Here's our summary of key economic events overnight that affect New Zealand, with news central bank bosses have been out warning of inflation and economic stress.
But first in the US, their Thanksgiving holiday has brought forward some key data releases. First up, the headline jobless claims numbers came in sharply lower than expected, indicating the American labour market isn't done yet showing its resilience. However we should note that the actual claim levels were higher than the seasonally adjusted levels even if not as high as was expected. There are now 1.65 mln people on these benefits, also quite a jump. But this is only back to September levels.
Second, mortgage applications rose marginally last week, but again only with the benefit of seasonal adjustment. Benchmark mortgage interest rates continued to move lower, now to 7.29% plus points, the lowest rate in two months. That is down -15 bps in just one week.
Also falling were new durable goods orders in October. After rising a good +4.0% in September, they fell a sharpish -5.4% on October so a net loss overall. Year-on-year they are only up +0.9%. Capital goods orders were up +1.6% however on that basis.
Going the other way, a current survey of year-ahead inflation expectations rose to a 7-month high of 4.5% in November, up from the preliminary estimate of 4.4% and above 4.2% in the prior month. That is according to a final reading of the University of Michigan survey. The last actual US CPI reading was at 3.2% in October and the November report is due on December 13 NZT.
In Canada, their central bank boss has signaled an end to rate hikes, saying "interest rates may now be restrictive enough to get us back to price stability".
But in Australia, their new central bank governor is singing a different tune. She is warning that the inflation challenge they face is increasingly homegrown and demand driven.
In China, one of their largest shadow banks warned it’s “severely insolvent,” with a debt pile more than two times higher than assets, according to a letter seen by Bloomberg. Liquidity has dried up and the recoverable amount from asset disposals is expected to be low, the company said. China's retail-dominated equity markets are vulnerable to fake news and rumour and authorities are on edge. It never helps when there are also major real stresses.
China isn't the only region of financial industry stress. In its Financial Stability Report, the ECB is warning that they too see "early signs of stress".
And from left-field, perhaps should note that the price of uranium is soaring again as global demand spikes for clean energy projects. We haven't seen these price levels since 2008. Thermal coal on the other hand is retreating.
The UST 10yr yield is little-changed from yesterday, now at 4.43%. The key 2-10 yield curve is a bit more inverted, now by -50 bps. Their 1-5 curve is marginally less inverted, by -82 bps. Their 3 mth-10yr curve inversion is now -97 bps and little-changed. The Australian 10 year bond yield is now at 4.50% and up +6 bps from yesterday. The China 10 year bond rate is little-changed at 2.69%. And the NZ Government 10 year bond rate is back up +6 bps at 5.04%.
In its pre-Thanksgiving Wednesday trade, on Wall Street the S&P500 is up +0.5% in modest volumes. Overnight European markets closed mixed with London down -0.2% and Paris up +0.4% to bookend these bourses. Yesterday, Tokyo ended its Wednesday session up +0.3%. Hong Kong ended little-changed. But Shanghai ended its session with a dive, ending down -0.8%. The ASX200 closed down -0.1% in Wednesday trade while the NZX50 was up +0.1%.
The price of gold will start today just on US$1990/oz and down -US$10/oz from this time yesterday.
Oil prices have fallen a sharpish -US$2.50 to be just under US$74/bbl in the US. The international Brent price is now at US$79.50/bbl. And this is happening after pricing in the OPEC+ production cut extensions expected to come in the weekend, although it now seems to have been delayed a day or so.
The Kiwi dollar starts today at 60.7 USc and marginally firmer from this time yesterday. Against the Aussie we are unchanged at 92.4 AUc. Against the euro we are also unchanged at 55.5 euro cents. That all means our TWI-5 starts today still just under 69.6.
The bitcoin price starts today at US$36,389 and down -2.4% from this time yesterday. Volatility over the past 24 hours has also been moderate however at just on +/- 2.6%.
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72 Comments
The first instinct is to say WTF? But in thinking about it it may be more along the lines that they have been given the money but cannot yet spend it because what they need to buy is not yet available? For example it has been identified that western arms manufacturing capacity is not sufficient to sustain stocks of munitions for a war footing. This is an important bit of information. What this situation would require then is huge stock piles built up over time and a capability to ramp up production rapidly. They might have had the first, but have burnt through the stocks when they gave them to Ukraine but it is clear they are not easily able to ramp up production to meet demand. This is a major vulnerability.
An attacking force could just stand off and exchange fire until the other side ran out of shells and then attack in force to over run the defensive forces.
Ukraine may also be putting resources aside for a rebuild after Russia is forced out? A somewhat premature and optimistic perspective, but valid none the less.
War of attrition, economically too. The frontline(s) virtually reduced to skirmishing and winter now cancels most of that. Ukraine are not going to get Russia to leave so the next pointer will be Russia’s capacity for a spring offensive. Both sides declare that they are not in a stalemate but if that offensive is not significant, then that’s how it will stay.
FG. Looking at the horrendous armoured and personnel losses being incurred by Russia, I suggest they are quite a bit more than 'skirmishes'. By any standards losing hundreds of armoured units in battles such as that currently going on around Avdiivka is a major engagement. Rasputitsa brought an end to mobility along the eastern front in WW2 and will do so again for heavy vehicles but the advance of technology since then changes the picture. As leaf cover disappears, more advanced drones, thermal imaging and the missile launched glide bombs rumoured to be heading the Ukrainians way, are examples of equipment that could turn our assumption that 'general winter' will result in trench bound stalemate on its head.
Aye skirmishing is a somewhat outdated description but nonetheless it does come down to territory and whatever is going on is not resulting in much advance from the east or reclamation from the west. Skirmishing in the old days of course, eg Gettysburg, often ignited into a major confrontation and battle of significance. Overall my take is that though, is more or less where it is at now but with the enhancement of modern technology as you describe. As Napoleon and Adolf found out the hard way the Dnieper has always controlled the territory and Kharkov is the key to it. It is largely overlooked the Wehrmacht & Red Army fought four major battles for that vital possession. Yet the Russians with all that history and knowledge thought to come across largely from the south.
Murray. Only the US supply of artillery shells is physically limited, it has sufficient existing stocks of all other munitions to supply Ukraine. The US has just announced a significant increase in 155mm shell production but this still won't be enough to meet the monstrous demand needed by Ukraine to combat the Russians. Meanwhile RU is ramping up its own military production but Putin is limited in how far he can do this without creating the excessive hardship which would affect urban Russians and likely begin to turn them against the invasion of UKR.
That may be the case inside Russia but don't forget that it has been established that Russia is buying munitions from North Korea (which uses what can only be described as what is effectively slave labour), and possibly China.
The supply of artillery shells to Ukraine did not come from European stocks primarily because they were concerned they did not have sufficient to maintain their own security. Not sure but I would suspect that at least a portion of the European stocks also come from the US.
EU 155mm production,"About 40% of the production is being exported to third countries, so it is not a lack of production capacities,”
https://www.theguardian.com/world/2023/nov/14/ukraine-artillery-shells-…
the headline jobless claims numbers came in sharply lower than expected, indicating the American labour market isn't done yet showing its resilience.
It was recently pointed here on interest how gig workers don't get counted in unemployment numbers (Boston Fed research paper). It is apparently a good chunk of workforce.
Gig workers also don't get unemployment benefits. Perhaps this explains their strong labour statistics which keeps defying expectations.
US economy continues to confound the clueless. I'm not saying all is well, but the metrics are pretty simple. The Govt is spending nearly 6% of GDP more $$$ into the economy than it is taxing back. They have never slipped into recession with that level of fiscal stimulus, and it's set to continue into the future.
Meanwhile in NZ, we are aiming to run a budget surplus by 2026 alongside a significant current account deficit. The perfect recipe for a deep recession.
What is the potential for hyperinflation and significant subsequent recession, what chance all this money printing comes home to roost as the Boomers and China consumption fades?
I appreciate the magic here is the exorbitant privilege, the US avoids the inflation trap as the worlds reliance on the petro-dollar/euro-dollar means that they can export their inflation to the world but is there a tipping point? Anyone seen any research on that and what the tell's would be? So far I can see no change, this latest example of inflation taming is a good one.
NZ's problem is of course that we still have some honest politicians who know when they are spending money we don't have, and actually try to balance our spending, like honest, decent people try to do. US is just so totally different to that. Their politicians are either totally clueless muppets who just go where they are pointed, or they are in on, and feed generously off the perpetual 6% deficit scam, run by cynical evil scam artists.
Every dollar we spend is new money created from thin air - the deficit is just how much money the Govt leaves circulating in the economy before it taxes it back. NZ is one of the very few countries with a trade deficit that still thinks a budget surplus is a thing to be achieved rather than avoided.
"New nuclear for maritime is now firmly on the agenda for the ocean transport industry as the only solution that can take us to actual zero"
https://splash247.com/tests-underway-on-keenly-watched-nuclear-reactor/
If this takes off our nuclear free status will likely result in the dirty old clunkers delivering our goods in and out of the country.
It's the other way around, modified covers all manner of breeding techniques and has a non threatening "modified" warm fuzzy attached. Greenwash at its finest. Engineered, which is more accurately what the cut and paste crowd do, has a synthetic, unnatural contructiveness connotation to it, which is unmarketable.
There are 4 types of genetic engineering:
1. selective breeding, which has been practiced since nomads settled down using naturally-occurring mutations with desirable traits
2. selective breeding by taking seeds that have been forced to mutate by exposing them to radiation and keeping mutations that occur with desirable traits
3. gene splicing, which get your insect-resistant vegetables by splicing genes from outside the genome to get a desired trait
4. gene editing, where the desired genes are activated using a variety of methods including CRISPR, using only genes within the genome.
I don't have an issue with 1, 2 or 4, which are essentially different methods of achieving the same result, but all of which keep within the genome.
"Modified" is too crude, and doesn't allow a rational conversation to be had.
I'm perfectly aware the types of genetic modification/engineering. Your list is all types of modification. The first two generate random combinations in genetic code, but only the types that require cut and paste are engineering. Engineer....design and build (a machine, or structure) the structure being strands of DNA.
We are still not measuring the true cost of nuclear, France has the most advanced reprocessing facilities but it makes the fuel more expensive and is not significant elsewhere (US does not even bother). Storage is forever. Literally forever and there is nowhere on the planet except soon in Finland where it can be safely stored.
We are solving one problem and creating another. I believe Solid State batteries will be the answer and when Japan (Toyota) solves this problem they will once again be the new Saudi Arabia.
Would even solid state batteries be energy dense enough for cargo shipping? I'd seriously doubt it.
The spent nuclear material is 'spent' form a military perspective. I admit I don't know for sure, but the spent fuel still retains most of its energy before being discarded. In a civilian/commercial context, I'd suspect they'd squeeze a lot more juice out of the fuel. This won't fix your point, but would reduce the impact. If we're serious about tackling climate change, then the trade-offs need to be debated, and people need to be less scared of nuclear. Respect yes, fear no.
There is no doubt that the batteries will need some accommodation. I have tried some simple calcs, forgive any errors (and please correct :).
Current average size container ships (not the new big ones) and can generally hold up to 5,000 TEUs (Containers). Those vessels typically hold between 1.5 million and 2 million gallons of fuel. 2 Million gallons for fuel weighs 7,570,823kg.
Today's lithium ion batteries have an energy density of 200-300 Wh/kg. In other words, there is 4kg of material per kWh of energy storage.
So just replacing the fuel with batteries gives us 1,892 MWh of storage so we could run 2, 1MWh engines for 1000 hours or so from the 100%charge.
I just did some quick math and came to the same conclusion as sluggy.
Youre 1000 hours run time is pretty good, a 5000 TEU container ship using 150 tons of fuel a day at fast cruise would have a constant run time of 49 days, although if it slowed down a few knots it could halve that fuel consumption. 1000 hours is a tad over 40 days. But it will also be needing 45 - 60 MW engine power, not 2 MW. Sailing ships would be quite a lot faster than electric ships. it starkly illustrates the relative energy density in fossil fuel
Wrong.
Times have changed - you are not up to speed
Nuclear was expensive due to one off designs and their complexity.
New modular designs will be economic.
Secure safe life storage is available and far preferable to spewing toxins into the atmosphere and waterways.
I could go on...but you can use google.
We can disagree but I'm not wrong :). Safe, secure storage is not available. The US Waste is currently stored "safely" at the Yucca Mountain facility (old nuclear bunker site) and this might last for 100 years maybe, certainly not 27,000. Concreting over the door will not last - Chenobyl has show us this.
Modular designs are simply a construction methodology, smaller reactors are still producing the same volume of waste on per watt basis.
Breeder reactors would be a valid nuclear option but there are none in operation.
Actually SMRs produce more waste per KWH.
https://news.stanford.edu/2022/05/30/small-modular-reactors-produce-hig…
I recall reading some years ago that the US storage site is raising concerns re the containers of the waste in the old bunkers. From memory moisture/water was getting in and many of the drums and containers were rusting.
Create the need and a better solution will be found, even if it is only putting it on a rocket and shooting it at the sun despite all the risks.
You are speculating about the future as if it is the present.
"New modular designs will be economic. ", yeah is that like how when Nuclear power stations were first under development, they were going to make electricity so cheap we wont need meters anymore?
I'm not saying modular designs definitely wont be, but your counting your chickens decades before they hatch. It would be like Steven Joyce in 2008 halting all spending on roads and rail in New Zealand because autonomous electric flying taxis were going to replace car trips by 2017.
No speculation about the future - its ben here for some time.
The US Navy has accumulated over 6200 reactor-years of accident-free experience involving 526 nuclear reactor cores over the course of 240 million kilometres, without a single radiological incident, over a period of more than 50 years. It operated 81 nuclear-powered ships (11 aircraft carriers, 70 submarines – 18 SSBN/SSGN, 52 SSN) with 92 reactors in 2017.
There were 10 Nimitz-class carriers in service (CVN 68-77), each designed for 50-year service life with one mid-life refuelling and complex overhaul of their two A4W Westinghouse reactors*.
The Gerald Ford class (CVN 78 on) has a similar hull and some 800 fewer crew and two more powerful Bechtel A1B reactors driving four shafts as well as the electromagnetic aircraft launch system. It has an expected service life of 90 years.
I respond to your comment about "new modular designs will be economic" and you try to prove that with with reference to 10 Nimitz-class carriers?
What is the drive away price on a Nimitz-class carrier please?
It's telling that the two operational SMRs are in Russia and China where economic rationality take a back seat to National Pride.
The economics of SMR is pure speculation
> A production cost calculation done by the German Federal Office for the Safety of Nuclear Waste Management (BASE), taking into account economies of scale and learning effects from the nuclear industry, suggests that an average of 3,000 SMR would have to be produced before SMR production would be worthwhile.
https://en.wikipedia.org/wiki/Small_modular_reactor#Economics
Reprocessing makes the fuel more expensive by a factor of 3 or 4, but the fuel costs are pretty insignificant in the overall running cost of a nuclear power plant. Might make the final product a few % more expensive.
Regardless, I would happily swap a worldwide climate problem for a waste storage problem that could fit within a couple of warehouses.
LOL - I'll come back when you make me Deputy PM;
Apocryphal Winston Churchill quote seems appropriate here, as people have voted for MMP twice, despite much better alternatives being available for representative democracy:
“The best argument against Democracy is a five-minute conversation with the average voter.”
Also Churchill:
"Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.…’
Winston S Churchill, 11 November 1947
Define "stuff up". If that means getting rid of minority race based political policies that cannot be presented to the voters in a democratic manner, then we have stuffed up. If it means running financial matters in a reasonable intelligent manner, and having civil servants who actually try to look after the taxpayers who pay their wages, then we have stuffed up. Etc, etc.
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