Here's our summary of key economic events over the weekend that affect New Zealand, with news China seems to be inching toward an economic reckoning.
But first up today, all eyes will be on the New Zealand CPI inflation rate for the June quarter, which will be released at 10:45am today. It was 6.9% in March and today's consensus expectation is that it will have risen to 7.1%. Variations from that may well shift financial markets. Check back with us then; we will have full coverage.
Meanwhile, China has reported bad economic activity levels for the June quarter, worse than the poor ones expected. And remember, these are the official data. GDP fell -2.6% in the June quarter from the March quarter, and that undermined the year-on-year expansion to just +0.4%, well below the expected +1.0% and miles lower than the March level of +4.8%. China's goal of a 2022 expansion of "about 5½%" is now lost. The upcoming Party Congress is likely to be a dour affair with a dark economic shadow hanging over it (the date for this Congress hasn't been set yet).
Their central bank is worried, promising a more "prudent" approach to monetary stimulus because it is facing "certain downward pressure". Their rising Covid cases pose fresh risks to China’s growth.
China's weak GDP result is after they reported a surprise rise in retail sales for June. The +3.1% year-on-year increase for June easily beat market estimates of a flat reading and shifting from a -6.7% drop in May. The latest figure marked the first increase in retail trade since February, as consumption recovered following a drop in pandemic lockdown restrictions.
After sliding all year, China says its electricity production rose sharply in June, up +1.5% from year ago levels after May was down -3.3% on the same basis. June's coal production, used mainly to fire up electricity generators, was up +15%. China is said to be considering swallowing its pride and start buying Australian coal again - mainly because local production is unsustainable at current levels. The new Australian government is encouraging that. China's climate goals are a massive case of greenwashing - ditto Australia.
China is scrubbing social media of any references to the growing mortgage boycott there. No one is suggesting this movement is enough to undermine their banking system yet, but it is a rare indication of widespread discontent over how their economy is putting pressure on homeowners. It does have a chance of being big - China's middle class has more than 70% of its personal wealth tied up in housing. (Equivalent New Zealand data out earlier this week shows our level is less than 30%.) Only 22 of their 70 major urban areas didn't see house price declines from a year ago, and that is is the official data. Over the weekend, a banking regulator told their banks to lend to complete projects.
We should also note that China is significantly raising its threat of an invasion of Taiwan - the chances of an attack are heightened before the Party Congress.
Hong Kong business confidence is improving in an official survey out over the weekend. But given their equity market signals (see below) you do need to be a bit sceptical of these results.
US June retail sales came in better than expected as our weekly monitoring had suggested. They were up +1.0% from May and up +8.9% from year-ago levels on an actual basis. Much, but certainly not all, will be price increases.
Business inventories rose +1.4% in May from April to be almost +18% higher than year-ago levels. The Inventory/Sales ratio is creeping up now to be higher than year-ago levels, so you can see why managers are taking action on that front.
Still, factory data can still surprise on the positive side, and that is what we got from the New York factory survey for July. It bounced back unexpectedly, with increases in new orders, production activity, and employment. But even after those gains, firms grew more pessimistic, thinking it is down from here.
A more broad, national industrial production measure, this one for June, recorded a +4.2% gain year on year but that was lower than for May.
Businesses may be a little less optimistic, but somewhat surprisingly, consumers are picking themselves off the mat. The widely-watched national University of Michigan consumer sentiment survey rose in July from June. It is still very low, but an improvement was not anticipated.
Also still negative, but improving more than expected, was the Canadian senior loan officer survey.
And that is despite a retreating housing market there.
In Australia, where infections and deaths are again rising sharply, the new pandemic wave has seen their new Government backtrack and re-introduce support payments for workers forced to isolate. These payments, which ended on June 30 and entitled workers to get up to AU$750 for each seven-day quarantine period, will be restored and extended until September 30.
We should also note that the new pandemic wave is hitting New Zealand as hard as anywhere, with up to 30% of workers isolating at many companies. That will make customer service very difficult in the coming weeks and test the tolerance of many customers. Mask complacency is rife making the spread very difficult to stop.
Back in Australia, shareholder objections might have put the kibosh on ANZ's ambitions to buy MYOB. But the bank does look likely to be the winner in the race to buy Suncorp Bank. That would add AU$85 bln in banking assets to its existing AU$678 bln. After that, it would still leave ANZ as the #4 'big bank' at 67% the size of market leader CBA.
A review of some key commodity prices shows inflation isn't likely to be driven higher from these. Copper is down -28% since the start of the year with most of the fall since early June, nickel has now lost all its 2022 gains, iron ore is now lower than its 2022 start. Aluminium is similar. The oil price is still higher than when Russia invaded Ukraine, but is back a lot since early June. Even the wheat price is retreating and has given up all its invasion premium. If inflation stays high, it won't be because of these core commodities. "Transitory" still has a chance of being right.
The UST 10yr yield starts today down at 2.93% and unchanged from Saturday. A week ago it was at 3.08%. The UST 2-10 rate curve is more negative today, now at -20 bps and their 1-5 curve is also little-changed at -6 bps. Their 30 day-10yr curve is now at +96 bps. The Australian ten year bond is down -2 bps at 3.47%. The China Govt ten year bond is unchanged at 2.81%. And the New Zealand Govt ten year will start today also unchanged at 3.71%.
The price of gold will open today at US$1709/oz which is +US$4 firmer than this time Saturday. And that is -US$34 lower than this time last week.
And oil prices are little-changed at just under US$95/bbl in the US, while the international Brent price is just over US$98.50/bbl. A week ago these prices were US$103 and US$106/bbl respectively.
The Kiwi dollar will open today at 61.6 USc. A week ago it was at 61.9 USc. Against the Australian dollar we are little-changed at 90.7 AUc. Against the euro we are also little-changed at 61.1 euro cents. That means our TWI-5 starts today at just under 70.8 and up a mere +20 bps from this time last week.
The bitcoin price rose from this time Saturday by +0.6% to US$21,077. A week ago it was at US$ 21,598. Volatility over the past 24 hours however has been modest at just under +/-2.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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124 Comments
If the inflation number is high today, will it be justified that is high but lower than expected to throw positive spin by vested biased experts / lobbyist.
Government has already extended fuel subsidy before the announcement to cover themselves when facing the media.
So the expectation is between 6.95% to 7.1%
https://i.stuff.co.nz/business/129284165/inflation-figure-above-72-or-b…
Anything below 7.1% will be positive and anything above will be doomsday in market today.
There are some who think RBNZ may do this last 50bps rise then drop to 25's if this is a high print then that potentially goes out the window.... Every data print is now important, Employment / CPI / GDP maybe not so much. If there are "Technical" issue and gas does not start flowing into Germany later in the week, then perhaps we wont see many more rate rises. All depends on what Putins game plan is here......
Europe’s response to Putin’s current strategy is a tense and sobering watch. They seem helpless in the face of Putin’s energy brinkmanship. Even if they resort to military action what can they achieve apart from ejecting Russia from Ukraine. Will that force a change in tactics from Putin? I would not have thought so. What next? An invasion of Russian territory to force a change? The European countries dependant on Russian oil and gas are over a barrel. Capitulate to Putin’s demands to keep their economies operating or suffer the consequences. As we are seeing st the moment. I feel sorry for the rank and file citizenry of those affected countries. I also feel lucky that we are somewhat protected by ‘the tyranny of distance’ here in NZ.
It's not complicated at all. The price goes up instantly and they make more profit on what's already in the petrol station tanks and when it goes down they sell out the exiting stock before lowering the price to the cheaper incoming stock. That's called a win win situation if you own a station.
“Oil has dropped nearly 30 percent yet the price at the pump has not. Is there a question to be asked here?”
When asked that question at their announcement yesterday Megan Woods was very clear that they have written a letter to the fuel industry asking that exact question, so rest easy…….not.
Interesting gag reflex from some here, question anything about Robertson or Ardern and you get "BUT LUXON" from multiple commenters, including what appears to be some sort of fat-shaming attempt. Those jokes are shitty when they're about Robertson and they're equally as shitty when they are unprompted and about Luxon. It's not like you're short of actual things you can criticise him for either, so do better.
I must admit. And I'm being honest here.
I'm in my 40s and fit.
Its hard work. But I'm a hard worker. Happy to make the sacrifice of my time and also to eat lentils. And the long term benefits are plain to see.
So when I see fat people. I'm not judging, but I do think lazy or lack of self discipline.
And I don't want to be led by lazy people with not enough self discipline to at least keep themselves healthy.
Just choose the salad not the toasty. Not rocket science.
Just choose the salad not the toasty. Not rocket science.
Actually it's much more complex than that. Book recommendation: Spoon Fed by Tim Spector. His argument is that the gut biome means that what's good for the goose is not good for the gander unless their biome is identical, and most of what you've been taught about food is wrong and not actually based on science. And he's no quack, he's Head of Department, Department of Twin Research & Genetic Epidemiology at Kings College of London.
Yeah that's right Carlos, very easy to be in top condition in one's 40s and I would have to add that at that age you are in the prime of your life. Regardless of life style most do alright.
60+ uummm now it comes down to perhaps genetics or life style. Watching people go down around me these days it is hard to work out what is the right way to live. ??????????????
Those jokes are shitty when they're about Robertson and they're equally as shitty when they are unprompted and about Luxon. It's not like you're short of actual things you can criticise him for either, so do better.
Robbo is the out-of-shape Minister of Sport so the jokes do have some reflection on the absurdity of it all. I do understand that some sports like darts do not require phsyical training.
We should also note that the new pandemic wave is hitting New Zealand as hard as anywhere, with up to 30% of workers isolating at many companies. That will make customer service very difficult in the coming weeks and test the tolerance of many customers. Mask complacency is rife making the spread very difficult to stop.
Mask wearing will be mandatory again before the end of the year...
Spoke to a client the other day - in his factory they had 19 of 20 off with Covid last week (and the one guy left can't do his job without someone else, so he had to go home too).
But I still don't see mask wearing becoming mandatory again - that would have been done already. The announcement the other day was just a polite beg for mask wearing.
At the mall yesterday, I'd say 3/10 weren't wearing a mask (not counting people walking around with a coffee or drink, just people clearly not bothered to wear one).
"Mask complacency is rife making the spread very difficult to stop."
Before the pandemic it was widely-known that most masks provide no protection against an aerosolised virus, which passes easily around the edges. In 2020 all the "experts" told us so, scornfully sometimes - before dramatically reversing their position months later, with no new evidence.
Most masks are just surgical splash guards, which are useless:
https://www.researchsquare.com/article/rs-1773983/v1
https://pubmed.ncbi.nlm.nih.gov/35607577/
https://www.bloomberg.com/opinion/articles/2022-02-11/did-mask-mandates…
Cloth masks are even worse than useless; they allow through 97% of virus particles and actually increase infection:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4420971/
The only masks that actually do anything are N95 masks that are properly fit-tested:
https://academic.oup.com/jid/advance-article/doi/10.1093/infdis/jiac195…
Well I guess the go hard go early has not really panned out has it, if you look at cases and death rates, did we just delay the inevitable. Think most people think so. Remember the days when 10 people had it, front page of news, locked down hard. now 11k a day, 20 plus deaths and it' on the back page.
TBH,pretty hard to quantify FCM as we are now dealing with omicron,most experts (real ones) agree that what NZ did was advantageous in keeping our death toll down during the original outbreak and then delta,but I am sure folk will want to re write history and pretend all those images of body bags overseas were some fake news produced in the same film studios as the moon landing.
I'm curious as to which type of crude oil affects the diesel price, as opposed to the petrol or avgas. There are many sources of oil, but really only two indices, Brent and WTI. Air NZ are saying avgas has doubled.
I know there are road taxes and other factors in the equation, but it seems to me diesel users have been hit harder than petrol users in the recent price increases.
The substitution of electric for petrol is way easier than for diesel, and as good as impossible for avgas.
Coming back to my question, where is the price of diesel going?
Diesel oil is the cream distilate from crude oil.
The best crude (that has a high proportion of diesel) is called "light sweet crude". As the light sweet fields become depleted we are left with the lesser types that contain less diesel.
So the price is only going one way compared to other distilates.
I thought something like that from what is happening to diesel prices, good to know, but from anyone pulling a heavy trailer knows, petrol still way less efficient. It's got some distance to go before we will be driving petrol trucks. That probably means as far as impact on imported inflation, we need to be looking at the WTI index first instead of Brent.
All those products you mention come from the same oil barrel.
https://www.visualcapitalist.com/whats-made-barrel-of-oil/
"...the Orr-Robertson degrading of the Bank continues"
https://croakingcassandra.com/2022/07/01/the-new-reserve-bank-board/
Not just us it seems:
https://www.news.com.au/finance/economy/interest-rates/parttime-amateur…
‘Part-time amateurs’: RBA ‘failing’ due to lack of expertise, former insiders say
The RBA could soon see a major overhaul, amid accusations that its nine-member board lacks economic qualifications.
i remember a comment I heard that says "amateurs built the ark, professionals built the Titanic."
There's plenty of evidence and commentary around about economists being too wed to economic theory and detached from the real world. changing the make up of the RBA would not be a guarantee that things will get better.
Be good if folk also put the microscope on some of the oppostions ideas from covid history,we might have Oz's white elephants if we followed Nats advice:
https://www.dailymail.co.uk/news/article-11011881/Australias-2BILLION-C…
https://www.1news.co.nz/2021/02/20/national-proposes-building-of-purpos…
So are you saying that Kaikohe & Kaitaia were thriving metropolis's before labour took over? They have always been areas of deprivation over the years,when either side was running the country...Northland is still waiting for all those bridges that Simon promised to build.No Govt has spent enough on infrastructure up that way.
Karma for China? If they didn’t have filthy markets trading wild and endangered animals at high intensities there’s a good chance we and they wouldn’t have had our lives so disrupted by this bloody virus. Of course, their early response to the virus was awful too.
Well where there’s smoke there’s fire. Just a coincidence it’s likely origin is the Wuhan market?
Or do you subscribe to the lab conspiracy?
I thought scientists had posited the markets as the most likely origin?
even if that’s not true, no one can deny their early management of the virus was atrocious. And WHO were complicit.
HouseMouse, in all previous jumps from animals to humans, eventual testing of animals has shown us the earlier versions of the virus, just like sequencing today..... This was true for SARS and MERS, with the Wuhan Flu, nothing has ever been identified, yet the virus spike protein was optimised to infect human cells. The most likely reason is that it was been used with human ACE2 modified lab mice in the Wuhan lab... It's impossible for it not to have visible footprints in animal stock, even now we can see foot prints of covid19 after it got out, in cats and ferrets, minks etc, but for not one earlier version of the sequence to be found in the wild.... This is the smoking gun itself.
Don't confuse dumb luck with malicious intent. It's the same argument of evolution vs intelligent design (look how complex the eye is so there MUST be a creator!). With the amount of exposure humans have with animals every day all over the world, it is highly likely we get cross over viruses all the time.
Just think about it "optimised to infect human cells" are the only way one of these viruses ends up going large. But just because that's the one we see, it doesn't mean to say it's the only one that has crossed over. It's just that the rest of them were fought off by the people initially infected, so didn't become pandemic viruses.
Viruses mutate all the time to avoid immune defences, but humans are the only species that move around the world and interact with each other in the extreme. Most other animals keep to their slowly evolving/slow moving bubbles. That makes us the perfect vector for widespread transmission of any virus and even more likely that we are also the ones to suffer the worst.
I don't know where it comes from. If people are eating bats then sure thats a bad idea? But communicable viruses have been around as long as human history. China this time, Congo the next.
We've had some near misses over the past couple of decades. With the state of globalisation an connectiveness of humans, its a surprise its not happened before, or with something much more deadly.
SARS, MERS, EBOLA. Only a matter of time before the next one really.
It isn't the fact that the Chinese eat animals that are not appealing to New Zealanders. The jump from species is caused by humans encroaching further and further into the wilderness and coming into closer contact with virus that they otherwise would not be exposed to.
"Mask compliance is Rife making infection hard to stop"
What spew.
Weve been wearing masks for months and covid is still Rampent. Like that's the make or break of this disease.
What's the point of wearing masks at shops (socially distant air conditioned) when my kids go to ground zero every day. Or me at my office?
Everyone has had it, or will get it.
Time to move on. Leave your mask at home.
No, exactly. its very sad for them, but life must move on. 3x vaccines, massive lock downs, social disruption, crazy out of control monetary policy.
Time for some stiff upper lip. This one largely targets the old, sick, fat. It's called natural selection & compared to the eons of history the mortality of this one is insignificant.
I'm not stopping you from putting on a mask if you feel like this actually does something.
Wild how the old "toughen up sweetheart" thing never applies to the people who are pissing and moaning about doing something as basic as putting on a mask and want to have a meltdown about how they should get to do what they want.
When my kid does this, we call it a 'tantrum'.
It's everywhere because people won't wear masks or wash their hands or maybe stay home when they get sick.
Like I say, thinking of people other than yourself is free, but it doesn't stop some whiney dickheads insisting they're special snowflakes and shouldn't have to follow basic courtesies. Bet they still expect grade-a hospital treatment if they have a heart attack or keel over though. But sure, I'd love to hear more about it, and maybe at some stage, I can tell you what it's like as a parent to be told an ambulance isn't coming for your sick infant because they're slammed with people going down with Covid.
If you take that approach,many conditions could be classed as 'natural selection'...here's hoping you don't get heart disease or cancer,no point throwing good money after bad aye...maybe you should head down to Starship and tell all those parents you are pulling the financial plug on their little drains on society.
It might be inconvenient,but lets not be selfish,if not for you,do it for our stretched health workers,our businesses which provide jobs for people.In many Asian cultures,mask wearing is normal practice,it is more about protecting and having respect for others health as opposed "being frightened' as so many say.It is no longer acceptable to "soldier on with Codral"
Sorry but I cannot protect other people's health (neither can Big Pharma), you are responsible for your own 'health'. The problem is the obese diabetics that have trouble with their respiratory system when they catch this mild cold. And I cannot stop their poor lifestyle choices. These are the selfish people, not us pure bloods that embrace infection.
And tell me, the people with demolished immune systems due to ongoing treatments or conditions, are they just collateral damage because you want to moan about wearing a mask, something that other civilised countries managed for years before Covid came along?
I think if your point of view boils down to "Cancer patients probably have it coming anyway" then it's probably a strong signal that you might be wired wrong.
My bleeding heart...
What respect was there when we pumped house prices to the moon and locked out generations from owning their own home.
What respect was there when we buggered up the vaccine & RAT procurement process?
What respect was there when my wifes mum died and she couldn't travel overseas for the funeral?
And our health system was buggered before the pandemic. I've not noticed any change in service levels. I can access the GP, my aunty still gets her cancer treatment & my wife just had electable surgery. Still had to wait in line. No change there...
Most people have now had covid, or have at least encountered significant exposure (and are quite likely naturally more immune than others).
Time to move on.
Yea. I'm going to let you think about how the Covid response would have gone if we'd all acted like this. Maybe the reason your family can get access to medical care is because there are more people who are prepared to cop a little inconvenience without having a total meltdown about it, and that might just be why our hospitals are still barely functioning.
Personally, my family wasn't so lucky. But hey, that's their fault right? On account of the fact that you might not get to do what you want?
No the evidence is that people can get reinfected with it. and now the research is showing that the risks increase with further infections too. It is not time to move on - keep wearing your masks and if you're not well, stay the F..k home!
https://www.stuff.co.nz/opinion/300637799/heres-why-you-dont-want-to-ge…
"covid is still Rampent" - without masks it would be more rampant. At the moment it is almost manageable. If everyone gets it at once then our health service is screwed.
Your argument is similar to saying unless everyone wears seatbelts then no one may as well wear them.
Back in Australia, shareholder objections might have put the kibosh on ANZ's ambitions to buy MYOB.
It looked like a bizzare proposal to me. Banks shouldn't be in tech, they have neither the management talent nor risk appetite. The only place they ever succeed is within their little walled garden safe from outside competition.
If you look at the level of available health care in China, look at ours (actually a lot better then theirs) and our vax rate is somewhat higher in elderly, you can see why China is very worried... not they are going to be able to stop it before they loose all of their economy.... I think Xi might just get rolled here.
I think a high inflation figure will actually be good right now, it will increase OCR expectations and improve the dollar.
The reality is that todays number is almost pointless, we know we had high inflation in the June quarter. But it may cause an over-the-top political reaction from the government or RBNZ (it already has in terms of subsidising fossil fuels for even longer).
I am probably missing something obvious here. Why does the CCP continue with the zero covid strategy when their record on caring for the individual is not great as evidenced by their enforcement methods for that strategy. They must see that the mass death resulting from opening up as a threat to their control of the country. Which speaks to an interesting facet of the national character from the standpoint of their cultural respect for the wellbeing of their elderly.
their vaccine doesn't work.
Letting it rip will mean going through what we do now but worse in terms of health outcomes.
Think factories shut down, no new iphones, or nike sneakers etc. This is on top of a giant property bubble that makes ours look like childs play.
I also question this and know the culture pretty well having lived there for quite some time. The main motivation that the government has is social order, to prevent situations of any type that the government cannot have majority control over. They have seen many other countries where the virus has caused a lot of damage, in China the government fears that sort of disorder could be reflected on themselves, so will avoid it at all costs. With low efficacy of their vaccine there and low uptake, letting the virus run around is likely to cause severe social disorder, which the government fears the most. So they put as much control as they can to stop mass outbreaks, even if it means temporarily restricting freedom of movement and even if it means bombing the economy a little bit. Those things are secondary to maintaining social order. They have learned from the failure of one party states elsewhere to know they have to maintain social order and make their citizens lives better in the long run, to continue to have a license to govern. So they are likely to continue with lock downs until there is a very weak strain of the virus that isn't much more than a cold. Essentially they are letting the rest of the world blunt the virus for them, which isn't really a bad strategy as viruses like COVID tend to become more virulent and less deadly over time. Let others suffer before your own people.
Note they have reduced isolation times for travellers now to 7 days + 3 at home, so their policies are evolving, just not as fast or as widespread as ours.
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