Here's our summary of key economic events overnight that affect New Zealand, with news of some more suggestions that the global hard landing may be even further away. The 'soft landing' has actually happened and that's despite wars, China's stumbles and trade tussles.
But we start today with the results of the final dairy auction of the year and the results are somewhat mixed. The headline change is a good +2.25% rise overall in USD terms. The key WMP price rose +2.9% and the foodservice commodities rose much more with cheddar cheese up +6.9% and butter up a strong +9.9%. But volumes offered and sold were on the lowish side. And the whole event was somewhat undermined by a sharp rise in the NZD at the same time so that in NZD terms there was essentially no change from the last auction. Overall, the story is somewhat similar - from a year ago prices are now little-changed which isn't that great when you realise that prices this time last year were -20% lower than the prior year (even if they were unusually high in 2021). At least today's result is better than another retreat.
In the US, housing data has surprised with new housing starts soaring. Bolstered by low inventories and now lower mortgage rates, they jumped unexpectedly by almost +15% in November from October to an annualised rate of +1.56 mln starts, the highest rate in six months, and well above market forecasts of 1.36 mln. Starts for single-family homes jumped +18%, the highest level since April 2022, and those for buildings with five units or more went up +8.9%. It is certainly an eye-catching move. But we should note that residential building consent levels did not jump, so the housing start data may just be a one-off catch-up.
American retail sales last week rose +3.6% at bricks & mortar stores on same-store basis, so those gains above inflation are holding and a good sign for holiday retailing. Early indications however are that online shopping is performing better than in-store this year.
Meanwhile, consumer inflation in Canada eased in November to be +3.1% higher than a year ago. A year ago it was running at well over double that. Still, that is stubbornly above their central bank's inflation target. Canadian producer prices are still falling however, down -2.3%, so perhaps the Canadian CPI has more falls to go.
The Bank of Japan maintained its key short-term interest rate at -0.1% and that for 10-year bond yields at around 0% in a final meeting of the year and by unanimous vote. There are no surprises here and that was widely expected. The central bank also left unchanged a loose upper bound of 1.0% set for the long-term government bond yield. The yen fell -½% after the announcement, vs both the USD and the NZD.
Yesterday the release of the RBA minutes brought a fresh perspective to their 'warning' that rate rises may be needed if inflation doesn't cool further there. However those warnings are being ignored in wholesale markets, who are pricing in rate cuts in late 2024, not rises. And that is because the RBA also has an employment mandate, so markets don't believe its hawkish inflation-fighting talk.
We should also note that the Icelandic volcano near Grindavik has suddenly exploded. But this time there are no major ash emissions. Still, natural events like this (and the 2022 Tongan explosion) can have lingering global atmospheric implications.
Of more immediate concerns are the security issues for shipping in the Red Sea. An international military effort to keep the routes open is underway. Now giant Chinese shipping company COSCO is avoiding the area. Freight rates and the cost of many essential raw materials will likely rise because of all this.
The UST 10yr yield has slipped -4 bps today, now at 3.92%. The key 2-10 yield curve is marginally more inverted, now by -53 bps. And their 1-5 curve inversion is still inverted by -103 bps. And their 3 mth-10yr curve inversion is also marginally more inverted at -143 bps. The Australian 10 year bond yield is now at 4.09% and down -2 bps from yesterday. The China 10 year bond rate is up +1 bp at 2.65%. And the NZ Government 10 year bond rate little-changed from yesterday at 4.61%.
Wall Street is up +0.4% on the S&P500 in Tuesday trade. Overnight, European markets closed bookended by Frankfurt' rise of +0.6%, and Paris' rise of +0.1%. Yesterday, Tokyo rose a strong +1.4% in Tuesday trade, Hong Kong fell -0.8%, while Shanghai was essentially unchanged. The ASX200 ended its Tuesday session up +0.8% whereas the NZS50 managed a lesser but still goo +0.5% gain.
The price of gold will start today up +US$21 at just on US$2043/oz.
Oil prices are holding higher at just on US$74/bbl in the US although they had been lower in between. The international Brent price is now at US$79.50/bbl.
The Kiwi dollar starts today at 62.7 USc and up more than +½c from yesterday. Against the Aussie we are holding at 92.7 AUc. Against the euro we are up at 57.1 euro cents. That all means our TWI-5 starts today just on 70.8, up +40 bps from yesterday and back to more than a six month high.
The bitcoin price starts today at US$42,329 and up +2.1% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.5%.
Please note that we have the final of these Breakfast Briefings tomorrow (Thursday). Then we publish our content at a lesser intensity, more focused on holiday reads, reviews, and catch-ups. The advertising that powers much of our sustainability is already on holiday-mode, so this is when we really appreciate the vital support of readers. If you can support us during this commercially fragile time till the end of January, the team at interest.co.nz will be very appreciative.
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40 Comments
There are time we can laugh at Australian politics; Hanson, Hinze, Petersen, Dutton (note they're all from Queensland, albeit one can be traced to Dannevirke); the narcissism of Hawke - but this time the boot is on the other foot. At least we can promise to spend a bigger percentage of our GDP on space-militarization without spending a cent more...
https://www.youtube.com/watch?v=8L6KGuTr9TI
Sad indictment on a nation's intellectual immaturity
Ours.
Still, given that list of Australian maladroit identities, should New Zealand as some would wish become instead, Aotearoa then that would be an easy fit at least for our navy to join up with the Australian fleet. Because the navy’s vessels (both of them) would likewise be HMAS etc and no longer HMNZS. Just kidding!
100 million barrels of oil extracted yesterday; half of it burned as fuel, some of the remainder Haber-Bosch-ed into fertiliser. A large part of the rest into bitumen. From a finite stock.
But a goodly number of digits went into a bank computer, right? So that's all good...
Have a good holiday period - use that plastic oil-proxy while it still represents something.
:)
Serious answer: Short on logic.
The problem is the pursuit of exponential growth, based on physical extraction. That, jointly and severally, must both peak, and end. The only question of both phases is: When? (And given that the last 'Doubling Time' is going to be the last half of anything, we can guess pretty accurately).
So when humanity has commandeered so much of the planet - above-ground acreage, below-ground concentrated minerals, even the ability of the biosphere to absorb - we know we're into the last 'Doubling'. You put a percentage on that, and I'll tell you when it ends. You want 3% GROWTH? I'll tell you you're into the last 24 years...
This is corroborated by the smallness of future proposals; the DoC estate is hardly a doubling-potential, is it? And almost all proposals now, encroach on other spatial uses (forestry/farming/sprawl/fishing).
Thus, good leadership has to be addressing both the cessation of GROWTH, and the inevitable post-cessation reduction of GROWTH. That, in turn, tells us that this lot are a waste of preparation-time, in fact, worse, they're rolling back much of what already wasn't enough, anyway. We can trace this to money and lobbying - Brown and cars, Jones and fishing, Bishop and tobacco are my guesses amongst others - on behalf of the existing regime, and that's predictable. But good leadership is much more than that - Roosevelt comes to mind as an intellect capable of steering the past-clingers into the needed future.
Go well.
PDK you are correct but I don't see an alternative - for better or worse
As a species we have got ourselves into a position (lets be kind and say unwittingly) where a few billion people will be toast if we stopped using fossil fuels - and the great new green wave washing over us just results in the exhaustion of different finite elements of the planet so not really a solution
Meantime the greedy continue to plunder the oceans, chop down the forests and despoil the environment.
The big question is when will it end - because it is highly likely that it will - and it will be messy
My best guess is we will go sideways until 2030 via doubling down on debt to fund hard-to-extract oil and pumping as fast as we can (making future depletion worse). Then every year from then will have access to less energy and will be in permanent inflation and recession as we ride the curve downwards.
What can we do about it? Not much but investment now can make the downslope more manageable (not good but better than it would otherwise have been).
Here is a good piece on what to expect Ten Things that Change without Fossil Fuels
"My best guess is we will go sideways until 2030 via doubling down on debt to fund hard-to-extract oil and pumping as fast as we can (making future depletion worse). "
Depends upon who the we are you refer to....already some are suffering the reduced ability to access the required energy in a global bidding war.
Particularly grinding is the intellect of our elected representatives as they cram people into NZ as quickly as possible. "The population has become too large for the economy’s resource base"
The "good" news(sarc), is that the current government has canned free child care for 2 y.o.s That should put a dent into our indigenous birth rate, along with unaffordable housing for many and indentured sevitude to those brave enough to put their head in the noose. There's no better contraceptive than financial stress.
I think Dairy has a finite future, if you do some research it can basically be brewed and at a percentage of the cost, genetically identical and with minimal environmental impact, like beer more or less. The question will be what to do as an alternative, certainly not pines. To me it is an obvious pot hole the country is not looking at much at all. I believe Fonterra have made some investment already but I have been out of the industry for a few years now.
A whole bunch of doomsayers on here who cannot envisage a future that can involve growth without the additional use of resources is quite a statement. Have some faith would ya.
A pot hole - there is the answer - banned substances have a much better return than Fonterra
what could go wrong!!
You may be right about doomsayers but having returned from Asia its easy to see that the issues are getting worse not better in many parts of the world - and none are directly related to climate change. Shark fin soup anyone, tiger balm or bear gall bladder pills. Exotic timbers fresh from the national park where palm oil plantations spread. Got a waste problem just chuck it in the river it will be gone tomorrow, as are the fish and the water because its been dammed somewhere upstream
Willamone - sorry, but physics trumps faith (as our bumbling PM is about to find out).
That artificial food needs an energy-source. And a feedstock. Farming does that tapping into solar energy via photosynthesis, plus fertiliser via fossil energy. Lab food, I am prepared to acknowledge, could do it via electricity (grown under lights, as it were), but where is the electricity coming from, at that scale (replacing the solar-drenched paddocks)?
So many are energy-blind. Here's your holiday homework: https://www.thegreatsimplification.com/animations
Let's say you can produce milk protein twice as efficiently (note protein only currently, not fats, vitamins and other important parts that make up milk), then what will happen to milk protein consumption? The likely outcome is a doubling in consumption as proved many times via Jevons paradox. It could even go up more than that as more consumers that could not afford it previously start to buy it e.g. the third world's protein intake moves towards the first world levels. Then net benefit to the planet = 0 or negative.
The only way to reduce impact is to consume less and this will only happen when it becomes more expensive.
Faith? You have unwittingly stumbled over the root of the problem. "Strong belief in the doctrines of a religion, based on spiritual conviction rather than proof."
Nothing changed Frank..you just are too far away..
According to the 18th-century French banker and philosopher Richard Cantillon, who benefits when the state prints money is based on its institutional setup. In the 18th century, this meant that the closer you were to the king and the wealthy, the more you benefitted, and the further away you were, the more you were harmed. The same is true today, with the Fed’s anti-pandemic liquidity measures benefitting hedge funds and private equity firms first.
Edit - US Debt increased by 2.42 Trillion June to Dec 15 (nearing 34 Trillion total)
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