Here's our summary of key economic events overnight that affect New Zealand, with news China is rushing billion of support to shore up their wavering property sector.
But first, China's industrial production growth recovered in April after a disappointing March to be back the expansion level in the prior three months. But this is the only 'good news' in yesterday's data dump from the Middle Kingdom.
Their retail sales rose by only +2.3% year-on-year in April, down from +3.1% in March and missing market forecasts of +3.8%. That is quite a miss.
Electricity production slipped in April from March to be up only +3.1% in the year. That is a long way lower than the +8% rise in the year to December. If 3.1% is a proxy for GDP, they are not on track to achieve Beijing's growth targets.
Prices for new dwellings fell their most since July 2015. Prices for resales fell even more. The depth of their property sector retreat is laid bare here - and this is official information. It is no wonder they are considered a wholesale state intervention in the sector.
To clear away the drag that their property market has created, Beijing has taken some 'drastic moves'. The central bank has removed its lower limit banks can charge for home loan rates, nationally. It has cut interest rate benchmarks for housing-related lending by -25 bps.
And it has allocated ¥300 bln (NZ$42 bln) for lending aimed at buying by local authorities for unsold housing for "social purposes". They said the ¥300 bln of central bank cash will translate into an estimated ¥500 bln of credit overall.
We should keep an eye on their giant car manufacturing industry too. Its sales options are being constrained by new US tariffs, plus the market-dominant players are cutting prices aggressively too. (BYD cut another -5% this week.) Few are going to report profits in the current year, and many may not even survive. Competition this fierce is unstable for a nationally-important manufacturing base. It would be no surprise if beijing has to set it to clean things up here too.
The UN says India’s growth will rise in 2024 to +6.9%, from the 6.2% they estimated in January, driven by strong public spending and growing private consumption. The other big mover is Brazil, up to an expected +2.1% in 2025 from a January estimate of +1.6%. The US is still expected to expand +2.3%, Japan by +1.2%, China by +4.8% and the EU by +1.0%. Australia is +1.6%. New Zealand is ignored by this UN review.
The EU released its final April CPI rate which came in at 2.6% for the block, 2.4% for the Euro Area. Bothe were little-changed from March but sharply lower than a year ago. In April 2023 the EU rate was 8.1%. the Euro Area was 7.0%. Getting rid of dependence on Russian oil and gas has not been at the cost of higher inflation. But we should observe that the range is wide across the bloc between countries. Denmark recorded at 0.5% annual inflation rate in April, whereas Belgium 4.9% and they are less than 700 kms apart.
We should note that the social tensions in New Caledonia are echoing in the nickel market because there is an important mine there. It is the world's third largest producer, and my help explain why France isn't taking any backward steps. Global nickel prices have risen more than US$2000/tonne, up +11.2% over the past week over supply fears. It is a key ingredient for making stainless steel.
In Australia, casino operator SkyCity Entertainment (SKC) has said it had agreed to a proposed penalty with the AML regulator AUSTRAC, admitting it had broken the law by not carrying out customer due diligence with higher-risk customers. It will cost them NZ$73 mln to resolve the matter. It has provided for about $150 mln in its accounts in anticipation, so oddly it will get a profit boost when it reconciles the provision with the actual penalty.
The UST 10yr yield is now at 4.42% and up +4 bps from this time yesterday but down -8 bps from this time last week. The key 2-10 yield curve inversion is less at -40 bps. Their 1-5 curve is shallower at -69 bps. And their 3 mth-10yr curve inversion is shallower at -95 bps. The Australian 10 year bond yield is now at 4.29% and up +3 bps. The China 10 year bond rate is unchanged at 2.32%. The NZ Government 10 year bond rate is now at 4.66% and up +3 bps from yesterday but dowen -14 bps from a week ago.
Wall Street's Friday session was up a minor +0.1% on the S&P500, but up +1.3% for the week. Overnight European markets all fell about -0.2%. Yesterday Tokyo ended its Friday session down -0.3% for the day but up a strong +1.5% for the week. Hong Kong rose +0.9% to be +4.7% higher for the week. Shanghai jerked +1.0% higher at its close to be +0.5% up for the week. Singapore ended up +0.3% on Friday. The ASX200 ended its Friday session down -0.9% to limit its weekly gain to +0.8%, and the NZX50 fell -0.2% to end its week down -0.5%.
The Fear & Greed index has moved back into the "greedl" range as risk appetites return.
The price of gold will start today up +US$39 from yesterday at US$2419/oz. That is up US$50 for the week and a new all-time high. Silver has shot up too, up +12% for the week.
Oil prices are up +50 USc today to just over US$79.50/bbl in the US while the international Brent price is now just on US$83.50/bbl. Both are a bit more than +US$1 higher that a week ago.
The Kiwi dollar starts today up +20 bps from yesterday at just under 61.4 USc. That is up +120 bps in a week. Against the Aussie we are up at 91.7 AUc and a new one month high. Against the euro we are also firm at 56.4 euro cents. That all means our TWI-5 starts today just on 70.4, up +20 bps from yesterday and up +80 bps in a week.
The bitcoin price starts today at US$66,847 and up +2.9% from this time yesterday. And up +10.6% from this time last week. Volatility over the past 24 hours has been modest however at +/- 1.8%.
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48 Comments
How others see us
"Australia is now gaining 2,000 more New Zealanders every month as they go in search of opportunity. "
https://www.abc.net.au/news/2024-05-18/nz-unemployment-high-kiwis-comin…
The immigrants will find work. Join the dots.
It's not really comparing apples with apples when the immigrant gets the 'bonus' of residence (worth hundreds of thousands of dollars) after driving a bus for a couple of years and the existing NZ citizen only gets the same wages for driving the same bus though is it.
Apparently you're quite happy to import a couple of hundred thousand immigrants driving up housing costs, requiring medical, education resources etc so that the declining number of net income taxpayers (now less than half of NZ households) can keep funding people to sit on their couches.
Personally, I'd rather have the immigrants who will contribute much more to NZ. I walked along a street in Petone yesterday to meet someone for lunch; I passed several beggars sitting on the footpath with their bowls out. One asked me if I could spare $10 - clearly inflation has had an impact on the going rate Beggar groups travel to Rotorua to make up to $400 a day from ‘generous’ locals - NZ Herald
Their opening paragraph ...
"The job losses in New Zealand are piling up as the government slashes the public service, major media companies close and cut programming and employers in food manufacturing and fashion shut down. "
Note no mention of central bank actions in this paragraph? We have to get to the 5th paragraph before we hear about it.
"Like Australia, the country was dealing with rising inflation when the central bank started to increase the official cash rate. "
We're told that there is no other alternative. It just has to be. There's no other way. Nothing to see here.
Talk about conditioning!
Denmark recorded at 0.5% annual inflation rate in April,
Denmark handled that inflation surge well. They stamped on profiteering (grocery sector), put temporary limits on rent increases, subsidised energy costs to prevent price contagion, and their collective agreement pay structure held wages down.
What is interesting about wealthy countries like Denmark and Switzerland is that they have worked out that people being wealthy is an inflation risk because businesses with market power (and landlords) can push prices and profits up, and customers can still afford to pay. So they regulate prices and monitor profiteering aggressively. A far more elegant and direct approach than crashing the economy with interest rates.
How is two-three immigrants per newborn working out for kiwiland?
"Denmark — under Social Democrat Prime Minister Mette Frederiksen and her center-right predecessor Lars Løkke Rasmussen — has pursued some of the toughest immigration policies in Europe over recent years. Denmark’s policies were initially seen as extreme in countries such as the United Kingdom, Sweden and Germany but over recent years lawmakers in those states appear to have moved closer to Copenhagen’s line, and to some extent, followed its example."
https://www.politico.eu/article/denmark-migration-eu-parliament-electio…
Check out the increase of population of North African refugees in Monaco, Lechtenstein, Luxembourg, and Andorra. Practically zero over the last few years. it turns out that tough border controls can work, if the government wants them to. The reason other countries have ridiculous population demographic changes is because their governments allow the changes to happen. Quite simple.
How is two-three immigrants per newborn working out for kiwiland?
Thanks for pointing this out. Actually, Denmark stands out as one of the strictest EU countries on immigration.
Denmark — under Social Democrat Prime Minister Mette Frederiksen and her center-right predecessor Lars Løkke Rasmussen — has pursued some of the toughest immigration policies in Europe over recent years. Denmark’s policies were initially seen as extreme in countries such as the United Kingdom, Sweden and Germany but over recent years lawmakers in those states appear to have moved closer to Copenhagen’s line, and to some extent, followed its example.
https://www.politico.eu/article/denmark-migration-eu-parliament-electio…
the major beneficiaries of NZ's immigration policy seems to be the owners of NZ's capital & land.
The insane policies of NZ and Aussie are designed to protect the Ponzi; to ensure a supply of exploitable labor; and to maintain consumption volume as reported by GDP scorecards. It's the low-hanging fruit option to drive economic vitality.
Disgusting really. They don't give a rats about the migrants' welfare, particularly the lower skilled migrants. And in many ways, they don't give a rats about existing citizens on the lower end of the socio-economic totem pole.
What excessive neoliberalism in NZ? We have one of the most centralised economies in the OECD. Our housing and building market is statist - you have to get a permit to renovate your bathroom! Do you live in NZ?
"Of every dollar of government spending, more than 90c is controlled by central government in Wellington. Across the developed world, only Greece and Ireland are more centralised than New Zealand."
One of my sons and partner live in Denmark. I visited last year. All I would say is we could learn a few things. Not just politicians but NZers in general as their success is due mainly to their attitudes and mindsets which, sorry to say, are very different to most here, for the better of all there.
For starters ... Denmark has the highest per capita bicycle usage worldwide.
https://www.visitdenmark.com/press/latest-news/facts-and-figures-cyclin…
A few
1. Education is highly valued at all levels from checkout to phd. All education is free and support wrapped around. I see this as key to their success. Look at Treasuries last summary here - not a mention of education.
2. Respect all levels of people. Well paid but highly taxed but amazing public transport and health care. Education attracts the brightest and companies based on knowledge. Everyone seems happy and for the common good. Dominos pizza opened there and closed 2 years later as no one bought crap food.
2. There seems the ability to get a consensus.
3. Flashing wealth isn’t done. People buy one house, no housing frenzy. It seems you get taxed heavily if you try to leverage and buy houses. You can do rentals but strict rules. They only build quality - no Kmart or Warehouse.
4. Non Danish can buy a house but if you leave Denmark you can’t rent it out. You have to sell. No speculation. It’s nearly impossible to get a Danish passport. You can get a work visa that roles over as long as you behave.
5. They follow the rules. No jay walking, wait at crossings until light says go even if no traffic - everyone follows rules. Example if you cycle and don’t have a working bell or light you get fined. No warnings etc - you knew the rules, break it and get fined no exceptions.
A lack of angry people, very chilled. Saying that they drink like fish and know how to have a good time!
I have a friend who is a senior partner in a big accounting firm here. When the accounting rules changed a while ago Denmark decided they were silly so set there own. He told me they are so practical and sensible he wishes he was there.
In economic theory, many believe that "markets" will behave efficiently if all market participants are equally well informed. (I don't subscribe to this view because too many of the owners of the suppliers believe they have the right to plunder.)
We know that consumers - as a group - are poorly informed so their responses to market changes (e.g. price rises) are often far from rational.
Their fault? No.
Expecting the average person - remember half of the population have a below average IQ - to be experts in the market of every product they consume is nonsensical. And even those with the gift of both time and an upper IQ will be stretched to understand the impact of every product they consume.
And this is where Governments can improve the efficiency of the market. Governments have considerable resources and can ensure they are experts in every market. Thus Government interventions in markets - in effect filling the knowledge gap among consumers - is in fact an example of markets behaving efficiently.
Or put another way ... When major disruptions to normal markets occur, e.g. energy shocks ... No Government intervention = inefficient markets. (I.e. Capitalism - or as it gets called nowadays Neo-Liberalism - fails. I should add that the owners of the suppliers have no interest in efficient markets, only the extraction of profit.)
"and that my friends is why communism works so well."
No. It isn't. And it won't.
Governments, like everyone else, does not have unlimited resources. Nor can we realistically expect whoever Governments directs at improving Production will be as motivated to improve the process as much as someone whose livelihood and/or passion is directly involved.
Looks like the global economy is in trouble then...........https://www.theguardian.com/environment/article/2024/may/17/economic-da…
And folk wonder why everything things to be going backwards - it's hidden in plain sight.
Sadly, this has be known about for quite some time.
Way back when I was at Uni (80s) we looked at the economic collapse of in the Middle East and parts of Africa as droughts became more common and lasted for longer. The direct losses were huge. And the secondary losses (wars, mass migrations, institutional collapse, etc.) even larger still. And as we all know, they continue to mount with no end in sight. As the planet heats further, we'll see similar scenarios play out all over the world. Some of those scenarios - predicted back in the 80s - are well in train now.
May you live in interesting times.
Who predicted global greening and record crop yields in the 1980's? Certainly not the UN, the Guardian(!) or the climate change industry?
"Here we report, using high-resolution satellite imagery, that woody vegetation cover over sub-Saharan Africa increased by 8% over the past three decades and that a diversity of drivers, other than CO2, were able to explain 78% of the spatial variation in this trend. A decline in burned area along with warmer, wetter climates drove WPE, although this has been mitigated in areas with high population growth rates, and high and low extremes of herbivory, specifically browsers. These results confirm global greening trends, thereby bringing into question widely held theories about declining terrestrial carbon balances and desert expansion. Importantly, while global drivers such as climate and CO2 may enhance the risk of WPE, managing fire and herbivory at the local scale provides tools to mitigate continental WPE."
"Who predicted global greening and record crop yields in the 1980's?"
Economists did.
We observed that adding significant amounts of capital to the process of growing foods resulted in huge increases in crop yields. The capital was applied to the whole process, from selecting the best land for crops, adding machinery like tractors / ploughs / harvesters / heavy vehicle supply chains / etc., and of course fertilizers, many of which are derived from petrol-chemicals or consumer significant quantities of hydrocarbons to produce and transport.
Compare published Nature paper to your reckon above "...as droughts became more common and lasted for longer."?
Do you have link for your economists prediction reckon? What mechanism does increased capital increase global greening?
"Here we use three long-term satellite leaf area index (LAI) records and ten global ecosystem models to investigate four key drivers of LAI trends during 1982–2009. We show a persistent and widespread increase of growing season integrated LAI (greening) over 25% to 50% of the global vegetated area, whereas less than 4% of the globe shows decreasing LAI (browning). Factorial simulations with multiple global ecosystem models suggest that CO2 fertilization effects explain 70% of the observed greening trend, followed by nitrogen deposition (9%), climate change (8%) and land cover change (LCC) (4%). CO2 fertilization effects explain most of the greening trends in the tropics, whereas climate change resulted in greening of the high latitudes and the Tibetan Plateau. LCC contributed most to the regional greening observed in southeast China and the eastern United States."
Again what is your point? If you could let us know where you are on the climate change denial stage today it will help us.
1. Human induced climate change isn't happening
2. Human induced climate change isn't bad it's good
3. Human induced climate change can't be mitigated
4. Human induced climate change is too expensive to mitigate?
I feel like today your at level 2 but you do switch quite a bit, not sure how much your employer's direct you on which messages to use at which time.
https://www.google.com/amp/s/amp.theguardian.com/environment/climate-co…
"Global use of nickel is currently 68% in stainless steel, 10% in nonferrous alloys, 9% electroplating, 7% alloy steel, 3% foundries, and 4% other (including batteries)." Source: https://en.wikipedia.org/wiki/Nickel (I thought it best to get in quick before the petrol heads went on the warpath. ;-)
To clear away the drag that their property market has created, Beijing has taken some 'drastic moves'.
+
The price of gold will start today up +US$39 from yesterday at US$2419/oz. That is up US$50 for the week and a new all-time high. Silver has shot up too, up +12% for the week.
Coincidence?
Silver has shot up too, up +12% for the week.
Up 6%+ overnight. First time silver has closed above $30 in over a decade.
Game on.
Described by one of my mentors as "the most anti-climatic, stealth bull market move in silver I have seen". Mainstream media ignoring it. Short positions against silver are massive and it's unclear if the underlying physical is even available for delivery.
But is this a short covering rally? Jamie Dimon will have a team lurking in the shadows. Watching. Plotting. Growing stronger. Getting smarter.
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