Here's our summary of key economic events overnight that affect New Zealand, with news China seems to be making a play to be avoided as an investment destination.
But first, initial US jobless claims fell to just +192,000 last week when a small increase was anticipated. Still no labour market stress signals here. The total number of people on these benefits fell below 1.7 mln, the lowest level of the year. The insured unemployment rate remains at a very low 1.1%.
The globally benchmarked S&P Global/Markit factory PMI for the US rose (to 50.9) in May from its steady state in April although it did not get its boost from new orders this time. But new order growth was a feature of their May services PMI (54.8) with an impressive display and a two year high.
This May strength is yet to show up in the Chicago Fed's National activity Index which slipped slightly in April. But it is showing up in the Kansas City Fed's factory survey which recorded a good recovery.
It definitely did not show up in the April new home sales data, which in the month ran at almost -8% lower than the year-ago level. The retreat has been gradual each month in that period, but relentless.
Perhaps we should note that there was another case reported where bird flu in US dairy cows has jumped to a human. Officials still say the risk is low.
The internationally-benchmarked May S&P Global (Markit) PMI for Japan delivered its fastest expansion in nine months. Their previously shrinking factory sector rose to a minor expansion (50.5) while their service sector expansion slipped slightly (53.6).
India's PMI data continued its strong run in May, for both the factory and services sector. A feature is the growing rise in exports, presumably benefiting from the China de-risking trend.
Taiwanese industrial production was up more than +14% from a year ago in April. That is partly a reflection of weakness a year ago but for the past three months the month-on-month rises have been impressive and March was notably revised higher. Their retail sales growth was more modest however although its base was more solid. All this comes before the full-court pressure the PLA is currently applying to the island nation, a crude show of force in the Russian style.
Beijing's claim that they are 'prioritising business reforms' rings hollow in light of the Taiwan pressure.
In Europe, their economic recovery gained momentum in May, according to provisional PMI survey data. Faster increases in business activity, new orders and employment were all recorded in the month, while business confidence hit a 27-month high. This recovery is being led by Germany. Meanwhile, rates of inflation of both input costs and output prices softened from April, but remained above pre-pandemic averages in each case.
Australian inflation expectations, as monitored in a respected Melbourne Institute survey, eased to 4.1% for the year ahead, down from 4.6% last month. The last time they measured actual inflation, it came in at 3.5% in March.
The internationally-benchmarked May S&P Global (Markit) PMI for Australia delivered another small contraction in the factory sector (49.6) but a good expansion in the service sector (53.1). But both levels were lower than March and April. New orders retreated in both sectors, but to be fair the reductions were slight and the least in the past three months.
The tighter global security situation has seen the container freight rates leap again, up +16% in the week to their highest in at least a year. The jump is all about outbound cargoes from China which emphasises the risks of trade from there. The Taiwan situation will make it even worse next week. So far, bulk cargo rates haven't moved much in the past week.
The UST 10yr yield is now at 4.48% and up +5 bps from this time yesterday. The key 2-10 yield curve inversion is marginally more at -45 bps. Their 1-5 curve is less at -68 bps. And their 3 mth-10yr curve inversion is also less at -89 bps. The Australian 10 year bond yield is now at 4.36% 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 4.80% and up +6 bps from yesterday.
Wall Street is ending its Thursday trade with the S&P500 down -0.8%. European markets were mostly slightly firmer overnight, except London which fell -0.4%. Yesterday Tokyo ended its Thursday session up +1.3% and more than making back the prior day's drop. Hong Kong eased a sharp -1.7% and Shanghai was down -1.3%, a large retreat for them. Singapore was up +0.5% on the day as a haven for China's woes. The ASX200 fell -0.5% yesterday in sympathy with China but the NZX50 was up an unusual +0.7%.
The price of gold will start today still in a sharp down-trend, down another -US$51 at US$2336/oz. That is now down -US$119 from its all-time high on May 20, 2024, a -4.8% retreat.
Oil prices are down another -US$1 at US$76.50/bbl in the US while the international Brent price is down a bit less to under US$81/bbl.
The Kiwi dollar starts today unchanged from yesterday at just on 61 USc. Against the Aussie we are firmer, up +¼c at 92.3 AUc and a two-month high. Against the euro we are firmish at 56.4 euro cents. That all means our TWI-5 starts today just on 70.4, and up +10 bps from yesterday.
The bitcoin price starts today at US$67,776 and down -3.0% from this time yesterday. Volatility over the past 24 hours has been modest however at just on +/- 1.8%.
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62 Comments
"Gareth Kiernan, chief forecaster at Infometrics, said he expected house prices to be at 2023 levels in mid-2026.
"Our forecast horizon is mid-2029 and we still think house prices will be below the 2021 peak at that point"
https://www.rnz.co.nz/news/national/517687/house-prices-won-t-return-to…
From your link:
He said he still expected a more obvious upswing in prices next year.
"More demand-friendly housing policies...
So continued mass immigration then?
At least Aussie are looking into the downside of unaffordable housing/rents:
Another renter dealing with housing insecurity and affordability, Libby, said she and her family have had to move six times in six years.
The mother said all the moving has affected her kids because the sky-high rents pushed them out of their community.
Already the case in NZ with renting. I have friends with kids who have had to move multiple times in multiple years as 'the landlord is moving in', only to be relisted at a much higher price soon after or put up for sale. Very hard in many places for a single parent with kids to fund a house to rent, and miniscule opportunity, if any, for those with pets. Their parents ended up moving cities and buying, they all moved in together and their dad reno'd the place to have two split places internally and an extension off ne end to allow the other living room. Crazy times.
It really must just be luck. I've been renting for almost 30 years in Auckland. Over that time have lived in 8 different places. Only twice have we been forced to move. Once the landlord was moving in, the other time they were selling. All of them (or their agents) have been decent to deal with as well. Honestly I can't ever recall a problem they wouldn't solve. Had a cat at the last two places. I realise this doesn't seem to be common from the stories out there.
A quick search of rental properties in Sydney show there are plenty for less than $850 a week. Here's a perfectly reasonable four bedroom home in Blacktown for $670 a week. https://www.realestate.com.au/property-house-nsw-blacktown-439226284
People just want to live a lifestyle they cant afford, then blame everyone else when they struggle to afford it. Sydney is a big place, move to a more affordable area.
‘And we still think house prices will be below the 2021 peak at that point’
unlikely. If that’s correct, then our domestic economy is toast. At some point, our economy is going to be so weak that the OCR will be back to circa 2.0- 2.5%. Probably by early 2026. That will stimulate another round of house price rises, albeit muted.
I would say house prices will be back to 2021 peak levels in late 2026, then nudging up from there.
All this comes before the full-court pressure the PLA is currently applying to the island nation, a crude show of force in the Russian style.
Rules based order: Now we find Mike suggesting the US could be next. The implication seems to be that they are admitting that they have breached international law themselves. Mike is also threatening that the US will punish the ICC if they proceed with the case against Israel. Clearly Mike doesn't realise the optics in doing so. One may argue that threatening the Chief prosecutor in the ICC amounts to a breach of international law in of itself. Then we also come to the fact that they support the ICC ruling against Putin. They have now effectively made that position redundant. Link
Agreed. this sends a message to any nation that while any unwarranted invasion or war crime might be against international law, so might an excessive response. The US should be made to understand how they look to others internationally.
While Hamas' attack was insane and an extreme crime, so too is Netanyahu's response.
I too think the ICC should be commended for their actions on this.
According to the Ministry of Internal Affairs and Communications the number of vacant houses in Japan rose to a fresh record of 9 million in 2023, up 510,000 from the previous 2018 survey and representing 14% of all houses in the country, also a record-high.
https://japantoday.com/category/national/Number-of-vacant-homes-in-Japa…
Japan’s child population fell to 14.0 million in 2024, its lowest ever level. This is less than 40% of the senior population aged over 65.
Environmental protection/degradation authority.
https://www.sunlive.co.nz/news/343706-kiwifruit-orchards-saved--spray-r…
Hi cane is absolutely horrible stuff but in the name of economics we can justify anything.
You could say that, but half the planets population only exist because of synthetic nitrogen.
https://ourworldindata.org/grapher/world-population-with-and-without-fe…
So it's either poisoning the the planet with nutrient enrichment, mass starvation, or degrowth of the human population over time (which the economic growth cult are desparate to avoid).
But meat and dairy taste so good and we need to pay for imported tofu somehow. No, just destock to the point legumes can supply enough N instead of artificially forcing pastures. With the current numbers of humans could never grow enough of the rest of the human diet though which is mostly nutrition less carbs.
I work in crop protection and this is the industry standard. Hi-Cane is a nice euphemism for hydrogen cyanamide which as you said is terrible chemistry. Unfortunately, it is also very good at increasing the yield of acceptable fruit in aiding the bud breaking cycle including to produce less triple flowers, which would require manual pruning. There are other alternatives out there, but they are usually more hands on and require better timing in late Winter, prior to the first shoots breaking out.
Hydrogen cyanamide had initially been under review by the EPA as a carcinogen, however the authority reversed this when they found no evidence to support the claim.
Hmm, there being 'no evidence' it is harmful is not the same as it being known to be safe. I guess time will tell.
Yes, be very, very careful around fruits an vegetables.
"The toxicological significance of exposures to synthetic chemicals is examined in the context of exposures to naturally occurring chemicals. We calculate that 99.99% (by weight) of the pesticides in the American diet are chemicals that plants produce to defend themselves. Only 52 natural pesticides have been tested in high-dose animal cancer tests, and about half (27) are rodent carcinogens; these 27 are shown to be present in many common foods. We conclude that natural and synthetic chemicals are equally likely to be positive in animal cancer tests. We also conclude that at the low doses of most human exposures the comparative hazards of synthetic pesticide residues are insignificant. "
Not sure if you are being sarcastic or not with your first sentence but, yes, absolutely. People should ponder, for a moment, the vast majority of plant life is very toxic. Sometimes medicinal. Only a few species are deemed barely edible and then largely because of many years, in some case thousands of years, of human manipulation, to make them less harmful. Potatoes for example.
I recall picking up a cucumber for my wife at the supermarket and an elderly gentleman told me to make sure I peeled it as you wouldn't believe how many chemicals the growers sprayed on them. Tomatoes as well. I recall a large amount being stolen before they were due for picking and they were quite concerned about the sprays that were on them.
With natural toxins prey species have adapted to processing the plants they eat using gut microbiome so these toxins are not transferred so much to the meat. It could build up in some of their organs though. Every species would be different I imagine. This is why ruminant animals are considered best for consumption rather than chickens or pigs..or sharks. AI told me not to eat koala bears.
Yes, pesticide use it much lower now. Luddites and do gooders are quite environmentally damaging. Kind though.
"Biden et al.34 established the GM canola adoption rate in Western Canada over its first decade of 1997–2007 and compared this rate with the 2004–2014 Australian adoption rate, allowing them to estimate the economic and environmental costs of the moratorium. After a decade of full and partial state moratorium, the estimated costs include: the application of an additional 6.5 million kg of chemicals; 7 million additional field passes were made, requiring 8.7 million liters of diesel; 24 million kg of greenhouse gases were released; the environmental impact of the additional chemicals applied was 14% higher; and Australian farmers lost the opportunity to increase their farm revenues by A$485 million. This estimate of the costs of not adopting innovative technologies such as GM crops, highlights the significant increase in chemical use and environmental impacts from ignoring evidence."
Agricultural chemical use and the rural-urban divide in Canada
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10880490/
"Average application rates in the 1950s were 1,200, 1,700, and 2,400 grams of active ingredient used per hectare for fungicides, insecticides, and herbicides respectively. By the 2000s the average use rates were reduced to 100, 40, and 75 g/ha. This technology evolution means the amount of active ingredient used by a farmer today is around 95% lower than the rate used in the 1950s. "
https://croplife.org/wp-content/uploads/2018/11/Phillips-McDougall-Evol…
some 50 years ago I spent a couple of summers sitting on a tractor seat dressed in singlet and shorts spraying weeds with DDT/ 245T for neighbour farmers - no safety warnings on the containers and covered in the stuff by the end of the day
I told our kids that they were lucky to be almost ok but the damage done might get me yet
DDT wouldn't have killed many weeds, it's a pesticide.
Always thought it ironic that 245t was demonised, no way it was the worst chemical used and most of that was due to slack quality control producing dioxin.
I remember the story of someone drinking a glass of it to prove it non toxic. Fair to say you wouldn't even joke about such a thing with hi-cane.
I think it's the organophosphate pesticides, rather than herbicides that wreck your nervous system.
It is "unsafe" for a limited period. Spray drift is the main culprit of any issues, although that is regulated by the environmental conditions at the time of application. I have developed formulations including herbicides and fungicides; many carry dangerous goods and hazard pictograms as a product so are inherently dangerous However the EPA and ACVM bodies require (increasingly) rigorous residue testing to determine withholding periods. As a so-called "insider" I can earnestly say that you have little to fear. Just don't visit orchards and crop fields during the spraying applications.
for all you believers of infinite never ending progress ... a nice article
https://thehonestsorcerer.substack.com/p/the-end-of-science-as-a-useful…
On a similar vein, this doco on the moon landings apparently will make you question it ever happening (i havent had time to watch it yet_
https://www.youtube.com/watch?v=KpuKu3fF0BvY
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