Here's our summary of key economic events over the weekend that affect New Zealand with news the virulent Omicron is casting a pall over the close of 2021.
The run-up to the holidays will be all about retail sales (and whether the softness from supply chain issues and inflation can be overcome). There will not be not much economic news, although China is reviewing its prime rates and Taiwan's export order levels in November will come through later today. And many countries will report their final Q3 GDP results.
And there is another dairy auction on Wednesday morning.
Over this past weekend, an American regulator said it was investigating the buy-now, pay-later industry with an investigation into the largest operators there, which includes two of Australia's largest (AfterPay and Zip). Shares in both fell heavily after the announcement. The US regulator is concerned about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology.
And it is not only regulators. Consumer credit reports are now getting this BNPL debt added, the obligations for which have been a blind spot for lenders. Having BNPL debt can seriously hurt your chances of getting a loan or mortgage.
In China, they reported that fiscal revenue is still falling, and falling faster with a fifth straight month of declining tax receipts, especially from the private sector and SMEs.
And that comes after China revised down its 2020 GDP growth to 2.2%. Some now think 2021 growth will be lucky to reach 5%.
Meanwhile, S&P has become the latest ratings agency to declare Evergrande in default.
And staying in China, foreign direct investment rose almost +16% in November from the same month in 2020, reaching NZ$235 bln in the month. But most of this is now coming from 'partners' in their Belt & Road initiative, rather than from first world investment. These heady increases are slowing, from +20% in September to +18% in October to +16% in November.
In Germany, business confidence as measured by the widely-watched Ifo survey fell for a sixth month in December and to its lowest level since February. It was a fall greater than expected. Confidence in the near-term economic outlook is weakening due to renewed restrictions to curb the country's fourth wave of the pandemic as the effects of supply bottlenecks go on and on.
But there are some signs the factory inflationary pressures are moderating. Even though producer prices rose +19.2% from a year ago, the December level came in with a rise much less than expected over November (+0.8% vs +1.4% expected). That might not mean much if later data resumes the climb, or it could be an early indication of a topping out. It is hard to see however, how +19% cost increases can be tolerated, even if most of it comes from high-cost Russian energy.
In Russia, these same energy rises are causing their economy indigestion. They raised their official interest rate by +1% over the weekend to 8.5% and back to 2017 levels to keep a lid in their wave of inflation. They also said more hikes are coming because even more inflation is probably coming.
In Turkey, the situation is going from very bad to much worse. The further sharp fall in their currency after the recent interest rate cut (and the selling of FX reserves to support it turned into a vast waste of money) has brought a trading halt in the main stock exchange. Even after their 50% hike in the minimum wage a few days ago, the raging inflation means the affected workers are still worse off than a year ago. The situation is now so bad that what is required to sort the gigantic mess out will likely be equally painful.
Mexico also raised rates over the weekend, up +50 bps to 5.50% and also tackling entrenched inflation here. It was their fifth straight rise.
The Bank of Japan left its interest rate settings unchanged, but decided to wind down its pandemic support. They did say that they see a good economic recovery building there and private spending starting to rise in the way they want.
In Australia, pandemic cases in Victoria were reported at 1240 yesterday. There are now 13,093 active cases in the state - and there were another 4 deaths. In NSW there were 2566 new community cases reported yesterday, and another jump, with 14,055 active locally acquired cases (and now exceeding Victoria), but no deaths. Queensland is now reporting 34 new cases, and a big jump for them. The ACT has 18 new cases. Overall in Australia, 89.4% of eligible Aussies are fully vaccinated (12+), plus 3.5% have now had one shot so far.
Europe is suffering a gigantic Omicron infection wave and many countries are going back into lockdown to deal with it. The Netherlands and the UK are especially hard hit although few others are escaping the surge.
Australia has opened its borders to "skilled workers" and they are starting to arrive in numbers to address critical labour shortages. How far a similar surge in Omicron pandemic infections will be will soon be known.
The UST 10yr yield opens today at 1.41% and a+2 bps firming since this time Saturday. That is a -10 bps fall from a week ago. The UST 2-10 rate curve starts today unchanged at +77 bps. Their 1-5 curve is also little-changed at +92 bps, while their 3m-10 year curve is marginally steeper at +137 bps. The Australian Govt ten year benchmark rate is up +2 bps at 1.59%. The China Govt ten year bond is unchanged at 2.87%. The New Zealand Govt ten year is also unchanged at 2.27%.
The price of gold will start today at US$1799/oz and down -US$6 from this time yesterday.
And oil prices start today -US$1 lower at just over US$70/bbl in the US, while the international Brent price is now just under US$73/bbl. But in Europe, natural gas prices are surging and from levels that were already high.
The Kiwi dollar opens today softer at 67.3 USc and that is -¾c lower than this time last week. Against the Australian dollar we are little-changed at 94.6 AUc. Against the euro we are still at 60 euro cents. That means our TWI-5 starts the today unchanged at 72.2 and back to its four month lows.
The bitcoin price is holding at US$47,191 and up a mere +0.5% from this time Saturday. Volatility over the past 24 hours has been low at +/- 0.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
44 Comments
Peter Schiff....is he correct or fibbing :
Are they lying? Or just playing the cards they are dealt with? Considering blowing bubbles is what every western government and their expert economic advisors have considered best practice for decades, can you realistically expect a change of direction? The next government and their money manager appointees will continue this ultimately doomed strategy, until it hits the wall! Considering recognising the mountain of debt created is not repayable would result in very unpleasant outcomes, the game will be played, until the music stops.
I'll get back to you on that. Meantime I'm going to shape and influence the broader spectrum while developing and executing a robust and digestive debate. I will establish a visionary goalpost, using dynamic adaptive pathways, while transacting and resolving issues encountered.
Anyone who hasn't seen Utopia, on netflix, do so. It soooooo captures the nonsense. You'll wet yourself laughing.
Both events likely to speed up the CBDC and use of digital passes.
https://www.nzherald.co.nz/brand-insight/why-a-kiwi-digital-currency-ma…
Bitcoin gives me hope. CBDC are the end of freedom.
Eww man that article is so cringy. CBDC will be great for everybody! they wont replace cash! its like having the bank in your pocket! except the bank is the government.....
"CBDCs can also help change the world by supporting a new type of green finance. Helping to finance the green transition and monitor climate change is the world's biggest issue –"
Oh you drove your car too much this week, were going to take .5% out of your account. Oh you spent too much on alcohol or meat, sorry were limiting your ability to buy those items.
Hmm I see you haven't spent much lately, sorry but $500 in your account is now going to expire in 2 weeks....
Well balanced journalism at its best.
It's OK, Labour will transfer all the cases back to MiQ in Auckland, the rest of the country can relax and not worry.
Jacinda doesn't care because she's gone off for her wedding and isn't needing Auckland to be open for her.
I'm sure that shutting down Auckland after the inevitable MiQ "leakage" won't be too bad, we can just borrow Grant's spending firehose......
How the doom machine works - "He's a professor at London School of Hygiene & Tropical Medicine (LSHTM) which last weekend published a study on Omicron with very gloomy scenarios and making the case for more restrictions. But JP Morgan had a close look at this study and spotted something big: all the way through, LSHTM assumes that the Omicron variant is just as deadly as Delta. ‘But evidence from South Africa suggests that Omicron infections are milder,’ JP Morgan pointed out in a note to clients. Adjust for this, it found, and the picture changes dramatically:
“Bed occupancy by Covid-19 patients at the end of January would be 33% of the peak seen in January 2021. This would be manageable without further restrictions.
So JP Morgan had shown that, if you tweak one assumption (on severity) then — suddenly — no need for lockdown.
Why was this scenario left out? Why would this fairly-important and fairly-basic fact on Omicron modelling not presented by Sage modellers like Professor Medley to ministers — and to the general public?"
https://www.spectator.co.uk/article/my-twitter-conversation-with-the-ch…
The reaction to Omicron is very strange. To me it looks like a remarkably happy development, a natural progression to a milder form. If the first Covid-19 variant was "just the flu, bro" then Omicron is "just a cold, bro".
Why do they always assume the worst case scenarios when these have proven time and time again to be wrong?
How strong is the evidence for it being weaker? I've heard numbers thrown about like 5-30 times reduction in risk of hospitalisation and death vs delta but not sure how certain we can be yet, although it looks extremely promising. Another few weeks of confirmatory evidence and delta spreading round the country and we should be talking about letting Omicron through the border...
Entertainingly, it looks like three vaccine shots is much more effective against Omicron infection than previous infection with another strain, which is a real bugger for the 'natural immunity' crowd.
No strong evidence. I think the issue is, is that most people outside of the "zero covid utopia's" have caught covid by now so the disease is no longer novel for these populations. With Omicron people regardless of vaccinaion are on there 2nd or 3rd run. The loss in the "novelty factor" means the IFR for each wave of the virus will continue to fall.
It doesn't leave NZ in a good place. As now we are faced with an "ultra infectious" variant with no prior natural immunity. The ability of the vaccine to protect against severe disease is also very contentious as given pretty much everyone has been infected by now there is no way of knowing if it is the vaccine or nautral immunity putting up the fight against Omicron. All we know is less people appear to be getting hospitalised in countries that have already had several waves of covid.
Australia over the next month will provide a good bellwether of how screwed we are. As Australia does not have a lot of "natural immunity though infection" and is dependent on the vaccines to "fight covid".
Currently I am leaning to your view that Omicron could be the way out, as a milder version. But I note an omission in most if not all the discussion - mutation. With lots of people catching Omicron, it raises the possibility that it can mutate into something more lethal. I don't think there is much doubt that it will mutate, just what effect the dominant mutation will have is anybody's guess.
The news I'm seeing is Omicron is just as bad as Delta in terms of hospitalization rates, however because it spreads so fast you have far more people sick at the SAME TIME so in effect its 5 times worse. Its all about hospital overload and this determines the "Bad" numbers.
I've had a look at the hospialisation rate in the UK. Seems pretty stable?
https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare…
What it IS doing, is sidelining the bigger issues.
Real growth is in the rearview mirror now, despite the optimistic vernacular from those who choose only to count (and report) 'payments received'. Added to ' debts owing'; the sum has been negative for perhaps 20 years, arguably for 50 - in physical terms.
Maximum energy going into the global system seems to have peaked in 2018. Even that was a fudge, given that it takes more and more from the future supply of energy, to supply today's (thus the inevitability of a down-turn increases with time).
So are they - perhaps subconsciously - diverting attention? Blaming lockdowns and ' supply chain issues' for the effects of real depletion?
The most interesting part of all of this is Graham Medley's tweet:
"We generally model what we are asked to model. There is a dialogue in which policy teams discuss with the modellers what they need to inform their policy"
NZD falls back on USD strength
TIC October: The Deflationary ‘Dollars’ Behind The Flat, Inverting Curves
It has been high misunderstood for far too long in this Fed-centric era (cult) which identifies foreign selling of Treasuries with everything it is not. In other words, there has been a long and consistent history which conclusively shows foreign selling of not just Treasuries but also T-bills and other US$ assets, both by private foreign institutions as well as overseas central banks and governments, is brought up and forced upon for entirely some form of dollar problem or shortage.
During reflationary periods or better, such as the pre-crisis “weak” dollar era, an overabundance of eurodollar funding leads both private and official foreign institutions to purchase lots of US$ assets. An overwhelming amount (which is where Ben Bernanke’s absurd global savings glut was forced into his brain).
When eurodollar funding begins to dry up, foreigners will purchase fewer.
And when eurodollar funding “evaporates”, to borrow a June 2018 term, foreigners have to outright sell to make up for this specific deficiency.
Its 3 to 5 times more transmissible.
So it does not need to be more deadly. Exponential growth of the infected.
Think overload of already overloaded hospitals. Think entire wards or even hospitals closing because of staff infection rates. Think of your workplace closing because too many are sick.
This is the reason for caution. Waiting for a graph to rise and it's too late late.
Europe is suffering a gigantic Omicron infection wave and many countries are going back into lockdown to deal with it.
One of my family (vaccinated with two shots, no booster) caught Omicron last week, said she had a slight sore throat for two days and then sniffles for about three days afterwards before fully recovering. She reported it but wasn't sent any of those new drugs so made do with a few hot toddys and a hot water bottle. Her husband caught it from her but was totally asymptomatic.
I'm not sure if Omicron will have any impact on hospitalisations or deaths due to its mild nature. So far no change in the UK: https://coronavirus.data.gov.uk/details/healthcare
South Africa have a decline in cases, I guess that might be due to the far more dangerous Delta losing against the milder Omicron.
Omicron will only be an issue in 2022 if our politicians make it an issue
I am putting my money on the Chinese housing market being a major negative next year just as housing market issues in other countries have derailed economies in the past - might even be President Xi's undoing given how important it is to their economy and chinese people generally. And this comes on top of the other financial issues that have been building for China for some time
I am putting my money on the Chinese housing market being a major negative next year
For who? Chinese people? Or for the sheeple of NZ and the the prophecies of Ashley Church? Of course it's negative for the Chinese people and the ripples are starting to be felt as Chinese consumers close their wallets and retail growth slows. That also affects NZ exporters to China.
https://www.scmp.com/economy/economic-indicators/article/3159743/chinas…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.