Here's our summary of key economic events overnight that affect New Zealand with news New Zealand's container ports rank among the worst in the world for efficiency.
But first, the consumer inflation measure the US Fed watches most closely, the PCE, dipped slightly in April, 'down' to 6.3% from March's +6.6%. Excluding food and fuel, it recorded its lowest level of the year, down to 4.9%. The same data showed that inflation-adjusted personal incomes were unchanged but consumption expenditures rose. That is the fourth straight rising month. The financial markets like that consumers are continuing their spending a good levels and Wall Street rose strongly to book a better-than-average weekly gain.
That strong consumer spending impulse is reflected in the April trade deficit, on a merchandise-only basis coming in at -US$105 bln. Still that was -15% lower than for March. With port backlogs clearing, that was always going to push this metric up. It is also pushing wholesale inventories up, and if supply chain stress eases it might result in a downstream impact where orders will need to be cut back to give time to absorb them. Then again, no-one will want to be caught in a supply chain hell a second time, so inventories may stay at higher levels for quite some time.
Those free-spending American consumers aren't feeling that great however. The latest measure of consumer sentiment is now back at GFC levels. This time, that is probably more to do with their culture wars than their economic opinion.
In Japan, Toyota has lowered its global production forecast for June by about 50,000 vehicles, to around 800,000, as parts shortages caused by the pandemic lockdown in Shanghai continue to disrupt them. In Japan, that will involve a five-day halt of 16 local production lines.
China reported that its industrial companies saw profits grew +3.5% in the four months January to April. In the three months January to March they grew +8.5%. That means the April-alone result was very tough for their industrial companies. Profits at industrial companies fell -8.5% year-on-year in April alone. High raw material prices and supply chain disruptions have significantly squeezed margins.
Their lock-down pain is spreading fast now. According to Moody's, China's property development sector and its related supply chain account for as much as 28% of the country's GDP. And the struggles and declines we have been reporting for more than a year have now turned into a rout. Even State-owned property companies are in big trouble. It will be virtually impossible for China to achieve its expansion target of +5.5% with its property sector imploding.
For all its export prowess, and that has been impressive through the whole pandemic stress, Taiwan reported that its Q1-2022 GDP expanded at "only" +3.1% real. That is a reversion to the levels it was recording pre-pandemic since the GFC. During the pandemic period it peaked at +9.2% after a +0.6% dip.
Singapore reported that its producer prices rose very sharply in April, in fact the fastest rise they have had in more than 40 years. They are up almost +30% year-on-year.
Australia reported that retail sales were up +0.9% month-on-month in April, and up +9.6% year-on-year. These are gains financial markets were expecting and reflect a small slowing in retail demand. But this data is not inflation-adjusted, so that colours the results.
The World Bank has been surveying the efficiency of 370 of the world's major container ports, and the results are not good for New Zealand. Among others, Tauranga ranks about 325th and Auckland ranks about 350th. Even just among "Oceania", Auckland is the worst-ranking facility. No New Zealand port looks efficient in this survey, the best being Wellington ranked #151 and still near the bottom half.
The UST 10yr yield will start today at 2.74% and -2 bps softer. The UST 2-10 rate curve is little-changed at +26 bps and their 1-5 curve is marginally flatter at +73 bps. Their 30 day-10yr curve is a lot flatter at +204 bps because of sharp rises at the short end. The Australian ten year bond is now at 3.25% and up +4 bps. The China Govt ten year bond is unchanged at 2.76%. And the New Zealand Govt ten year is up +3 bps at 3.52%.
Wall Street has finished its week strongly with the S&P500 up another strong +2.1% in Friday trade and for the full week it has risen a rather tasty +5.7%. The NASDAQ recovered to rise more than +6% for the week. Overnight, European markets were all up another +1.6% except London which gained just +0.3%. However all of them ended up more than +2.5% for the week. Yesterday, Tokyo ended up +0.7% on the day but down -0.8% for the week, Hong Kong ended with a Friday gain of +2.9% allowing it to record a weekly rise of +0.4%. Shanghai closed up +0.2% on Friday but fell -0.6% for the week. The ASX200 ended its Friday session up +1.1% allowing it to record a +0.6% weekly gain, while the NZX50 was the weakest of all, falling -0.3% yesterday and shedding -1.8% for the week.
The price of gold is firmer today, up +US$4 since this time yesterday at US$1853/oz. And that is a +US$10 rise in a week.
And oil prices are up +50 USc from this time yesterday and now just over US$114/bbl in the US, while the international Brent price is now just over US$115.50/bbl. These are both +US$4/bbl weekly rises.
The Kiwi dollar will open today up almost +¾c against the US dollar, now at 65.4 USc. Against the Australian dollar we are firmish at 91.3 AUc. Against the euro we are up to 60.9 euro cents. That all means our TWI-5 starts today at 72.1 and its highest of the month.
The bitcoin price has slipped a rather heavy -3.8% from this time yesterday and is now at US$28,501. That is its lowest since December 2020 and the contrast with equities is stark. Volatility over the past 24 hours has been moderate at +/- 2.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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60 Comments
Corporate ownership of NZ property is the future, we've seen it overseas now it's coming to a town near you. Example seen here: https://i.stuff.co.nz/life-style/homed/300599420/soon-you-can-live-at-t…
Again, if they are increasing the supply of rentals, even ones that attract a premium, they will never be large enough to significantly control rents for NZ. I think this is good, by having a greater supply of rentals that offer differences for the wide variety of renters. Already we have in NZ, there is significant demand for rental housing, which is so great that the government has had to step and even use motels to address it. Our population will continue to increase as we fully open up and as the Covid-19 impact lessens. We need more supply of rental housing and residential housing that helps to meet demand and therefore decrease price/unaffordability issues.
It does when investors/landlords are buying up those very properties kiwis would typically start out with. You know, the those high yielding entry level properties that out of touch boomers suggest youngin's buy for their first homes.
But these aren't so bad, if it's residential accommodation attached to malls etc.
"Mackenzie said that Kiwi Property would not own nearly enough of a share of the total housing stock in Auckland to be able to drive up rents.
He said Kiwi Property’s apartments would be set by market rents, as defined by Tenancy Services, with a “small added premium”."
https://www.stuff.co.nz/life-style/homed/300599420/soon-you-can-live-at…
Make of that what you will ...in an environment where rents are already unsupportable by typical incomes.
And oil prices are up +50 USc from this time yesterday and now just over US$114/bbl in the US, while the international Brent price is now just over US$115.50/bbl. These are both +US$4/bbl weekly rises.
Iran Seizes 2 Greek Tankers In Gulf As Retaliation For US Taking Oil
Even if Russia discount their oil by 15-20% they must still be hanging in economically.
Can't get the link to work. This does not appear to be paywalled.
https://www.forbes.com/sites/tilakdoshi/2022/05/26/watch-western-sancti…
Batshit crazy green energy policies drive up the price of LNG and China switches to cheaper, dirtier coal
"…High prices are another killer as many of my clients can't possibly pass on the cost when their business orders shrink.
…But as the world's second-biggest economy struggles, the authorities have focussed on securing supply and curbing costs, which helps cheaper coal versus cleaner gas, said Lu Xiao, analyst at S&P Global Commodity Insights.
https://www.reuters.com/business/energy/chinas-lng-imports-set-first-bi…
He told Sky News that the root causes of the recent increase in gas and energy prices in Europe and beyond could be traced back many years before the Russian invasion of Ukraine.
"It's definitely a deeper issue," he said - pointing out that investment in gas production had fallen steadily in recent years, as Europe pushed to eliminate carbon emissions sooner in an effort to combat climate change.
"There was a build up of countries pushing for the [energy] transition in a hard way. [They pushed for] net-zero, moving to renewables, doing away with fossil fuels and demonising the oil and gas companies, [calling them] the bad guys. And [as a result] you don't have enough investment in the oil and gas sector."
https://news.sky.com/story/cost-of-living-west-reaping-the-consequences…
... someone needs to confront Jacinda Ardern directly with the question : " you shut NZ's offshore natural gas exploration industry down ... yet you permit 2 million tonnes per year of Indonesian coal be imported & burnt at Huntly ... can you not see the incredible hypocrisy here ? " ...
You are dreaming if you think he two most populated countries on the planet are ramping up coal production/consumption due do stupid global energy policies are "a few edge cases". We are doing worse than nothing. The net effect of our policies is to import Indo coal. The goals of our policy have been a complete failure:
"Since the 1990s, New Zealand’s share of the global oil industry has been between 0.02 and 0.08 per cent. Therefore, the ban’s direct impact on global oil production and its associated emissions will be very small.
As a relatively small country, the best way for New Zealand to make a difference is to place pressure on larger emitters by demonstrating the changes that other countries also need to make. If New Zealand and other like-minded countries succeed in persuading large fossil fuel producing countries to also restrict their production, the overall impact on global emissions would be significant."
But first, the consumer inflation measure the US Fed watches most closely, the PCE, dipped slightly in April, 'down' to 6.3% from March's +6.6%. Excluding food and fuel, it recorded its lowest level of the year, down to 4.9%
Why Stocks Are Surging And What Today's Core PCE Data Means For Next Month's CPI Print
“Monetary policy is 98% talk.” - Ben Bernanke, former Fed Chair
Here's the full quote from Ben Bernanke's talk today at Brookings: "I think monetary policy is 98% talk and 2% action, and communication is a big part." (He was speaking about his new book: "21st Century Monetary Policy.")
Insofar as 2022’s “inflation” might be concerned, there’s a building chance it’s already behind us. It was never once genuine inflation caused by a surplus of effective and circulating money, instead the simple (small “e”) economics of a supply shock. We know how those end; history provides ample examples.
Biden this week:
"And when it comes to the gas prices, we're going through an incredible transition that is taking place that, God willing, when it's over, we'll be stronger and the world will be stronger and less reliant on fossil fuels when this is over"
All part of the plan then?
The most efficient ports in the world list is topped by 5 in the Middle East , closely following by eastern Asia's ports ...
... down down down in the dumps are the Kiwi ports , along with English & the biggest American ports ...
... interestingly , smaller US ports which have invested heavily in technology rate far higher than the biggest ones ... shifting containers , and getting ships in & back out quickly ...
Nah I’m too lazy to back up my generalisations! When you say dreadful, how many deaths are you talking about? 2? It’s quite possible that is a normal week in some countries, I don’t really know.
or maybe the employees have to work real hard and have much less rights compared to our port workers.
It just seems a bit odd to me that countries with cheaper labour would be more efficient.
Wellington been updated to repair earthquake damage may have something to do with its "highest" rating.
Too many ports too close together is probably another reason for NZ's poor showing. Problem is , none stand out as the best candidate to close , or keep open.
Marsden point probably the only port capable of serving mega ships , local coastal shipping from there to all other ports to make it attractive for the megas to bother with NZ???
I heard that the lawyers who worked on the contract for their defective automated system botched the whole agreement and Ports of Auckland effectively has no comeback to hold the supplier accountable for the software fault preventing them operating. Just another cost the rate payer has to suck up and meanwhile the port is kept in the dark ages.
"The Government is expected to begin its capital withdrawals from the Fund in 2035 (with sustained withdrawals to begin in 2053). At the peak of its size in 2071, the Government's capital withdrawals from the Fund, as well as the Fund's tax payments, are expected to cover 20.5% of the total cost of New Zealand superannuation."
https://www.nzsuperfund.nz/assets/Publications/SOI-SPE/Statement-of-Int…
... the last time I had a look , the fund had $ 58 billion in it , built up over 2 decades ...
Robbo blew out the government debt by a similar amount , during just 2 years of covid ...
... and , he's earmarked another $ 40 billion to top that , over the next 3 years ... Wow !
Well eating is obviously pretty inelastic but reducing driving is possible and we should be planning for it as energy and materials become more scarce. Especially as a larger proportion of our energy will be going towards producing food. The choice in the future will literally be eating or driving. Let's get on with reducing the driving now.
Everything is just so expensive. Rent/ housing, food and fuel. Probably, best to stop living and start 'lying flat' so you're using less and consuming less energy. This is probably there's so many beneficiaries on the WINZ pay roll; they've wise up to this trick for decades.
On first reading of NZ port rankings the knee jerk reaction is .... Crap, what happened to all the efficiency gains from ports restructuring that has occurred over the last 20+ years?
Then I think of the massive layers of OSH requirements that have been imposed on pretty much all industries in NZ and the impact that has on productive efficiency.
This came to mind the other day at roadworks on Route 52 with traffic lights in operation AND a traffic management person in a vehicle parked beside the traffic light at each end.
So, when comparison of NZ against other nations, what is being compared? Are the regulated compliance requirements that increase costs and give greater assurance of employee safety, food safety, environmental welfare, animal welfare, etc., factors factored in to compare apples with apples?
... the actual report is easy enough to find , but much harder to pick through ...
I think you're correct , that it makes some inclusions & some omissions which may hamper the ranking of some ports ...
... they do take into account port size , numbers of cranes ... trying to create a level playing field between ports of radically different size ...
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