Here's our summary of key economic events overnight with news the US expansion rolls on, pushing back the timing of when interest rate normalisation will happen.
US CPI inflation came in lower than expected for May, slowing to 3.3%, the lowest in three months. In April it was 3.4% and forecasts for May were 3.4%. While this rise was lower than the past three months it is a higher rate than the October to February period. And it is above the Fed's target.
Then the US Federal Reserve kept the federal funds rate unchanged at the 5.25% to 5.5% range, as expected. Still, the Fed officials projected only one interest rate cut this year and four cuts in 2025, emphasising their intention to maintain higher borrowing costs for a longer period to get inflation back into range.
While all this was going on, US mortgage applications surged almost +16% in the first week of June, the sharpest weekly increase since January 2023. This is a rebound from the -5.2% drop in the last week of May and fully erases the slumps from the two prior weeks.
India's industrial production rose +5.0% in April from a year ago, little-changed from recent growth levels. The heady rises of late 2023 seem to be past them now with a more orderly expansion in play. India's passenger vehicle sales had been falling over the past few months after a heady rise and were only +4.3% higher in May than a year ago.
India's CPI inflation eased to 4.7% in May from 4.6% in April. But food price inflation hardly changed at 8.7%, a worrying sign for them.
China's CPI rate slipped -0.1% in May from April, to be just +0.3% higher than a year ago. Observers were expecting a stronger price gain than that, although not by much more. Low demand seems to be keeping prices close to deflation again. Beef prices were particularly soft, down -3.6% in the month to be almost -13% lower than a year ago. Lamb prices were down -1.2% in May from April, down -7.5% in a year. These are far softer than overall food price changes (-1.0%) for the year). Milk prices were unchanged in May, down -1.7% for the year. Meanwhile, producer prices are still languishing in deflation, but less so. They were down -2.5% in April from a year ago, easing to -1.4% in May.
Meanwhile, Japanese producer price inflation is rising, up +2.4% in May from a year ago, a nine month high.
The Bank of Japan is about to consider gradually reducing its Japanese government bond holdings, taking a step toward normalising not just interest rates, but the quantitative side as well. They are in the middle of a sea-change shift in monetary policy.
The EU has decided to hit EV imports from China with new anti-dumping tariffs taking them to almost 50% for some models. The concerns about the impact of Chinese "over-capacity" are spreading globally now. As you might expect, China isn't happy with this move.
The UST 10yr yield is now at 4.30% and down -10 bps from yesterday. The key 2-10 yield curve inversion is little-changed at -44 bps. Their 1-5 curve is also more inverted at -83 bps. And their 3 mth-10yr curve inversion is much more at -109 bps. The Australian 10 year bond yield is down -10 bps at 4.24%. The China 10 year bond rate is unchanged as usual at 2.32%. The NZ Government 10 year bond rate is now at 4.79% and yet to feel the impact of today's changes.
Wall Street in its Wednesday session has the S&P500 is up +0.9%, shrugging off today's data releases. Overnight European markets were also up, with London +0.8%. Frankfurt up +1.4%, and Paris up +1.0%. Yesterday Tokyo ended down -0.7%. And Hong Kong was -1.3% lower but Shanghai closed up +0.3%. Singapore ended down -0.1%. The ASX was down its own -0.5%. And the NZX50 ended its day down -0.4%.
The price of gold will start today up +US$16 from yesterday at US$2329/oz.
Oil prices are up +50 USc at US$78/bbl in the US while the international Brent price is just over US$82/bbl. However whether they will remain up at these levels seems uncertain. The world faces a ‘staggering’ oil glut by end of decade, the IEA warned overnight.
The Kiwi dollar starts today +½c firmer at just over 61.9 USc and jerked around by the two big US forces. Against the Aussie we are slightly softer at 92.8 AUc. Against the euro we are little-changed at 57.3 euro cents. That all means our TWI-5 starts today at 71.2, and up another net +20 bps from yesterday.
The bitcoin price starts today at US$69,157 and a bounce-back of +3.6% from this time yesterday. Volatility over the past 24 hours has still been moderate at just on +/- 2.4%.
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121 Comments
It's an interesting read - I've just skimmed all 151 pages - but garbage in gives garbage out, no matter the minutiae gone into.
The problem is information integration - Systems, even getting into Boolean algebra - but there is too much 'all else being equal' involved.
It will pan out differently; my picks are that fracking peaks, and also increasingly cannot make a profit. China and India are still building coal-fired plant; but that won't displace existing oil demand; merely accelerate climate pressure. Globalisation will continue disintegrating, reducing demand (both for feedstock, and transport). Recession(s) will also slow energy demand. Contrarily, conflict(s) and infrastructure decay (entropy) will increase demand. Much proposed 'renewable' infrastructure won't get built.
WW3 by 2030, or global depression/collapse. The debt currently held - let alone projected additions - is unassuageable. Who blinks first? And beyond that, who pays for energy given that work needs it, and work is needed to do the repaying? And that debt gap is widening...
If anything, we will have an economic boom going on through 2030, probably starting in the next few years. History repeats. The world has gone through tough few years, similar to a war. There is going to be a long period of rebuilding, that will create this strong economy for a number of years.
"The world has gone through tough few years, similar to a war."
WTAF? Suggest you go and have a chat with some of the last living veterans and ask them how the last couple of years compared to WW2?
Even in Ukraine which is currently in a hot war, it's nothing like WW2. What planet are you on?
I supposed I don't need to point out to you that the world has gone through a pandemic, though which terrible decisions were made that have destroyed economies and lives, and put terrible stress on a large number of people (similar to a war see, and I did not say an actual war). As a result, there will be a recovery, most likely a strong one, just has happens after a war. I thought this would be quite obvious. I suggest you go ask Google about the roaring 40s. Many commentators believe something similar will occur in the next few years as recovery begins
I asked Google about the roaring 40s and got information on strong westerly winds found in the Southern Hemisphere.
After reframing to 'post war economic boom' I found it was driven by several key factors including:
Keynesian economic policies that promoted government intervention
Growth in international trade
Massive reconstruction efforts
The post-war baby boom contributing to an expanding labour force and increased demand for goods and services
Given Keynesian policies appear to be left leaning while the world is voting right, international trade is in reverse with protectionism, and population growth is slowing - what do these many commentators see driving a recovery?
Sorry roaring 20s. It ended in the depression of course...but it was great for a while.
https://www.economicsobservatory.com/are-we-about-to-experience-another…
Due to work commitments I was unable to watch and participate in yesterday's article and comments, but Audaxes posted a link and article portion that I felt was important for discussion. While it discusses Hong Kong's Courts and US sanctions against their judges, I feel there are significant ramifications that need to be discussed because it is all connected and ultimately impact economics too.
"Interesting fact hidden half way in this FT article (https://ft.com/content/60c825be-b70a-4152-895f-f6127974570a) on the rule of law being "in danger" in Hong Kong: "[There's] a growing malaise in the Hong Kong judiciary. Hong Kong’s judges have been threatened with sanctions in the US, an idea that is crude, counterproductive and unjust." Is it respectful of the "rule of law" to threaten judges of another country with freezing their assets if they stay in their post? Link"
The phrase in question is "rule of law". Judges in any country adminster the practical application of the laws in their country. their respective governments and case law provides the structure under which those laws are interpreted. Thus it could be argued that even Chinese society operates under the 'rule of law'. Whether those laws and the application of them define a fair and just society though is an entirely different question. So the question the article poses is a good one; is it appropriate for a foreign country to threaten or impose sanctions on judges who are administering their own government's laws? How would the US react if NZ decided to impose sanctions on a US judge who upheld a law in the US which we felt was inappropriate and threatened the freedom and security of the people? And then there is possible discussion on what the definition of "Justice" is in this context.
https://m.youtube.com/watch?v=dws3Rfn_ePo
Interesting looking movie about organisations and governments scrambling to buy up food and water resources around the world.
Yes and no.
I don't believe we will ever be able stop using fossil fuels unless and until some viable alternative for things like aircraft become available. But the goal for the world is actually to become carbon neutral, (for a period, carbon negative until some level of balance is achieved). For NZ to start exploration for oil and gas, it is effectively recognising this is just a gap filler until something better comes along. More concerning though it is also a bit of obfuscation by the government because they think this will prop up a failing economy when they really have little or no vision, and are not promoting a strategy that is realistic and practical that will rebuild the economy FOR EVERYONE.
While possibly true, the only time we've had an economy like the one you're suggesting, it wasn't planned, and was the result of a global conflict that killed around 70 million people.
It's like when people cite NZ being up the top of the OECD. That wasn't down to NZs prowess, it was because most of the rest of the OECD was ravaged by war in Europe.
I can't ever see the world becoming carbon neutral. I'll use the example of Peru. Geographically it is very diverse with the flatland dry coast, high alps with villages dotted all around and can be very time consuming to get to, and then the amazon basin side which again poses significant limitations for access. All throughout you have a variety of lovely cultures and dialects with their own different ways of life. How then do they ever get an educated vote for a single government, given that often MP's have to travel from village to village to try and convey their message and promises to win over the people. the answer is that it isn't logistically possible.
This is what I see of the world. the west can try and find solutions to the climate issues it has created with extreme consumption, while the countries it has exploited for wealth (resources) try to emulate the west as they want the same standard of living. All of this is far too large and intricate to
1./ Police: e.g How do you stop Brazil, Colombia, Bolivia and Peru from deforestation for agriculture in the amazon basin. Ecological collapse will come eventually there and this will have global impacts.
2./ Commitment: e.g How do you convince the USA to lower their mass consumption/consumerism when the world sells everything to it. If they did this, they would likely be overtaken by another country as the worlds largest superpower and thy would likely lose the reserve currency (although thsi is likely to happen eventually anyway if history is anything to go by)
You're into the core of the issue. In simple terms there are too many people. Countries like the US and China are not backed by their economic might, but rather the number bodies that can potentially be put into armies to either defend oneself or invade a foreign territory. While technology offsets this somewhat, and to limited extents makes the consumption of existing resources more efficient, in the end it all comes down to people.
It is people who consume and therefore lead to the creation of climate damaging gases. Governments must and will endeavour to keep their people happy to a degree (oppression usually, although not always leads to a short life for governments), so population declines however they are achieved would not be looked on favourably if the end result is to undermine the strength, real or perceived, of the ruling elites.
Within the physical constraints we face today, I cannot see any favourable outcomes. It is only a matter of when not if, a government is pushed into doing something disastrous.
I'd have to say that even if we halved the world population today, there will still be the knowledge and resources to exploit the earth and step on each other to push ones' self up, which sadly is a trait of human nature. The only solution is for human mentality to change and parents to work through the trauma and childhood issues that they cyclically pass to their children through behaviour. The population decline will help without a doubt, but it is human nature and mentality that is the culprit more so than the numbers to me at least.
I agree with you that mentality (i think of it as 'attitude') is a big part of the problem. But it is only a part of the problem. If we were all still neanderthals living caves, all 9 billion of us. What do you think the planet would look like? Denuded of trees, polluted with human waste, bugger all animals to sustain the population (could the population reach 9 billion if we were still living in caves?). So too many people is still too many, no matter the technology level we achieve.
I tend to think we could sustain a bigger population with efficient use of technology. But I think that level is already well overshot.
India's CPI inflation eased to 4.7% in May from 4.6% in April
Isn't that a rise? Eased back up?
Year on year prices continue to show a small increase of 0.9 per cent, maintaining an overall upward trend for the fourth month in a row," Trade Me spokesperson Casey Wylde said.
Interesting way to spin this month's 2.3% drop in prices
https://www.newshub.co.nz/home/money/2024/06/new-zealand-house-prices-p…
Where are these kayak price drops? i'm in the market for a second kayak...
I think the retailers have figured out by now that winter comes every year and avoided overstocking into a slow sales season.
No price drops here https://canoeandkayak.co.nz/product-category/kayaks/sit-on-tops-kayaks/
Accurately gauging demand for seasonal products can be tricky, effected by weather, and whatever the overall economy is doing.
https://www.kathmandu.co.nz/gear/kayaking.html
https://www.marine-deals.co.nz/watersports/kayaks-kayak-accessories/wat…
https://www.furtherfaster.co.nz/collections/whitewater-kayaks
EU gives the middle finger to an overflow of EVs out of China and Switzerland gives the EU Court of Human Rights ditto about their decision on the nations climate emissions. The two issues are hardly directly related but it does illustrate just what a clusteretc of contradictions and bumph the world’s bureaucracies are continuously creating.
Yep, EU turning right in a hurry, after a similar disaster caused by the incompetent left is being discovered, as it was here in NZ. All the nonsense they have implemented over the last few years, particularly climate and energy and farming related is going to be stripped back. Car makers are already rapidly scaling back EV production already. Look for EV related plans to be scrapped quickly in the EU and for the US to turn right in the same manner in November.
It's called stupidity.
1 - squander one-off natural stocks, as fast as possible.
2 - peddle a false - but self-justifying - narrative (essentially, that the squandering can be continued/grown indefinitely) which is untrue.
3 - run into the widening gap between fostered expectations, and natural stock availability.
4 - blame others (Jews, the left, the right, other).
5 - go to war with them, over who get the natural stocks.
It relies on folk being stupid enough to believe, at stage 4.
It's really a global workforce that's done us in.
If the average person's only real asset is the value of their labour, it'll only drop once you introduce billions more bodies into the mix.
People assume a productivity jump will over-ride it, but most productivity advantages can be exported.
It's really a global workforce that's done us in.
Interesting angle but I'd have to agree somewhat. Look how cheap and easy it is to up and off to Oz now vs say in the 1950's. We are traditionally nomadic people that have evolved, but come crisis we will as always, flee for better pastures. Enter water scarcity, oil scarcity and mass migration as the ongoing global issues.
"It's really a global workforce that's done us in.
If the average person's only real asset is the value of their labour, it'll only drop once you introduce billions more bodies into the mix."
An interesting take. But complete nonsense.
Thought experiment: If the world gave one billion Chinese workers a shovel each back in 1949 - but nothing else - would they be exporting EVs now?
An interesting take. But complete nonsense.
Ah, so developed nations haven't lost huge swathes of jobs in the likes of manufacturing and customer service to other markets with much cheaper labour? Good to know.
Thought experiment: If the world gave one billion Chinese workers a shovel each back in 1949 - but nothing else - would they be exporting EVs now?
Would they have used the shovels to bludgen their Communist leadership?
Not a fan of EVs. https://global.toyota/en/newsroom/corporate/40850156.html
Three big Japanese manufacturers are pooling their resources on refining the combustion engine, but instead of working on one common engine, Toyota, Mazda and Subaru will build “signature engines” that represent each brand.
That means Toyota will work on inline-fours, Subaru the boxer engine, and Mazda will push on with the rotary. Each new engine will work with carbon neutral fuels like liquid hydrogen, biofuel and synthetic fuels while also being tailored towards electrification including hybrids and plug-in hybrids.
vhs < betamax, mp3 < acc, ev < hydrogen.
Biofuels are indeed part of our future
But they require acreage - solar acreage - already in use/contention.
Fossil fuels, of course, are on the way out.
Catch 22 - business models, all built on the premise of endless growth, are in trouble. Doesn't matter whether they're called Toyota - they're betting on a loser, but they have no choice, there is no 'winner'.
EVs don't have a future. Toyota are the biggest car company in the world. They know what they are doing. If they wanted to compete with Telsa, they would beat them....but they they don't feel they need to. Last month in NZ, Toyota sold around 2000 cars, as did Ford. Tesla sold 24. Says a lot.
Self drive?
Probably because the tech and regulations are a distant unknowable. Regardless, ICE manufacturers are indeed working on self drive, have been for a while now. They're just not marketing it in the same sort of hail Mary fashion.
How many years overdue is Elons self drive? 7?
Seriously my new ICE has enough driver assist as it is, I turned most of it OFF. The bloody thing is constantly beeping at me about the driver that's a bit close on a round about to the driver pulling away in front of me at the lights telling me they have moved. Anyone that enjoys driving owns a manual car for starters and they don't want all the auto shit, not even the auto headlights and wipers. Price is way cheaper than a Tesla.
Anybody driving a car who doesn’t know when to turn the windscreen wipers on is frankly not fit to drive a car. Last vehicle I bought was a 2015 model relatively unsophisticated electronic thingys most of which could be easily turned off or not used and that’s why I chose it.
Funny you should say that but many people are now deliberately dumbing down their phones to get rid of all social media because they finally realise how bad it is for them mentally and how much time they are wasting on their phones. Do you realise the youth of today are wasting 6 hours a day on their phones ? Its really turned into an illness.
Its easy to believe after it already happened. They had their own smartphone operating system and they gave up on it thinking it wasn't worth investing in. The funny thing is that apple and android are getting very boring, a good alternative would be good right now
"They had their own smartphone operating system and they gave up on it thinking it wasn't worth investing in."
Not quite so. MS's first smartphone OS was a cut down version of a version of Windows. It was a dog with fleas and ripped through batteries. MS realised way before the iPhone was released that it was going nowhere with it and a ground up development would be required. Various 'skunk works' projects got started on it but iOS came along and blew them out of the water. Even before then people were looking forward to the days networks would be fast enough and ubiquitous enough that a smart phone would be little more than delivery vehicle for a window desktop hosted in the cloud. Not quite there yet but it's close.
By many you mean very few. Almost everyone I know uses a smartphone. Some people try a dumb phone but eventually go back.
I agree, smartphones are the worst invention of all time, a highly addictive disease. But my point still stands that Toyota not making EVs does not mean EVs are dead.
I give you that one. They are not completely dead. They have had a surge due to fake pricing (subsidies), but now that is gone, they will retain a 3-4% market share. There is always a certain % of people that have a certain use for them or think they are cool or whatever, but mainstream. Nope.
"Microsoft didn't think smart phones had a future..."
That's what they said publicly. And only for a few years. The reality was that they knew exactly how big smart phones would become and were terrified they'd slipped behind the eight ball. The problem for MS at that time is they couldn't convince hardware suppliers to invest in developing them. Always a problem when, as MS did, you only focus on generic software. Jobs has no such issues. His device was going to be 100% proprietary so he just had to find one supplier willing to take a risk.
Personally I think PHEVs are the immediate future, that is what I would choose if buying new. A battery capable of doing 30km would probably convert 90% of my driving to electric without costing a fortune to make. Pick the low hanging fruit first, the short trips.
Its a real shame that say Toyota doesn't move to just engine production that can then be used in all the Japanese cars. Imagine the cost savings and the ease of repair and parts availability. As much as I love the Subaru H6, the flat 4 has not been a great engine and the rotary is a dog. The inline 4 cylinder is the way to go, has been for decades.
Other peoples money #123456789
https://www.rnz.co.nz/news/national/519415/millions-spent-reopening-mot…
Have you given any real thought to going and living somewhere that doesn't have a government? By living in a place with a government you are actively supporting taxation - the worst kind of theft.
Maybe start a militia of likeminded individuals and capture some are for a new state which you can designate a tax free area. Once you do that though you will need to start nightly patrols to protect the borders from incursion. Nobody would do that job for free though, so you will need to start paying them. And that can't go on forever without some kind of revenue. Hmm.
He's fine with millions being spent on investigating a tunnel that any half decent planner/engineer could tell you makes no sense in about 15 minutes.
https://www.nzherald.co.nz/nz/nearly-1m-spent-on-consultant-fees-to-inv….
Also, from the article
He said the money spent on the rail upgrade had not been wasted.
The scrub clearing and drainage improvements had to be done regardless, while the imported rails and Whangārei-made sleepers could be reused anywhere in the country.
"There's no point at the moment of picking up the sleepers and moving them somewhere else, if we're going to restart on the line. So they may as well stay there as anywhere, and be an object of some curiosity."
Sounds like a sensible approach.
While all this was going on, US mortgage applications surged almost +16% in the first week of June, the sharpest weekly increase since January 2023.
How Many Millennials Will Be Rich Enough to Buy the Boomers' Millions of Unaffordable Bungalows?
Will UK Labour get a supermajority vote ?
https://www.bbc.com/news/articles/cv221jple3jo
Odds have probably shortened a bit..
"I went without Sky TV as a child, says Sunak"
https://bbc.com/news/articles/c2qql1wk794o
"Sunak's D-Day absence: How the PM walked into an election blunder"
Don't fall for the politicians electioneering slogans. There is no such thing as a super-majority in the UK parliament. Either you have majority, or you don't.
You gotta feel for Sunak. Poor guy is so outta touch with the common person his claims to not be outta touch just demonstrate it more.
He's confusing the fact the Tories are so internally divided that they cannot guarantee their own policies get implemented with some sort of MMP system. You're correct, the UK is first past the post.
The current Tories, like the US Republicans are just made up of some wildly misaligned interests that agree to come together under the Tory banner to stay in power. Traditional UK Tories are pulling their hair out. Just like traditional Republican's with Trump. The right/centrist moderates are gradually being pushed out by extremists as they sacrifice their principles for power.
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