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US durable goods orders rise; US services sector growth slower; air cargo volumes up +6.9%; truck orders jump; Aussie power prices double; UST 10yr yield at 2.51%; oil and gold unchanged; NZ$1 = 70 US¢, TWI-5 = 75.6

US durable goods orders rise; US services sector growth slower; air cargo volumes up +6.9%; truck orders jump; Aussie power prices double; UST 10yr yield at 2.51%; oil and gold unchanged; NZ$1 = 70 US¢, TWI-5 = 75.6
7th Mar 17, 7:32am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news of some eye-watering cost increases coming for Aussie businesses.

But first in the US, durable goods orders increased +2% for a second straight month in January, and faster than markets expected, suggesting their factory sector is in good shape.

But things are slightly softer in their giant services sector with the rate of expansion slowing to its tamest pace in five months.

World trade, as measured by air cargo volumes, is still growing, up +6.9% in January from the same month a year ago. However airlines report this is a slowing from the growth levels we saw at the end of last year.

It is not only airlines who are feeling confident about trade; in the US truckers are too. Orders for new heavy-duty trucks rose in February for the fourth month in a row. Fleet owners ordered 22,900 big rigs used in long-haul trucking, up +5% compared with January and a +28% increase from a year earlier. February orders pushed the backlog of trucks ordered that haven't yet been built past 100,000 units.

Away from the limelight, it seems Fonterra is making significant progress in going up-market in China with its core ingredients. Investors are noticing as their shares have risen +18% in the past eight months. Still, that may not be enough to save tomorrow's dairy auction, which looks like it will post a sharp -10% fall in WMP prices. Dairy farmers may find their payout under threat again, which will hurt more than any rise in Fonterra's earnings and dividend.

And in Australia, a new and dangerous trend is developing fast - surging electricity prices. Many businesses are facing 100% increases; jobs and investment decisions are at risk. The closure at the end of the month of a large coal-fired power plant in Victoria is the catalyst for the hikes, but hot weather demand and rising "green" power costs make alternatives tough to find. New Zealand may look an attractive alternative to many Australian manufacturing businesses.

In New York, the UST 10yr yield is now at 2.51% after a dip down, then up in early afternoon trading.

Oil prices are unchanged today, at just over US$53 for the US benchmark, while the Brent benchmark is just under US$56 a barrel.

The gold price is also unchanged at US$1,226/oz.

But the New Zealand dollar has fallen and is now just under 70 USc. On the cross rates we are down at 92.3 AU¢, and against the euro at 66.1 euro cents. The NZ TWI-5 index is down to 75.6 and its level lowest since just before Christmas.

If you want to catch up with all the changes yesterday, we have an update here.

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

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29 Comments

by  sharetrader  |  7th Mar 17, 7:50am 1488826214

for a country of so much heat and sunlight they have been slow to take up roof top solar heating.
with the new tech of roof solar tiles and battery packs you would not need mains power
https://www.tesla.com/en_AU/energy
I guess the coal industry is too big. at least our forefathers got it right with the hydro schemes
http://www.energymatters.com.au/energy-efficiency/australian-electricit…

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by  ham n eggs  |  7th Mar 17, 8:56am 1488830182
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by  iconoclast  |  7th Mar 17, 9:17am 1488831463

Not so - at last reading more than 25% of 9 million homes had roof-top solar

NB: The report refers to commercial contracts - not residential consumers - if these price increases migrate into the residential market there will be a further upsurge into roof-top solar

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by  iconoclast  |  7th Mar 17, 9:21am 1488831691

I lived in Melbourne - was a first mover into Roof-Top solar with a 1 kw/h system
Produced up to 7 and 8 kw's per day in summer
Would be lucky to get 2 kw's on a good day between April and October

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by  Noncents  |  7th Mar 17, 9:31am 1488832269

Often it is to do with Peak Load.They have the ideal conditions for solar, but not the usage pattern. Then there are the battery costs.

In Perth, peak load comes on at about 5pm - when everyone gets home and starts their air-conditioning.
Its dark in summer by about 6-6.30pm (No daylight savings). The peak lasts until about 11pm - on hot nights in summer it can go right through.

My FIL has solar there - he got a Govt Subsidy, without it he wouldn't have touched it. He sells his power back at a subsidised rate of 24c. So overall he benefits. He never even considered batteries as even with the subsidy they were simply too expensive.

The subsidies also no longer exist for new connections, so prices have actually increased over the last few years rather than decreased as per the rest of the world.

On the flip side, a lot of day use things in Perth are solar powered - council depots, Bus stops, small business, swimming pools (Solar hot water - you see all the tubes spread over roofs), solar water pumps etc.. This is where the benefit is too them - things that are used during the day.

They have dropped their daytime reliance by 30% since I last worked over there in 2007. It will continue to reduce. Last I heard even some of the larger office buildings were looking at solar - if they can get it too work, a lot of the CBD will be "off grid" during daylight hours.

Like all places, solar will pick up in OZ once they can get the panels and batteries to a realistic payback level. i.e. 5 years rather than the current 20+

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by  kane02  |  7th Mar 17, 9:41am 1488832889

I think you'll find ST that the lines companies cant cope with the amount of generation being fed back into the network. In short the lines are being fried. This has slowed the uptake of solar enormously.

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by  Uninterested  |  7th Mar 17, 8:04am 1488827049

One question about the National policy to increase in retirement age, does anyone know if access to Kiwisaver will be delayed until people become 67?
THAT would be a biggie!

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by  sharetrader  |  7th Mar 17, 8:07am 1488827246

not at this stage, but don't be surprised if it gets changed down the track.
also those under 20 start planning for it to move to 70

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by  dictator  |  7th Mar 17, 8:09am 1488827377

It will move with retirement age. It's part funded by the Government so the kiwisaver age will move with it. I believe United are the only ones that have been suggesting variable access ages similar to what is available in the US.

It seems it will be impossible to unretard the National Party so hopefully they will stick with being boomer party and die out with their support base. Then we can get back to running the country in a financially responsible manner.

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by  Hamish  |  7th Mar 17, 8:50am 1488829847

From the kiwisaver webpage,

"When you can get your money

Your KiwiSaver savings will generally be locked in until:
-you're eligible for NZ Super (currently 65), or
-you've been a member for at least 5 years (if you joined over the age of 60).
"
I would be a lot more inclined to join kiwisaver if every time a term or condition changed, you could opt out at that point in time if you chose to. Although without going to find the fine print of the contract you enter into, I would guess that changing the retirement age in NZ (and therefore when you get your hands on your kiwisaver funds) wouldn't be considered such a trigger.

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by  Roger Witherspoon  |  7th Mar 17, 8:55am 1488830118

What, politicians run the country in a financially responsible manner? Cripes, another impossible thing to practise believing in before breakfast.

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by  Halfway To Paradise  |  7th Mar 17, 8:51am 1488829874

Bill English said access to Kiwisaver would remain as at 65. I won der if contributions will be able to be made upto 67.

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by  dictator  |  7th Mar 17, 9:33am 1488832412

Bill English won't be PM when people reach that age. The rules will keep changing. At the moment people can take all of the money out, that will change in the future as things get dire.

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by  Halfway To Paradise  |  7th Mar 17, 9:40am 1488832836

I also see it becoming compulsory and the rate of contribution increasing. Maybe not yet but certainly into the future.

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by  jfree  |  7th Mar 17, 11:58am 1488841107

Let's be honest, is it really going to matter? The amounts people will be withdrawing at that age in the future probably won't be that much at the rate current KiwiSavers are being emptied to desperately claw their way into the property market.

So much for this being a retirement savings scheme.

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by  Uninterested  |  7th Mar 17, 8:07am 1488827264

Yep. Green power aint cheap. Cross subsidies abound..

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by  Stephen Hulme  |  7th Mar 17, 9:40am 1488832836

A profitability analysis of Meridian, Genesis and Mighty River conducted by Ernst and Young in 2011 estimated that economic profit totalled $3.8 billion between 2002 and 2011, on total revenues of $42 billion.

Their invested capital rose from $4 billion in 2002 to nearly $12 billion in 2011 but most of this increase - $6.2 billion, according to the companies' annual reports - was asset revaluations, with less than $2 billion representing the historic cost of net actual investment.

Those increases in asset values went untaxed but made their returns on investment look low, which justified price hikes, he said. Genesis did not want to comment on the revaluations and Mighty River said it was a question for the Electricity Authority. Read more and more

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by  dictator  |  7th Mar 17, 10:15am 1488834930

In short it's good to own generation companies if you want to farm consumers for income and tax free capital gains.

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by  Stephen Hulme  |  7th Mar 17, 9:22am 1488831720

Capitalism?

We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability. Read more

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by  dictator  |  7th Mar 17, 9:36am 1488832597

Capitalism at it's finest. Of course it's a complete misallocation of capital. I suppose it's fine as a gamble as a trader but worthless to an investor.

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by  Boatman  |  7th Mar 17, 11:23am 1488839003

First rule of investing :-

If you dont understand the business ( model) , dont go anywhere near it

Second rule of investing :-

If you dont understand how it makes its money ( profit) , dont go anywhere near it

Third rule of investing :-

If its a trend or fad or an off-the-wall idea with low or no barriers to entry , invest only what you can afford to lose ( called F-U Money )

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by  Stephen Hulme  |  7th Mar 17, 9:27am 1488832045

BIS Admits TARGET2 Is A Stealth Bailout Of Europe's Periphery Read more and more.

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by  dictator  |  7th Mar 17, 9:34am 1488832475

Until there's a debt haircut the euro is built up on false promises. Of course there won't be a debt haircut as people in Germany will flip out.

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by  Andrewj  |  7th Mar 17, 10:11am 1488834672

Hotel Macquarie: you can check out any time you like but you can never leave

http://www.michaelwest.com.au/super-hotel-macquarie-you-can-check-out-a…

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by  Boatman  |  7th Mar 17, 11:27am 1488839242

As an ex-banker I am never surprised by anything that investment bankers get up to , they are full of new ideas to clip the ticket everywhere and every time a cent changes hands ............... but this one is just too much to stomach .

Bastards !

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by  Boatman  |  7th Mar 17, 11:16am 1488838587

You know change is always good and nothing focuses human ingenuity and development and like a crisis.

Power prices doubling is a crisis

If Aussies cant generate power from solar and wind or other renewable sources and store it , then they are doomed .

Power companies are going to end up like the copper cable based telco's of the last century , Gas Companies of old and even the V8 Petrol internal combustion engine .......as technology develops and change hits them .

Bring it on I say

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by  waymad  |  7th Mar 17, 1:32pm 1488846741

The Oz (more specifically SA) power crisis is self-inflicted. Joanne Nova http://joannenova.com.au/ has an ongoing series on this: the key points are that a dreadful combination of perverse (if well-meant) incentives and politically driven attitudes is driving base-load synchronous generation off a cliff; that the network taken as a whole is not equipped physically or data-collection-wise for high percentages of intermittent generation; and that sunshine and breezes are, whodathunk - intermittent.

  • The RET gives renewable generators guaranteed prices for any and all output
  • RET-sourced generation is given first priority, so that when the inevitable happens - the sun goes down or the wind ceases, there may be no spinning synchronous generation - er - spinning - to take up the slack
  • Two interconnects to VIC (lignite-fuelled...) generation can supply the slack but only up to a point, beyond which they simply trip off to preserve VIC's power system integrity
  • Reserve generation in SA is available (e.g. gas at Pelican Point) but is expensive (so last in line) and takes significant spin-up time
  • SA has major smelting industries (lead at Port Pirie, copper at Olympic Dam) which, naturally, don't like to see their furnaces stop (and turn into solidified slag)
  • The last coal-fired station in SA (Port Augusta) was switched off in mid-2016
  • Quelle surprise, SA has since experienced a black system (Sep 28 2016) , and extensive outages in December 2016 and January plus February 2017. A summary here: http://www.news.com.au/technology/environment/why-south-australias-blac…
  • With VIC's Hazelwood coal station due to close, pollies in both SA and VIC are suddenly experiencing what can only be termed 'buyer's remorse'....another term perhaps is 'karma'
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by  KH  |  7th Mar 17, 2:36pm 1488850562

Contrary to popular belief wind can contribute to the varying load demands.
https://www.linkedin.com/pulse/australian-wind-farms-compete-gas-provid…

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