Here's our summary of key economic events over the weekend that affect New Zealand, with news of generally modest and uninspiring economic data.
We start today with updates from China.
Their April CPI came in +0.3% higher than a year ago, low but not as low as expected and not deflation yet (which they had from October to January). In the circumstances they will be ok with this. But both beef and lamb prices fell and quite sharply, not only from a year ago, but from March as well. Milk prices fell as well although by lesser amounts.
Meanwhile, Chinese producer prices fell and at a slightly faster rate than the -2.3% expected, down -2.5% from a year ago.
Also much lower than expected is new bank lending. This activity was far less than in March and far less than what was expected. To be fair, there is usually a retreat in April from March, but just barely achieving the April 2023 level will have been quite a disappointment, especially as Beijing is on record encouraging lending (especially to property developers). The analysts expected lenders to heed the signals, but it seems they ignored them. Overall credit came in with a rare contraction. And the April new yuan loan level is near the trough of levels we have seen since late 2017.
Foreign direct investment fell a sharp -56% on the year in the first quarter of 2024, according to official Chinese data. It rose +US$12.5 bln in March from February 2024, much lower than the +US19.7 bln rise in the same period in 2023, and the +US$21.5 bln in the year prior. Global business are still reluctant to invest in an economy grappling with weak internal demand, and veering into Party controls of business operations. Foreign companies made just US$10.3 bln in net direct investments lower than during the same period last year. It is a falling trend that started by Shanghai's COVID lockdown.
China's vehicle sales grew by +9.3% in April from the prior year to 2.36 million. This follows a +9.9% March increase. Sales of new energy vehicles jumped by 33.5%. But we can also see this current overall sales level is only at the April 2018 level, so the 'growth' only underscores how weak it has been recently. But for car sales, they don't have this on their own.
The coming week will bring updates on China's industrial production, retail sales, fixed asset investments, the house price index, and the unemployment rate for April. None of these are expected to show anything but modest changes or real improvements.
In Japan, household spending there dropped in real terms by -1.2% in the year to March, compared with market forecasts of a -2.4% fall, after a -0.5% decline in the prior month. It was the 13th straight month of declining personal expenditure, dragged by weak spending on housing, fuel, electricity & water charges. In contrast, expenditure for food, transport & communication, and education all rose.
Across the Pacific in the US, the widely-watched consumer sentiment survey by the University of Michigan fell in May and by more than expected. The driver was the expectation that future inflation will rise again and that unemployment and interest rates may all be moving in an unfavourable direction in the year ahead. But we should also note that May often delivers pessimist results in this survey and the current level is +14% higher than a year ago. Since June 2022 the trend has been rising and the latest result is not out of trend.
Global wheat prices rose to their best level since August after the important May USDA WASDE updated production and demand estimates. Rising production in the US, China, Australia and Canada is offset by falling output in the huge Russian regions, Ukraine, and the EU. Global corn and rice output is expected to rise. American beef production is expected to be lower as herds are rebuilt in 2024/25. And they have raised their forecast milk price.
Canada delivered its best jobs report in April since the start of 2023 with an increase of +90,400 new jobs in the month with a broad-based rise. But full-time positions increased by +40,100 while part-time jobs rose by +50,300. There are now 20.5 mln people employed in their workforce with a jobless rate of 6.1%.
Indian industrial production rose +4.9% in March, which was less than the expected +5.1% rise and lower than the February +5.6% rise. There are signs that the election underway there is creating some uncertainty and some voters tiring of BJP rule. But the BJP controls the voting system so a change to the Modi government isn't expected, just that tensions might be being suppressed.
The Australian federal budget will be released tomorrow (Tuesday) May 14 and more "pre-budget announcements" are being released. A big one over the weekend was that they will spend more than AU$11 bln on social housing initiatives to try and get on top of their housing crisis for low income people.
The UST 10yr yield is now at 4.50% and unchanged from Saturday. The key 2-10 yield curve inversion is marginally deeper at -37 bps. And their 1-5 curve inversion is still at -67 bps. Their 3 mth-10yr curve inversion is now at -88 bps and marginally shallower. The Australian 10 year bond yield is now at 4.41% and unchanged. The China 10 year bond rate is up +1 bp at 2.34%. The NZ Government 10 year bond rate is now at 4.79% and down -1 bp. A week ago it was at 4.89%.
The price of gold will start today down -US$8 from Saturday at US$2360/oz. It is on the rise again, mainly on Chinese demand, and heading back toward its mid-April all-time high. For reference it was US$2300 a week ago, so up +3.0% in the past seven days.
Oil prices have fallen slightly to just under US$78/bbl in the US while the international Brent price is now just under US$82.50/bbl. These are both the same levels of a week ago.
The Kiwi dollar starts today little-changed from Saturday at just under 60.2 USc. A week ago it was at exactly the same level. Against the Aussie we are also unchanged at 91.1 AUc. Against the euro we are unchanged at 55.9 euro cents. That all means our TWI-5 starts today just under 69.6 unchanged from Saturday but marginally firmer from a week ago.
The bitcoin price starts today at US$61,614 and up +1.9% from this time Saturday. Volatility over the past 24 hours has been low at just under +/- 1.0%.
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42 Comments
In our wild and wacky world of bureaucratic shenanigans, the US BLS has discontinued coffee prices in CPI inflation data. That means coffee is not included in the the April 2024 CPI inflation report.
Let's look at coffee prices in the near term. Since September 2023, coffee prices are up a whopping 78%. From January 1st, coffee prices gained 35%.
Bring on the clowns.
https://www.bls.gov/cpi/additional-resources/discontinued-series.htm
Correct. If you want to understand the definitions and relationship between CPI and average prices,
Their empire, so to speak, was condemned in my eyes after they bailed out so many of those that caused-by-knowingly-facilitating the GFC in the name of preventing a collapse, but in reality from preventing other countries having the opportunity to gain more influence in the global economy and potentially overthrow their reserve currency. It was only a matter of time thereafter before the debt became too much and they fulfil the way of every other global empire which enjoyed the benefits of a reserve currency in history.
Over in Aussie, retail share prices walloped as consumers hope for tax cuts and positive news on the Ponzi.
Consumers are increasingly bullish and banking on tax cuts and higher property values to buoy their finances – optimism which did little to stop a slide in retail stocks as investors took in weaker-than-expected sales so far this year.
Shares in Baby Bunting, the country’s largest children’s products retailer, tumbled more than 22 per cent on Thursday as it revealed profit for the 12 months to June 30 was likely to be as low as $2 million, compared to $14.5 million a year earlier.
Electronics outlet JB Hi-Fi, automotive chain Super Retail and online furniture store Temple and Webster also dropped on disappointing results, with shares in the latter falling more than 17 per cent to $10.46.
https://www.afr.com/companies/retail/shares-smashed-optimistic-shoppers…
And closer to home: https://www.rnz.co.nz/news/business/516469/warehouse-group-profits-sale…
Its only going to get worse as the younger people get online shopping savvy. AliExpress is killing it, its the first place I go now for any small items, including clothing that can be sent by courier to you. More than half the stuff you buy here now is made in China anyway, so why pay 300% mark up to get it locally. Packages are now arriving in as short as 7 days, I have had stuff sent out of the south island that's taken longer on Aramex.
Its only going to get worse as the younger people get online shopping savvy. AliExpress is killing it, its the first place I go now for any small items, including clothing that can be sent by courier to you.
Really? Younger people would buy an egg slice and pay to have it delivered? F'more, the cost to serve is completely unviable for ecommerce companies.
I've bought items smaller and cheaper than an egg slice online. Why? Because it costs less and is much less hassle. If I go in to town, it costs money for petrol, I have to find a park, shops often don't have what I am looking for and most retail staff add absolutely no value to the transaction whatsoever. Food items aside, it won't be long until I do almost all of my shopping online - and a chunk of it from international websites. Come to think of it, I am already there!
OK. How viable do you think this business model is? Considering that online grocery shopping is unviable in NZ and more or less unviable anywhere else, how will this industry survive without an army of South Asians being paid $10 per day?
HelloFresh is collapsing in the US, but here is Nu Zillun, she'll be right?
https://finance.yahoo.com/news/hellofresh-close-georgia-distribution-ce…
Long term it will only send our money offshore but as more and more people learn of Aliexpress, Temu etc then with the cost of living as it is, a good amount of people will go for price and convenience over moral high ground of supporting local. If or when that model collapses then perhaps we'll see a change in trend but I can't see it going any but one way for a few years at least.
Considering that online grocery shopping is unviable in NZ
Is this really the case? I can see what you mean about services like Hello Fresh and My Food Bag, but regular online grocery shopping seems to have stood the test of time. I was doing online grocery shopping with Countdown 15 years ago. It was a no-brainer as the delivery fee was cheap considering the cost of going to a supermarket and spending an hour or more doing so.
but regular online grocery shopping seems to have stood the test of time.
What proportion of grocery shopping occasions are done online? If it were so cost-beneficial to shoppers, everyone would do it.
If investment online grocery shopping is being discontinued in S'pore, why would it be any more viable in NZ?
Online grocery shopping will not disappear as long as there is a shopper to pay for the cost to serve.
I don't know about the proportion, but there has been a significant increase. It used to be that you had your pick of delivery slots - next or even the same day - but now you sometimes have to plan a couple of days ahead. This is not due to less capacity but more shoppers.
A big difference is that we now have a large underclass of migrant workers supporting online retail of food, groceries, liquor, etc. on the cheap compared to say 5 years ago.
Those 100K+ low-skilled workers living here with their families will take any form of supplementary income (stock supermarket shelves at night, drive Uber, etc.) to afford even the very basics.
In short, consumers get cheap stuff, businesses get higher margins and low-skilled migrants get better living standards compared to their source country. Over the long run though, we all get shafted with a worse-off economy and outdated infrastructure but she'll be right.
How viable? That's not a question I ask myself when I make a simple purchase decision. Of course, I'd prefer to buy locally and support New Zealand businesses but my experience is that a lot of New Zealand businesses are poorly run, and when prices are higher locally AND you can buy the exact same item online from an overseas vendor AND it will arrive faster than if you had ordered it from a local vendor, then how can you argue against it? Some Kiwi businesses need to be asking themselves some really tough questions.
For a specific example, I used to buy some supplements from HealthPost which is based at the top of the South Island. Make an order and the item would be packed and shipped anywhere between 1 and 3 days later. Delivery to me in Napier would take another 1 - 3 days. Order the same item online from iHerb in the USA and it's usually packed and dispatched within a couple of hours. The free delivery option (from the USA, all the way to Napier!) usually takes 4 days. On a couple of occasions, orders have arrived in 3 days i.e. ordered Sunday morning NZ time, and delivered Wednesday morning NZ time. To be clear, this is the FREE delivery option which uses Aramax locally.
Sorry, NZ businesses, while I'd prefer to support you, to often my experience has been lousy. Some of you *really* need to pull your socks up.
You have clearly not heard of Uber Eats, some people pay to have a burger delivered to their door ! You can get $16 items sent freight free out of China, its now costing me $11 to send a small package to Auckland. Price up your time and the cost of petrol, its not worth leaving your house.
Hmmmmm....https://www.temu.com/nz/
Losses of $500,000 to scammers by two investors thinking they were putting their money into safe TD investments. How will this be fixed if ever
I always put my money through reputable and established NZ banks and ASB securities brokerage. Never would consider citibank. I havent checked but perhaps can buy Macquarie green bonds through ASB securities as well
https://www.nzherald.co.nz/nz/nz-first-candidate-former-police-officer-…
Losses of $500,000 to scammers.. two investors thinking putting their money into safe TD investments. How will this be fixed if ever
By taking individual responsibility. If you don't believe that you can fully trust non-face to face management of your money, you should read all the risks associated in any contractual arrangement so you understand potential losses. Also, if you want to make a term deposit with a NZ bank, you can do this via phone. You can double check that the phone number and person you are talking to.
Interesting, seems that banks hide behind privacy laws and generally fight tooth-and-nail to avoid adopting new technologies that would reduce the attack possibilities for scammers.
If bank accounts were like websites, then your mule account wouldn't be able to get a HTTPS certificate to say their website belonged to Macquarie asset management (Without that part being its own elaborate scam). You would not be so foolish as to trust them when they say "send money here, yep its definitely us!"
For now all our minor financial institutions insist on just sending account numbers around; they tell us to trust them but don't put up anything as proof of identity or intent.
Blah indeed.
Dairy farm receivership: BNZ owed $36.5m from Waitonui limited partnership
Waitonui was established in 2019 when Milltrust, a UK investment manager, acquired nearly 30 per cent of Waitonui Milltrust Agricultural Holdings (WMAH).
The move consolidated a number of investments already made which Milltrust at the time said culminated in the establishment of a large-scale New Zealand integrated dairy and beef farming enterprise.
Milltrust said the venture had received the support of the UK local authority pension fund assets managed by Milltrust and its affiliate, Milltrust Agricultural Investments.
I am still surprised at what is paid for primary production land in NZ - very few stack up as a sensible business investment especially if you properly account for operational risk
and I understand the emotional attachment as family are farmers but I do think a correction is coming - especially for the sheep farmers where costs that they cannot control keep rising. And many of the costs are real when you live at the end of a long and winding road on the east cost or in the marlborough sounds where multi million dollar costs are involved keeping roading networks open for essentially loss making business operations
Here is a suggestion for those cash strapped sheep farmers: Plant more trees and utilize the carbon scam!
From Forest360 May 2024 report: This price point still provides for a very tidy return of around $1,605/ha and, with current returns from sheep, there will be many farmers very thankful for including carbon in their cashflow.
I am still surprised at what is paid for primary production land in NZ
It's no different than other property when it comes down to it. The business is just expected to cover the mortgage with the real reward coming from capital gains (sometimes exceptional if rezoning is involved). A lot of farming business are going to find themselves in trouble for exactly the same reason that a lot of residential property investors are. Same principles, different markets.
Hopefully the fatma are acquired by someone who actually knows how to run them.
https://www.stuff.co.nz/waikato-times/news/124953876/effluent-failures-…
Across the Pacific in the US, the widely-watched consumer sentiment survey by the University of Michigan fell in May and by more than expected. The driver was the expectation that future inflation will rise again and that unemployment and interest rates may all be moving in an unfavourable direction in the year ahead.
The Biggest Crash in 46 Years Sending MASSIVE Job Safety Warning
Another critical economic measures shows big negative changes and they aren't "inflation" problems. It's not just that American consumers are cracking, the consistent theme which keeps coming up over and over is jobs. The US labor market has been stuck in half a recession already, is this now the other half?
When a market is dysfunctional and only serves to make a subset richer - what do you do?
Answer: Make it worse.
For that is exactly what will happen when the Aussies attempt to help 'poor people' into housing.
What they should be doing is addressing the reasons why so many upper income people own more than one house. (NZ likewise!)
Aussie and Kiwi exports overwhelmingly originate in the regions/rural areas, so the only way for policymakers to prop up the urban economy is by inflating aggregate demand in major cities via means such as population growth, cheap money, perverse tax structures, etc.
Think Kiwibuild....just like NZ the 'announcables' are easy...delivering not so much.
https://www.abs.gov.au/statistics/industry/building-and-construction/bu…
Ford Begins Cutting Supplier Battery Orders As Electric Vehicle Market Sours
US set to impose 100% tariff on Chinese electric vehicle imports
Move marks latest effort by Biden administration to protect domestic industry from cheap competition
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