Here's our summary of key economic events over the weekend that affect New Zealand, with news American factory orders are rising and setting up a good second half of 2024.
But first we should note that the US is on holiday today and tomorrow, their Memorial Day (like our ANZAC Day but with more retail). This marks the start of their summer season when investors traditionally pull back from markets a little. But to be fair, it is less of a 'thing' now than it used to be. They return Wednesday, NZT.
The week will be 'highlighted' by the first full Budget by the new government, on Thursday. In Australia, they will release CPI inflation data, and inflation data will also come out in Germany and the EU. There will be Japanese data too (retail sales and industrial production) and some important guidance from the Bank of Japan. And from the US, they will release an important PCE update, more data on their GDP growth, consumer sentiment (CB) and home sales updates. We will also get the official PMIs for China for May at the end of the week.
And this is a big week in India. It is the final week in their six-weeks of staggered regional voting for 543 parliamentary seats. The ruling BJP are expected to win in what is a system with questionable vote-counting integrity. Final official results will be released some time on Tuesday, June 4, 2024
In China, isolation by foreign investors is becoming quite stark. New net foreign investment grew a paltry +US$8.3 bln in April from March which looks like it is a decade low. For a country the size of China, this amount is just a 'rounding error'. In April 2023 it was only +US$14.1 bln and also considered low. In fact the total new foreign investment in the first four months of 2024 was -31% lower than in the same period a year earlier which itself was weak. The international de-risking trend is biting hard now as the nation turns inward.
And Bloomberg has an interesting story about the record withdrawals from Chinese bank deposits in April. One-year term deposits at China’s largest banks pay a record-low of just 1.45% pa. There was a large -NZ$880 bln outflow in deposits from banks in April, -1.3% of all deposits, and much of it flooded into bonds and "wealth management products". The policy goal is to spur national economic impetus by making these funds work harder. But China has had significant issues with "wealth management products" in the recent past so this is a very risky strategy. There is a history of a lot of people getting hurt - and very angry.
In Japan, their inflation rate fell to 2.5% in April from 2.7% in March. Their core inflation rate dropped to 2.2% from 2.6%. While these falls were not unexpected, they are the lowest levels since January.
Singapore's industrial production recovered sharply in April after the big miss in March. But it still isn't back to year-ago levels.
Across the Pacific, US durable goods orders rose by +0.7% in April from March, following a +0.8% increase in March and defying market expectations of a -0.8% drop. That makes them a very impressive +7.9% higher than in April a year ago and augers very well for their factory sector in coming months. It was mainly driven by strong demand for transport equipment.
An updated University of Michigan consumer sentiment survey result for May was released, coming in very much better than the preliminary version which recorded a drop. Yes there is still an easing but only a minor one. And this current level is +17% higher than a year ago.
After three dour and disappointing consecutive months, Canada's retail sales sparked into life in April with its best rise in a year. But it will still be only +2% higher than a year ago and less than inflation's bite.
The UST 10yr yield is now at 4.47% and up +1 bp from Saturday. And that is up a net +5 bps in a week. The key 2-10 yield curve inversion is unchanged at -48 bps. Their 1-5 curve is also unchanged at -68 bps. And their 3 mth-10yr curve inversion is still at -92 bps. The Australian 10 year bond yield is now at 4.35% and unchanged. The China 10 year bond rate is also unchanged at 2.32%. The NZ Government 10 year bond rate is still at 4.84% but up from 4.66% a week ago so up a sharpish +18 bps from then.
The price of gold will start today down a minor -US$1 from Saturday at US$2333/oz, and down -US$85 from a week ago.
Oil prices are down -50 USc at just over US$77.50/bbl in the US while the international Brent price is just under US$82/bbl. These levels were US$79.50 and US$83.50/bbl a week ago, so about -US$1.50 less since then.
The Kiwi dollar starts today unchanged from Saturday at just over 61.2 USc but -¼c lower than this time last week. Against the Aussie we are marginally firmer at 92.4 AUc. Against the euro we are also marginally firmer at 56.5 euro cents. That all means our TWI-5 starts today just under 70.6, which is up +20 bps from a week ago.
The bitcoin price starts today at US$67,735 and down -0.4% from this time Saturday. Volatility over the past 24 hours has been quite low at just on +/- 0.6%.
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67 Comments
Aussies suffer deep economic depression.
Real per capita household disposable income fell by 6% in 2023 - one of world’s biggest declines.
Boomers should be paying attention. But likely they won't be.
https://www.macrobusiness.com.au/2024/05/australians-suffer-deep-econom…
Everyone needs to be paying attention and talking to their local politicians. But then that's a lot like trying to nail down jelly.
“on a per capita basis, the current fall in real household spending will be the deepest and longest since at least the 1970s (excluding the pandemic period)”
Those politicians are about to learn that economies only work when people have money to spend.
Everyone needs to be paying attention and talking to their local politicians. But then that's a lot like trying to nail down jelly.
Likely to be as bad here as in Aussie. Our bureaucrats, academics, and media don't really dive into such things. But the issue as I see it is that if the reality is as bad, then how can the boomers expect the next generation pay for the assets at the prices that the boomers expect? The numbers will not stack up. M.ore money printing would seem the only way option they have. Extend and pretend.
This is not about the Boomers. About now the majority of those assets and the highest expectations will be with generations after the Boomers.
Hmmm. Not sure I agree that the post-boomer generations hold the majority of assets and are at the life stage where they are disposing of those assets. It's an interesting take but I don't buy it.
I don't think those numbers are right. I agree real disposable household incomes fell in Australia in 2023 but by -2.6%, not by -6%. The data is 2022 total household disposable income = AU$1.472 tln, rising to AU$1.518 tln in calendar 2023. The CPI index rose to 136.1 from 130.8, or +4.05% for the year. Their population rose from 26.270 mln to 26.730 mln. When you calc that, there is no way it is anything like a -6% fall. (Maybe the source used USD? or some other 'international' calc).
Significant Oz tax cuts from 1 July will reverse the trend for most people
https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/…
Interesting point. Given the sheer value of Aussie mining exports, the tax cuts and public investments could go a lot deeper if Aussie politicians played their cards right and actually grew a pair to stand up to corporations.
Australia's O&G exports in 2022-23 were valued similar to Qatar's, yet the Qatari government raked in 4.5x times the government revenue (AUD 73 billion) as various levels of government in Aussie did (~AUD 16.3 billion) on a gross level. What's worse is Aussie's net government revenue on O&G was a measly 5.2 billion (14x less than Qatar) considering the country also handed out approx. 11.1 billion in subsidies to their O&G companies in the same year.
For reference, Qatar subsidises energy for its consumers (electricity and pump prices) and not producers.
Worse than naive. If rumours are to be believed, ACT/NZF are about to change the law to actively put the taxpayer on the hook for any cleanup when an oil or gas well stops producing. Apparently no one will want to come here to explore for wells if they have to cleanup their own mess once they've finished extracting our mineral wealth for their private gain.
That may be due to the previous labour government preventing any further exploration, therefore no large O+G company will want to set up shop here if there's the risk the govt will simply flip flop after the next election and force them to spend up big again to pack up and go before they get their money back and some.
I've found some money for Nicolas tax cuts.
https://www.rnz.co.nz/news/business/511110/nearly-half-a-billion-taxpay…
Using StatsNZ data (equivalent to the ABS data used above), the New Zealand household net disposable incomes decreased -1.7% in 2023 from 2022. The data is 2022 total household disposable income = NZ$218.3 bln, rising to NZ$231.3 bln in calendar 2023. Our CPI index rose to 1259 from 1203, or +4.66% for the year. Our population rose from 5.161 mln to 5.314 mln.
I don't think those numbers are right
Thanks David. I think you're right. Regardless, it still would not surprise me that 6% is close to reality, even if it is not explained by the data. Some things we should be wary of:
- Manipulated data
- Manipulated interest rates to inflate prices
- Mass immigration to deflate wages
- Massive taxes and insurance
Greenpeace donations at work.
"‘A catastrophe’: Greenpeace blocks planting of ‘lifesaving’ Golden Rice
Scientists have warned that a court decision to block the growing of the genetically modified (GM) crop Golden Rice in the Philippines could have catastrophic consequences. Tens of thousands of children could die in the wake of the ruling, they argue."
https://www.theguardian.com/environment/article/2024/may/25/greenpeace-…
You only have to look at what happened with GMO crops in the US where neighbors crops were contaminated and Monsanto prosecuted farmer for stealing GMO seed and won! There are alternatives.
“Farmers who brought this case with us – along with local scientists – currently grow different varieties of rice, including high-value seeds they have worked with for generations and have control over. They’re rightly concerned that if their organic or heirloom varieties get mixed up with patented, genetically engineered rice, that could sabotage their certifications, reducing their market appeal and ultimately threatening their livelihoods.”
The farmers who use less chemicals and diesel?
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.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10880490/
You must be looking forward to chowing down on your GMO precision fermented food like substances?
Seems now the miracle of glyphosate resistant GMOs has wrecked the efficacy of the product, big GMO agchem has moved onto wrecking everyones crops with gene stacking.
https://beyondpesticides.org/dailynewsblog/2024/02/court-strikes-down-e…
The GM conundrum offers significant challenges. The classic response "Many scientists, however, say there is no evidence that Golden Rice is in any way dangerous." looks like a response from vested interests. "No evidence" doesn't mean it's not dangerous. It just means it hasn't been proven to be dangerous, and that also means that it hasn't been proven to be safe as well.
Looks like a good call by the courts.
Thing is blindness has been proven to be dangerous. The do gooder luddites are happy to sacrifice the Philippino kids to push their ideology.
Who are the "vested interests" you speak of? Golden rice is a non-profit. "Countries including America, Australia and New Zealand have ruled Golden Rice is safe." What is vested about non rice growing New Zealand scientists - and 150 Nobel laureates quoted in the article?
"In 2016, more than 150 Nobel laureates signed an open letter that attacked Greenpeace for campaigning against Golden Rice and other GM crops. Greenpeace had “misrepresented the risks, benefits and impacts” of genetically altered food plants, they said. “There has never been a single confirmed case of a negative health outcome for humans or animals from their consumption.”
https://ourworldindata.org/grapher/prevalence-of-vitamin-a-deficiency-i…
I'm not disputing the vitamin A deficiency Profile, but genetic modification of food crops has far wider implications than a single benefit. And that comment I cited is evidence in itself that the testing is not done or not complete. If there is no evidence the rice is dangerous then there must also be no evidence it is safe. Assumptions and hope are not evidence. On what basis did we or those other countries decide the rice is safe, or were the pollies bought off?
"The do gooder luddites are happy to sacrifice the Philippino kids to push their ideology."
I think you maybe need to read up on the Luddites and what their motivation was before you go throwing it around as a derogatory term. You might learn something.
Here is a good place to start:
https://books.google.co.nz/books/about/Blood_in_the_Machine.html?id=Xzd…
Although, I'll flag that this is based on proper historical research not conspiracy theories, hot takes and big oil propaganda so may not be to your taste.
The GM conundrum offers significant challenges. - No it doesnt. Greenpeace actions support their view of the world - usually based on emotion rather than science. Big business bad, regenerative and organic good (maybe less people alive also supports their environmental mantra)
There is to much BS and misinformation in the "save the planet" space and organisations like Greenpeace are as self serving as the best - Their "nitrates surveys" and the associated alarmist rhetoric are a case in point
"The GM conundrum offers significant challenges. - No it doesn't." I'm sorry but yes it does. Without the blanket blindness of the greenies I do think there are significant risk associated with GM of food sources. Just as Greenpeace does other interests tend to argue from very narrow perspectives. But the potential consequences of GM of food are huge, so care needs to be taken. Personally I'm not against it, but those who stand to profit from it (Monsanto for one) must be required to prove their change is safe, not just in the short term. There is simply too much at stake.
Why do put up a profit strawman? Golden Rice is a non profit project, as already stated above.
"The patented key technology for Golden Rice production, invented by Prof emeritus Ingo Potrykus, of ETH-Zurich and Prof Peter Beyer, of the Univ of Freiburg, provided access to a package of ancillary technologies required to engineer the trait into rice. A license to those technologies was obtained from Syngenta. The package contained proprietary technologies belonging not only to Syngenta but also to Bayer AG, Monsanto Co, Orynova BV, and Zeneca Mogen BV.These companies provided access to the required technologies free of charge, for humanitarian purposes."
Murray - google Golden Rice Double Blind test and have a read of some of the studies.
Back in 2016, a group of 100 Nobel Laureates issued an open letter to Greenpeace demanding that the anti-technology activist group "cease and desist in its campaign against Golden Rice specifically, and crops and foods improved through biotechnology in general." The laureates pointed out that "scientific and regulatory agencies around the world have repeatedly and consistently found crops and foods improved through biotechnology to be as safe as, if not safer than those derived from any other method of production. There has never been a single confirmed case of a negative health outcome for humans or animals from their consumption. Their environmental impacts have been shown repeatedly to be less damaging to the environment, and a boon to global biodiversity."
The laureates' letter ended:
WE CALL UPON GOVERNMENTS OF THE WORLD to reject Greenpeace's campaign against Golden Rice specifically, and crops and foods improved through biotechnology in general; and to do everything in their power to oppose Greenpeace's actions and accelerate the access of farmers to all the tools of modern biology, especially seeds improved through biotechnology. Opposition based on emotion and dogma contradicted by data must be stopped.
How many poor people in the world must die before we consider this a "crime against humanity"(emphasis theirs)?
https://reason.com/2024/04/25/greenpeace-crusade-will-blind-and-kill-ch…
I'll bite Profile. Supposedly this letter is backed up by documented evidence that could have been presented to the court to counter the blocking action by proving that it is safe? The letter itself is not proof, but merely the opinion of the signatories. A peer reviewed study report would be the required proof as a minimum. Why wasn't such evidence presented? does it even exist?
Pursuit of corporate science is just another ideology. One that has bought the biosphere to its knees mind, but ideology it is. Profile doesn't accept we are heat sterilising the planet, in spite of the mountains of evidence. But filling the world with synthetic organisms, yeah, great science, because $$$$$$.
But China has had significant issues with "wealth management products" in the recent past so this is a very risky strategy. There is a history of a lot of people getting hurt - and very angry.
Weekly Commentary: Speculative Bubble Hype
May 24 – Bloomberg (David Ingles): “Nvidia’s 110% gain this year is enough to slingshot the company’s value above the entire market capitalization of Germany along with a range of other major bourses. The AI-boom poster child overtook Australia in early February, topped South Korea a few weeks later and as of the Thursday close, is now also above Germany. The next 20% leg higher would likely add Saudi Arabia and Canada to the list. And if the prediction from one of Bloomberg TV’s guests on Thursday is correct and Nvidia does top $10 trillion, that would make it larger than all the world’s stock markets except the US.”
Investing in equities of publically traded corporations is easy to do, and many individuals will have at least some of their wealth invested in stocks.
However, like other wealth management products, equities come in varying flavour, and are available to fulfil diverse wealth management objectives.
Market capitalization isn’t “wealth.” It’s the latest price, times shares outstanding. Blotches of ink on paper. Flashing pixels on a screen. If a dentist in Poughkeepsie buys a single share of Apple at a price that’s 10 cents higher than the previous trade, $1.6 billion in market capitalization emerges from thin air. If a single share trades 10 cents lower, $1.6 billion evaporates just as quickly. Whatever happens, every security in existence has to be held by someone until it is retired. Ultimately, the wealth inherent in a security is the future stream of cash flows it will deliver to its holder(s) over time. Price fluctuations don’t change those underlying cash flows. They just provide opportunities for the transfer of savings between investors. High valuations favor the sellers. Low valuations favor the buyers. Investors have never paid higher prices for those future cash flows, or accepted prospective returns so low.
Put simply, the bubble hasn’t changed the wealth, and a collapse won’t change the wealth. What will change is the market cap. I suspect that the erasure of market cap in the coming years, and possibly the coming quarters, may be brutal. Still, no forecasts are required, and our own attention will remain on observable valuations, market internals, and other factors. Meanwhile, even if an investor sells at these extremes, the only thing that will change is who holds the bag. Link
One of my fav memes of all time is the banana man trading stocks....
https://x.com/zerohedge/status/1280116860512600064
WMPs, what can possibly go wrong....
I do not think its going to work this time.... I think even the chinese are positioning for end game with gold
Does that mean it's technology is advanced. Or it sells a lot of cheap entry level chips?
Rather the real game seems to be one of staying ahead on high tech.. which in turn will drive military and economic power. Those with the capability to produce the most useful chips will always win.. and that's years in the making.
I am not convinced the US will win... but it's probably the most important kpi to watch for our kids future.
According to the Institute for Fiscal Studies (IFS), the UK is in its worst financial situation for 70 years. It's getting worse by the day. There is no solution either unless they take a sledgehammer to financialisation of the economy. Link
[UK] Living standards since the last election
This parliament has been a tumultuous one for living standards. The COVID-19 pandemic and subsequent restrictions on economic activity led to huge disruption to the economy, with knock-on effects for people’s earnings as many were furloughed or lost work. Just as the economy bounced back from the pandemic, the cost-of-living crisis hit, with inflation interrupting the recovery in real disposable income. Consequently, and in spite of the huge amount of government spending to support incomes during both crises, this parliament is on course to be the worst on record for growth in average incomes, with real incomes falling across the majority of the distribution and average disposable income growth projected by the Office for Budget Responsibility (OBR) to remain low. Moreover, whilst these figures take account of average inflation, inflationary pressures since late 2021 have not hit everyone equally (e.g. Office for National Statistics, 2024a). Digging further into other indicators of material living standards suggests that the cost-of-living crisis has been even harder for low-income families than headline income statistics suggest.
Some parts of the uk economy are starting to really fire after brexit. Namely services export https://theconversation.com/the-uk-has-become-the-worlds-fourth-largest…
However its likely that the growth is in finance, tech, military etc.. and as it says this isn't helping the lower income families... whic will rely more on a reduction in imported cheap labour.
The underlying issue which will affect everyone is that tech and productivity gains will affect low income low skilled people first and the most... the elite seem to think society will simply provide a basic income with no expectations for effort from those that can't find work in the new world... but in a capitalist society that won't happen.
So the low income , low skilled and increasingly restless portion of society will grow until it either elects extreme right wing governments to dismantle capitalism or they will simply violently rebel.
Can someone help me understand these China FDI flow figures.
With all the negative commentry, i'd expect to see outflows, that is more foreigners sold their investments than bought investments.
But then we see growth of 'only' +US$8.3 bln. If FDI is growing (albeit a smaller amount than previously) then doesn't this mean more foreigners are investing in CHina that pulling out? Rather than declining or hold steady, people are actually investing more into china than they were before? And what is the base figure is it 10b growing to 18b or 100000b growing to 1000008b. Or 8.3b actually the FDI figure, and not just the growth compared to the previous period?
Wrong. It's mostly China finally refusing to buy US Treasuries & instead investing in African infrastructure & gold. Gold imports are great at hiding the accumulation of what is similar to, but better than FX reserves: they reduce the trade surplus & hide the foreign investment. Link
NZ is going to have to pick sides soon. I hope there are enough brain cell in NACT to handle this situation? Interest rates may head to zero in an instant?
school-leavers would be obliged to spend a year in a full-time Armed Forces role or volunteering with organisations such that as the police or NHS
So not just military. I wonder what sort of impact working in a hospital or with the police would have on 18 year olds.
Yes, but of course taxing foreign investors for those 'high value' sales (one of the ways National was going to pay for its tax cuts) didn't work out for National (due in the main to FTAs, I think); but I'm talking about opening it back up to all residential RE, as was closed down by the Labour/Ardern government.
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