last 50 years? Is 3 years their only timespan?
This is a great article, published today in the USA re what is happening with hedge funds (another one went under yesterday). I have made no secret that my interest is in Gamestop, but there are some very smart people (apes) on Reddit/Superstonk who have discovered how hedge funds have managed to get away with creating fake shares for so long. The SEC needs to act and quickly:
https://prospect.org/power/how-the-gamestop-hustle-worked/
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