Here's our summary of key economic events over the weekend night that affect New Zealand with news the pandemic is taking second bite out of our economic recovery.
But first, industrial profits in May in China recovered strongly on a year-on-year basis, but if we compare them with May 2019 levels they are up a still-good overall +48%. But the recovery is still unbalanced, with smaller companies registering a slower pace than large and medium-sized enterprises. Of 41 industrial sectors tracked, nearly 70% posted yearly profit increases for May, while 80% showed profits at about 2019 levels.
China is focusing its efforts to get its relatively low consumption (60% of GDP) up to developed country levels (80% of GDP). And their 'dual circulation' policy is aimed at doing that. They have a very long way to go, but the progress will be quite extraordinary and distortionary to the world economy with many winners and some losers along the way.
S&P has affirmed its A+ credit rating for China. It is not a rating that China has solicited. It sees the country able to maintain above-average growth in the next few years and wants to see it repair its deteriorated fiscal debt position over the next three to four years.
China is trying to tighten the screws on its trade with Australia, now extending the pushback to other areas. The WTO actions it initiated last week involve matters involving 1995 event (stainless steel sinks) so it is digging deep into its bottom drawers to find pressure points. It has now also initiated a pullback in academic cooperation over Antarctic research, and coral reef research.
More generally, China is pushing its influence on climate change negotiations.
Japan has ratified the RCEP, one of the largest economies to do so. Thailand, Singapore and China have already done so too. New Zealand has signed but not yet ratified it.
Singapore industrial production is bouncing back very strongly after some recent lackluster months. In May it was up +7.2% from April and up +30% from the same month a year ago. From May 2019 it is up almost +20%.
In Indonesia, hospitals are reported in a state of collapse as the pandemic grips the nation. Indonesia has about 175,000 doctors, 90% vaccinated with China's Sinovac vaccine. Over 400 have died so far from COVID. Of the 26 who died in June, ten had been fully vaccinated.
The Sydney pandemic outbreak is spreading. Overnight the number of Delta-variant-infected people rose to 112 with 30 more yesterday alone. There are now 181 locations where a visit requires self isolation. NSW is in lockdown for at least two weeks, but there are issues in other states as well. A failure to act decisively earlier looks like it hasn't worked to keep the Delta variant from spreading. The Federal Government has dropped the ball on vaccine supply, so the vaccination option isn't available to them. New Zealand extended its travel bubble pause with Australia for another 3 days last night. The Level 2 restrictions in Wellington have also been extended until Tuesday night. The problem is that the Delta variant can infect others rapidly before symptoms become obvious making contact tracing and early isolation extremely difficult.
In the US, the inflation data the Fed watches was released over the weekend. The personal consumption expenditures (PCE) price index for May increased +3.9% from one year ago, reflecting increases in both goods and services. Energy prices increased +27% while food prices increased +0.4%. Excluding food and energy, the PCE price index for May increased 3.4% from one year ago. That is only marginally higher than the year-on-year rise for April of +3.1%. These rates are high but probably not high enough for the Fed to change its "this is transitory" stance.
Personal income slipped in May, but only because of a pullback in government benefits. The last industry survey for May had weekly earnings rising +2.6% in the past year. Personal spending was little-changed in May, but it is up +20% for goods from just before the pandemic hit, and down -1% for services on the same basis. It does seem now primed for strong growth in services over their summer period.
Another Fed member has come down on the side of an earlier rate hike saying the criteria for a hike "could be met as soon as the end of next year". (In the video, not the summary.)
The Federal Reserve released its updated annual bank stress tests as at March 2021, which showed that the 23 largest American banks continue to have strong capital levels "and could continue lending to households and businesses during a severe recession". With this official signal of a clean bill of health, these institutions are now poised to start issuing as much as US$130 bln in dividends and stock buybacks from July after almost an 18 month block on distributions to shareholders.
The UST 10yr yield starts today down -2 bps at 1.52%. The US 2-10 rate curve is marginally flatter at +1.26 bps. Their 1-5 curve is also a little flatter at +84 bps, while their 3m-10 year curve is also flatter at +147 bps. The Australian Govt ten year benchmark rate starts today at 1.56% and a -1 bps slip. The China Govt ten year bond is unchanged at 3.11%. And the New Zealand Govt ten year is now at 1.82% and that is unchanged too.
The price of gold starts at US$1782/oz which is up +US$2/oz from this time Saturday.
Oil prices are firmer again to start the week, in fact now the highest in nearly three years. In the US they are now at just under US$74/bbl, while the international Brent price is just under US$75.50/bbl.
The Kiwi dollar opens today unchanged at 70.6 USc. Against the Australian dollar we are also unchanged at 93.1 AUc. Against the euro we are unchanged too at 59.2 euro cents. That means our TWI-5 starts the week at 73.4.
The bitcoin price is now at US$33,057 and up 3.0% from this time Saturday. Volatility in the past 24 hours has been very high at +/- 4.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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38 Comments
"but the progress will be quite extraordinary and distortionary to the world economy with many winners and some losers along the way."
It's the other way around; many losers and some (temporary) winners.
https://mahb.stanford.edu/library-item/earth-and-humanity-myth-and-real…
pdk,
I saw a post in which you stated that interest rate rises were'impossible'. I found that choice of word curious, as it is so clearly incorrect. I think you meant that it would be very ill-advised, but they are not the same thing.
You were very taken with the report from the Finnish Geological Survey and it does make sobering reading. However, It specifically acknowledges/recommends that a new European mining frontier be opened for explortion and mining operations commissioned(p52). I have no doubt that this will happen. The report also acknowledges that 'peak oil' may not yet have occurred. What's my point?
Simply that the societal collapse you envisage will be postponed. New sources of minerals will be found and exploited. Eg. It is possible though not yet certain that significant amounts of lithium can be extracted from old Cornish tin mines. I think you greatly underestimate the global desire not to relinquish what we have now-at almost any cost. If this means mining in areas that are currently off-limits, then so be it. That may be incredibly short-sighted, but my knowledge of psychology suggests that that will be the public response. I think you also fail to take account of human ingenuity and adaptability. Yes, there will be consequences for our current consumer dominated lifestyle and that will be no bad thing. The possibility of regional warfare over water in particular is I think very real, particularly in Asia and were i able to come back in 100 years, I believe that the world will look markedly different.
Of course, if you and Clugston are right, then my grandchildren face a very bleak future.
Outstanding Thought Piece thanks PDK.
Could not stop listening.
Funny too - eg. 25.41: Decades of scientific research trumped by someone's "lived truth" that "Dolphins are big cute fish who could never starve because they're so fast."
He's totally wrong through - central bank stimulus has always overcome "technical" things like resource constraints, so it always will.
China has typically placed an emphasis on increasing research funding. They want their power to be supported by world class technological and industrial leadership. The CCP aren't focused on winning elections in a couple of years time, they are focused on where they want to be in a couple of generations time. I've got a lot of issues with Chinas but you have to realise that this is a superpower in it's ascendancy while many western countries are struggling to tread water.
https://data.worldbank.org/share/widget?end=2018&indicators=GB.XPD.RSDV…
xing,
Really? China's cyber regulator has now launched a hotline to enable citizens to denounce one another for online comments that 'distort' the party, attack its leadership or 'deny the excellence of advanced socialist culture'.
A sign of strength and confidence? No, a sign of weakness and paranoia. All repressive regimes fear their own citizens.
Shipping container sized nuclear batteries to battle our existential threat.
'It's so small that the whole power plant is actually built in a factory and fits within a standard container. The idea is to fit the whole power plant, which comprises a microreactor and a turbine that converts the heat to electricity, into the container.
This provides several benefits from an economic point of view. You are completely decoupling your projects and your technology from the construction site, which has been the source of every possible schedule delay and cost overrun for nuclear projects over the past 20 years.
This way it becomes sort of energy on demand. If the customer wants either heat or electricity, they can get it within a couple of months, or even weeks, and then it's plug and play. This machine arrives on the site, and just a few days later, you start getting your energy. So, it's a product, it's not a project.'
https://techxplore.com/news/2021-06-nuclear-batteries-approach-carbon-f…
*disclaimer: this post was paid for by big oil and Murdoch.
'U.S. officials have for the first time approved a design for a small commercial nuclear reactor, and a Utah energy cooperative wants to build 12 of them in Idaho.
The U.S. Nuclear Regulatory Commission on Friday approved Portland-based NuScale Power's application for the small modular reactor that Utah Associated Municipal Power Systems plans to build at a U.S. Department of Energy site in eastern Idaho.'
https://techxplore.com/news/2020-09-first-ever-small-commercial-nuclear…
'A country that has been one of the world’s most successful at combating Covid-19 has announced it will soon fundamentally change how it manages the pandemic.
The city state of Singapore has stated covid will be treated like other endemic diseases such as flu.
There will be no goals of zero transmission. Quarantine will be dumped for travellers and close contact of cases will not have to isolate. It also plans to no longer announce daily case numbers.'
https://www.news.com.au/world/asia/singapores-surprising-new-plan-to-li…
Reality cuts through in Singapore. According to Davids figures 400 have died of covid in Indonesia...not sure of time frame David. But 400 out of 200 million. Jeez such a scary bug even if its a month. Get a grip people. I read somewhere Indonesian govt building their own Ivomec production facility. Wont be long folks the dam will burst.
'Meta-analyses based on 18 randomized controlled treatment trials of ivermectin in COVID-19 have found large, statistically significant reductions in mortality, time to clinical recovery, and time to viral clearance. Furthermore, results from numerous controlled prophylaxis trials report significantly reduced risks of contracting COVID-19 with the regular use of ivermectin. Finally, the many examples of ivermectin distribution campaigns leading to rapid population-wide decreases in morbidity and mortality indicate that an oral agent effective in all phases of COVID-19 has been identified.'
https://journals.lww.com/americantherapeutics/Fulltext/2021/06000/Revie…
https://ebm.bmj.com/content/early/2021/05/26/bmjebm-2021-111678 a more reliable resource. Dexamethasone works more reliably. But the even better news is we have vaccines which work. If only the government would work a bit faster!
Yup Ivomec. I thought it was crazy initially. Used it for years...cattle, pigs, the odd dog. I have learnt a lot recently. So apparently humans have been using it for the last 50 years also. Its so safe and so good at getting rid of parasites. (Think equatorial tropical countries) Cheap too. Very cheap. So cheap its a much better idea for big pharma that we know nothing about ivomec and how dam good it is at knocking covid on the head. Even Merck who makes it doesnt want us to use it. They have something else cooking that is way more expensive.
I was sceptical about Ivermectin too -- but I found this particularly compelling: https://www.youtube.com/watch?v=D2ju5v4TAaQ . In a world where many don't have access to dexamethasone and vaccination, I feel WHO's half-hearted review of the data is unconscionable. Many lives may've been saved.
https://www.mdpi.com/2076-393X/9/7/693/htm try this link Realterms and check out the cost benefit in terms of lives, broken ones and lives lost. Wont find this sort of nugget through our media or health authorities.
If this is the truth in Australia.
The Federal Government has dropped the ball on vaccine supply,
What do we make of our Vaccine Stroll Out? (roll out)
- HT to Peter FitzSimons & Sally McManus
And, second: eight months after vaccines became available, just 3 per cent of us have been fully vaccinated! Sally McManus was right. “This is not a vaccine rollout, it’s a stroll-out.” That is partly the federal government’s fault and, partly, the general lack of urgency from we the people. And from the Opposition – they should be pushing an alternative plan for getting us out of this mess with all guns blazing!
https://www.smh.com.au/national/nsw/don-t-forget-where-this-pain-in-the…
Idea: Let's end the Government financing mainstream media.
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