Here's our summary of key economic events overnight that affect New Zealand with news that the extent of the de-risking from China is now becoming quite the thing.
But first, the first of the June PMIs are in for the US, the internationally benchmarked versions. Their factory sector PMI rose but still a modest expansion and a 3 month high. And their services PMI rose to a good expansion to a 2 year high. Both were on the back of rising new orders. Making this a bit more impressive is that cost inflation was much lower in both sectors, and business confidence in the immediate future (1 year) rose. This report that for the first time in 3 months, companies planned to expand their workforce.
In what might seem like a bit of irony, the Conference Board leading index was released overnight and it retreated - but it was more May and isn't reporting on the same period as the June PMIs. It's a 'leading index' that trails current data.
Also for May, American existing home sales fell -0.7% in May from April to a seasonally adjusted annualised rate of 4.11 mln units, the lowest in four months. The decline comes as the median sales price climbed to a record high of US$419,300 (NZ$685,000). Meanwhile, unsold inventory sits at a 3.7-month supply at the current sales pace. Interestingly, it you match the housing sales level between the US and New Zealand on a population basis, they will sell about 64,200 houses in a year on a NZ equivalent basis. Over the past year to May we have sold 67,400. Both markets are in the doldrums.
Retail sales in Canada are projected to have dropped by -0.6% in May 2024 compared to the previous month, according to a flash estimate. This would represent the steepest decline since March 2023. Such a decrease would offset the +0.7% surge in April, the largest in a year.
Canadian producer prices rose +1.8% in May, their fastest increase since January 2023.
The early versions of the Japanese PMIs reported gains in their factory sector to a modest expansion, but a fall back in their services sector to a modest contraction.
Japanese CPI inflation rose in May to 2.8%, up from 2.5% in April. Food was up +4.1%,
In India, their early PMIs rose to faster expanding levels in both sectors.
China attracted virtually no new foreign direct investment in May from April in an outcome that will probably alarm Beijing privately. That puts the May FDI level -28% lower than the year-ago level in a trajectory that is as tough for them as in the depths of the GFC. And it is probably going to get tougher for them, especially for important tech.
In Hong Kong, four defaulted Chinese developers are headed into court hearings on liquidation demands next week, marking one of the busiest such stretches ever for the sector. They include Kaisa, Shimao, Dafa, and Redsun. If they are in fact liquidated, they will join a number of other high profile defaulters in China's property sector like Evergrande and Dexin. Sunshine is sure to be added to the list as well, and don't forget Country Garden is yet to be resolved. If that too is liquidated that will be another giant to fall. Some of the lenders taking action to get them liquidated are Chinese state banks.
In the EU, their PMIs show their recovery is slowing in June as new orders fall for first time in four months. Their huge service sector is still expanding, but their factory sector is contracting at a slightly faster rate.
The UST 10yr yield is now at 4.26% and unchanged from this time yesterday. The key 2-10 yield curve inversion is still at -47 bps. Their 1-5 curve is still inverted by -84 bps. But their 3 mth-10yr curve inversion is more inverted at -106 bps. The Australian 10 year bond yield is down -3 bps at 4.25%. The China 10 year bond rate is up +2 bps at 2.27%. The NZ Government 10 year bond rate is now at 4.68% and up +3 bps from yesterday.
Wall Street is marginally lower with the S&P500 is down -0.1% in Friday trade. Overnight, European markets were all down about -0.5%. Yesterday Tokyo ended its Friday session down -0.1%. Hong Kong was down a sharp -1.7% and Shanghai fell another -0.2%. Singapore was also down -0.2%. The ASX200 ended up +0.3% on Friday but the NZX50 fell -0.8% in a broad retreat.
The price of gold will start today down -US$35 at US$2320/oz.
Oil prices are down -50 USc at US$80.50/bbl in the US while the international Brent price is now just on US$84.50/bbl.
The Kiwi dollar starts today unchanged at 61.2 USc. Against the Aussie we are marginally firmer at 92.1 AUc. Against the euro we are also marginally firmer at 57.2 euro cents. That all means our TWI-5 starts today up +20 bps at 70.9.
The bitcoin price starts today at US$63,975 and down -1.1% from this time yesterday. Volatility over the past 24 hours has again been modest at just on +/- 1.4%.
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71 Comments
So now Putin's threatening Sth Korea for considering arming Ukraine, in response to North Korea supplying Russia and the subsequent strengthening military ties there.
Really does seem like we are gravitating towards a bipolar military standoff.
And if they can make enough young people unemployed soon....
Russia has only a small border with Nth Korea but it’s enough and of course both Russia & China extensively supported Nth Korea in the civil war. Think this threesome has never unravelled and it suits all of them, in terms of bellicose policy and diplomacy, to continue the ride. On the face of and at the end of the day in the dark, nothing is going to stop armaments and munitions going to Russia anymore than those going to Ukraine.
At leader level, they'll be increasingly advised that we're heading for a - the - major stoush over 'what's left'. The average punter, everywhere, is uninformed about ultimate scarcity, and there's a spread of understanding even amongst the minority who have figured it out for themselves.
Appraising isn't made easier, by incessant propaganda - our (western) take on Israel being a classic: that is a simple case of apartheid being practised by one race, upon another. Dissing Hamas - a frustrated reaction to decades of apartheid - is unbalanced, in the extreme (read: The Other Side of Israel - Nathan/Harper). Thus we see Putin and all 'other' leaders as 'evil'.
But things are hardening up, sides being taken. The only fly in the ointment being that each grouping needs something the other lot make/supply, to wage said war. This has happened before: https://www.thegreatsimplification.com/episode/127-ed-conway The Brits needed lenses for their binoculars (to see where shells landed) the Germans needed rubber. Even at war, they traded...
Thanks. Will try that tomorrow (Pink Floyd tonight) I am more a reader than a listener as I find I need often to back page to make sure I got something right. But suggest likely in a similar vein? Read/Fisher “The Deadly Embrace.” Unfortunately my copy went out with most of my books in the burst water pipe episode in the EQs.
This one? https://youtu.be/irgQF_eKTqs ... I like!
You don't see leaders such as Putin, Un, Xi, the revolutionary council, Assad etc, as morally bankrupt? If fascists around the planet are cheerleading dictator Putin, a re-evaluation of support is probably required?
https://m.youtube.com/watch?v=vrTnFC4gzys&pp=ygUubWFyam9yaWUgdGF5bG9yIG…
You don't see leaders such as Putin, Un, Xi, the revolutionary council, Assad etc, as morally bankrupt?
Dude who is supplying the 1000lb guided bombs which have killed approximately 25,000 Palestinian children in the last eight months? I'll give you a clue, it ain't Putin, Kim, Xi, Khameini or Assad. The west IS morally bankrupt because we keep prattling on about human rights and protecting the innocent but when it comes down to it our actions are the exact opposite.
At leader level, they'll be increasingly advised that we're heading for a - the - major stoush over 'what's left'. The average punter, everywhere, is uninformed about ultimate scarcity, and there's a spread of understanding even amongst the minority who have figured it out for themselves.
While resources are certainly an issue, what's going on now is about more than this. China for instance is in a similar position to Japan 100 years ago, a rising power, fostered by the West, then as soon as they get powerful enough to be a significant threat, they start getting sanctioned.
A larger conflict will make things more scarce for everyone though, for sure.
Japan and China, then and now? Not an unreasonable comparison. China though has far greater land with resources and now has too vaster international influence with its various financial ventures abroad. Consider this though “Their economic purpose was to seize raw materials, markets and labour power, their political purpose was to free the Pacific of British and American domination and to establish an Asiatic sphere of co-prosperity ; and their military purpose was to use every resource of the Japanese nation to sweep away the territorial armies of Britain and America in the Pacific.” Now in the same vein of comparison it’s not all that unlikely that “Japanese”in the text, be replaced by “Chinese.”The paragraph was written by Jack Belden in 1943 after he had survived the retreat through Burma with US General Stilwell.
The situation definitely isn't identical, but also has quite a lot of similarities. A big part of the equation is I don't think the West ever factored in how far and fast China would become - or Japan. The speed at which both managed to develop and then challenge the status quo is remarkable.
As you say, the inter-dependence between China and much of the rest of the world is a stronger tie. So hopefully that aids neutrality on there behalf.
You're not correctly assessing that it is the western nations which are being isolated here while the non-western countries are busy networking and trading between themselves. The brief 300 year period of western industrial, technological and financial global dominance is in many practical ways, already over.
I wouldn't argue that much of the Western Sphere is in some form of decline or another.
But if we look at the state of the leading nations forming BRICs, with the exception of India they're looking worse - and all of them are at the top of the ranks of nations whose wealthiest are fleeing in droves. Their most desired destinations to flee to? Coincidentally the West.
Their most desired destinations to flee to? Coincidentally the West.
I certainly would have agreed in the 1990s and 2000s. Now though you just have to look at the state of the subway stations, public infrastructure, parks and public safety in Moscow and Beijing to know that we in the west are missing out in a big way (I'm talking especially versus London and Washington DC). In terms of the original BRICS nations, South Africa is the real basketcase.
China attracted virtually no new foreign direct investment in May from April in an outcome that will probably alarm Beijing privately.
Does Foreign Direct Investment Generate Economic Growth? A New Empirical Approach Applied to Spain
When Evergrande was in the last throws, foreign bond holders were ignored ahead of Chinese ones. It was also a surprise that it was not Govt guaranteed when it had be assumed so. Add in declining population and the mother of all housing ponzis.
Summary invest at your own risk.
So what are the reckons regarding the interisland ferries. How much more is the final bill for canning the Labour initiated purchase going to cost in the long run. Something needed to happen and the new ships seemed an ok deal, the new terminal requirements not so much. But now we have..............
Perhaps something a bit more obviously directly related..
"Aratere ferry had steering overhaul three weeks before grounding in Picton...
The work saw a number of systems upgraded on the ship, including the pre-emptive replacement of its steering system"
https://www.rnz.co.nz/news/national/520275/aratere-ferry-had-steering-o…
The final cost to NZ to cancel this deal with Hyundai Mipo Shipyard will be equal to buying 1 new ferry is my guess. Also Hyundai will no doubt complete the 2 ferry's and sell at a massive gain (world wide demand is high). Lastly future contracts will be much more expensive as a tonne of trust will be lost for the NZ Brand.
Visionary..
My reckon.
I support Nicola Willis.
The cost of the ships was OK. But the half billion initial price became three and a half billion with the shore works. Madness.
I am glad she said no. And at the same time gave a big fright to the other incompetent idiots just expecting us to pay and pay
The problem ain't the government in power. It's the crazy incompetent costs invented by constructors in league with government agencies. It has become a system that has to stop.
Mayor Brown talked recently of the Auckland light rail. $400 million per km. $700 million per km if underground. And you might expect to see those double and triple. Angers in France did it for $55 million. So !!!!
My issue with the ferry debacle is that it should have taken two weeks to revise the plan. But after most of a year. Nothing.
Sack the pricks.
Different reckon.
Shudda taken a few weeks to cancel the two huge ferries and replace with three smaller rail capables.
1. Kept Hyundai happy. Less penalty
2. New resilient suitable ships. Three gives you flex.
3. No overbuilt shoreworks at ridiculous cost.
4. The actual ships were the cheap part.
You don't get 3 smaller ferries for the cost of 2 large ones. They would not be significantly cheaper per ship. I agree 3 gives more flexibility , but also more running costs . Probably same high crew requirement as a bigger ferry.
Labour actually approved in principle funding of $ 700 million less , that would cut any bling from the project. bling in this case been terminals that look more like an airport , and less like a bus shelter.
There were also road bridges , which benefitted road more than rail / ferries , but somehow Kiwirail got to pay for it .
But the killer was earthquake and flood requirements, so we do without them , and hope neither happens. Great planning strategy.
Just musing here ... But how far above planned capacity are the current ships and shoreworks from what was originally envisioned way back when the current fleet and shoreworks were originally bought / constructed?
Or put another way, NZ Inc has grown considerably. Surely - if this isn't going to be yet another example NZ Inc's ongoing under-investment in infrastructure - we must upgrade just to account for historical growth?
If so, isn't this just another Nike project? (i.e. 'Just do it!')
Or does government need another distraction to keep us from realising we're still going backwards?
I think in this case "just do it" is another way of saying we have no brain, no skill, and too much money.
You have to notice we have seriously poor people in New Zealand. And lots of the population nearly there.
We have to develop ways to get the bang, at a fraction of the cost. Blindly leaping don't cut it. Lazy actually.
We've tried "just throw money at things and hopefully something will stick" for a while now and it's got a fairly crappy batting average. Linear thinking, when we need to be genuinely entrepreneurial. Or at least engage in capital investments that provide a clear net return.
In the perspective of capacity vs. population, the market addressed that by producing a competitor to the Interislander. Outside of maybe a 4 week window over XMAS, there's surplus capacity.
Kiwirail need to just bite the bullet and upgrade their fleet.
The rail loading of the ferries is actually very time efficient, they can pull a string of wagons equivalent to 10 trucks in the time it takes to drive one truck out. The new ferries had longer strings of wagons, requiring a longer back shunt. This meant crossing a creek, no big deal, but the planning then showed the existing creek infrastructure won't handle a flood / tide clash, so it needs major upgrading. In Picton, they have already upgraded a creek under the rail yard and road terminal area. In both cases, these creeks would not flood the actual railway, but the towns cape above them. These costs are been incorporated into the irex budget, but would have to be done anyway.
The rail loading of the ferries is actually very time efficient, they can pull a string of wagons equivalent to 10 trucks in the time it takes to drive one truck out.
So you'd save 10 minutes per sailing (actually a truck will come off every 20-30 seconds but let's be generous).
For half a billion dollars I can't work out how long that'd take to pay for the time savings.
I travel frequently on the Bluebridge. I will not use the Interislander anymore I dont trust them. Bigger ferries would cause bigger wake in the sounds? Would they be required to go slower? My preference is the Bluebridge size and more of them. If only we could hop on a ferry in Welly and get to Lyttleton.
Actually that will soon be an option! Theoretically. Having done a lot of low-level flying, both fixed-wing and rotary, I'm dubious and personally think this has the feel of the Springfield monorail project.
The 3 ex NAT MP/stooges have been paid 80 k in the last 2 months . Including 20 K for one days work. Can't say this government isn't looking after people .
Silly me didn't realise the crackdown on consultant spending just meant concentrating it on NAT donors / old boys.
Labour had already proposed knocking $ 700 million off it. I can't tell what this is based on, actual costings, or a , if you can do it for $ 700 million less , go for it. Probably things like staying with the existing temporary picton terminal building, not rebuilding the wellington one. No road overbridges/ road access improvements.
I do hope your right , though, and we end up getting the new ferries after all. Won't be cheaper price on them though, Hyundai know they could sell them for more.
What should happen is: 1. Kiwirails selfserving poison pill tender specification of custom rail ferrys is finally killed in favour of 100% road freight that can be carried by std ro/ro boats 2. the Cook Strait service is 100% opened to private sector competitive tender including any new terminal requirements.
This is where I feel sorry for the ideologically-blinkered 'I back National, no matter what' types. About as much as I feel sorry for southern baptist hysterics. Both are a threat to future generations.
Looking ahead, rail viable; road as we have temporarily known it, not. That said, there will be much less passing island-to-island. Sop the current size of ferry is probably fine.
So many future projections include growth - so few allow for the reality, which inevitably will include degrowth. There is NO political party, no employee representative, no Local Authority - indeed nobody, looking ahead with a reality lens.
That's an interesting idea, worth exploring.
It would be more efficient, quicker & safer to have seperate roads/lanes for buses & trucks from small passenger vehicles.
IIRC the freight ferry only has capacity for ~30 rail wagons x2 saliings per day. Hardly the volume to justify a robust business plan & billion$ capex for dedicated custom ferries and terminals
Only having one rail capable ferry constrains the whole Auckland - CHCH rail corridor. which is why Nationals road donor buddies want it scrapped. and the billins of extra cost has nothing to do with the extra billions cost . The rail capable ferries turned out to be a bargain.
Its mostly Auckland centric. Some refocus to CHCH after the earthquakes. One of our suppliers has started using Napier as an alternative for specific products . They do the same with CHCH, so when you get to the end of a line , we get them freighted up from CHCH. some of its just crazy . Like Courier packages from Paeroa to Thames going via Hamilton and Auckland . Seems the line haul is cheaper than local trucks.
Now the talk is not on decentralising , but of centralising on Australia , or Singapore.
This process is bordering on corruption. 3 national stooges find smaller non rail capable ferry is the best solution. Kiwirail board been "made better" , can almost guarantee the new chairman will be an ex nat mp. In case they don't manage to cut Kiwirail out of running the ferries altogether.
They might as well just put their road transport donors directly in charge of the process.
Most corrupt govt in years.
I may be naive here, but can't the US end Russia's war by proxy by announcing heavy restrictions on US businesses investing in manufacturing in any country that props up Russia while they are invading Ukraine?
The Chinese would be furious, because that will scope-creep to the Taiwain situation, but they are trying to sit in two camps here: Expansion and control by force, and wealthy trade partner.
No, and it's an important no.
Russia has a s-itload of energy resources, and mineral ones. More than most. Money, on the other hand, never hurt very hard when shot at someone else.
In short, we are seeing what we usually don't; that ultimately, money is neither a store of wealth, and doesn't make the world go around. Which is why Russia is better-off now, that it was pre-embargo - just as Germany was going gangbusters mid/late 30s.
The problem, as Eisenhower warned, is that when you come to depend on the military-industrial complex to keep your 'economy' going, you need to use - or render obsolete - the munitions you are churning out.
Why on Earth would you assume that the US wants to end the war in Ukraine? Have you not heard US politicians say what a good deal the war in Ukraine is in terms of destroying Russian manpower and war machinery with absolutely no risk to US soldiers' lives? Also China doesn't need US investment, it generates a massive daily trade surplus of US dollars as it is.
Who said that?
You need to read without pre-bias.
The US has been the biggest hegemonic energy/resource sucker-up, that the planet has even seen. I've repeatedly written about Vicrotia Nuland - stirrer extraordinaire - and I have the Kagan/Kagan book. The US cannot afford to stop.
China’s housing authority has become the latest to join a government plan for hundreds of cities to buy unsold commercial homes and convert the units into affordable housing.
https://www.scmp.com/economy/china-economy/article/3267550/china-aims-s…
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