Here's our summary of key economic events over the weekend that affect New Zealand with news July starts on shaky ground everywhere although the ground is firmer in the US than China.
As this is the first week of July, it will be heavy with PMI survey results everywhere (except New Zealand). But the most important release this week will be the American labour market report (their non-farms payrolls) for June on Saturday. Analysts currently expect another +180,000 gain. And before that we get their JOLTs report.
In Europe, election results in France and England will shape the week. But so will CPI inflation rates. Not only do we get them for the EU and the other big EU economies, they also come for South Korea, Turkey, Indonesia, and the Philippines too.
Over the weekend, Japanese industrial production data was released showing it rose +2.8% in May from April, beating market forecasts. It also recorded an unusual year-on-year gain too. This was the second increase so far this year, mainly due to strong motor vehicles output. They think June will slip back but July will be another gainer.
But it was all backwards in China.
The official factory PMI was steady for the second straight month as expected. The latest result marked the fourth contraction in factory activity so far this year, as Beijing was struggles to spur an economic revival amid weak demand, deflation risks, and a protracted property weakness. New orders, foreign sales, and buying levels all declined for the second month in a row
And their official services PMI slipped as well, now barely expanding. While it was the 18th consecutive month of expansion in June, the latest result was the softest since last December, as new orders and new export orders continues to contract.
On Wednesday we may get the Caixin versions of these two PMIs. Recently they have delivered better results, although not significantly different.
And thinking of vising China with their new visa-free offer? Just be prepared to have your mobile phone 'inspected' on entry. You may be interested in what you get back after the 'inspection'.
In the US, the inflation measure the Fed prefers, the personal consumption expenditure price index (PCE) was unchanged in May from April following a +0.3% rise in April. This was what markets were expecting. That means the annual PCE rate slipped to 2.6%, its lowest since March 2021. (The May CPI was 3.3% and we get the June CPI on June 13 (NZT).
Personal spending was up +2.4% from May a year ago, personal income a bit less.
US durable goods orders were unchanged in May from April but were -1.2% lower than the same month a year ago. Of more concern however will be that capital goods orders fell -10% on the same basis.
Eventually that may weigh on employment, but so far it hasn't. Last week initial claims for jobless benefits fell from the prior week. Compared to the same week a year ago the number of people on these benefits was higher, but in relation to their workforce, that gain was insignificant.
US pending home sales for May fell when a bounce-back was expected, reinforcing the funk the American housing market is in. In fact local sawmills have been closing on low new home demand and even that hasn't stopped wood prices from falling to post-pandemic lows. Their residential construction and home-improvement markets are buckling.
The widely-watched University of Michigan consumer sentiment survey was little-changed in June, but it is up more than +6% from a year ago.
The ECB said that its survey of consumer inflation expectations over the year ahead are now back to 2.8%, the same level they were at when they started this survey in early 2020. They peaked at 5.8% in October 2022. Those survey said they felt inflation ran at 5.8% over the prior 12 months. (It actually ran at 2.7% in the year to May but averaged 3.9% over the past twelve months. The June results comes later this week and is expected to be 2.5%.)
In France, exit polls show that far-right candidates probably made gains in their weekend first-round elections, garnering about a third of the votes. Turnout was a 'high' 60%. But the final outcome is still uncertain. The second round will take place on July 7, 2024.
The rise and rise of container freight rates continued last week, up +4% from the prior week to now be a massive 256% higher than the same week a year ago. Again the main culprit was outbound rates from China to Europe, hostage to the Yemeni Houthis and their piracy. Bulk cargo rates were up +2% for the week and are again in an uptrend. They are up +72% for the year.
The UST 10yr yield is now at 4.39% and unchanged from Saturday. The key 2-10 yield curve inversion is again less at -36 bps. Their 1-5 curve is also less inverted, by -76 bps. And their 3 mth-10yr curve inversion is also less inverted at -97 bps. The Australian 10 year bond yield starts where it left at 4.35%. The China 10 year bond rate is still at 2.21% and a new all-time record low. The NZ Government 10 year bond rate is now at 4.73% and up +5 bps for the week.
The price of gold will start today up +US$6 from Saturday at US$2326/oz.
Oil prices are little-changed from Saturday at just on US$81/bbl in the US while the international Brent price is still under US$85/bbl.
The Kiwi dollar starts today slightly softer from Saturday at just on 60.9 USc. Against the Aussie we are little-changed at 91.3 AUc. Against the euro we are also unchanged at 56.9 euro cents. That all means our TWI-5 starts today still lower at 70.5.
The bitcoin price starts today at US$61,628 back up +1.6% from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.9%.
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63 Comments
It depends on how you divide the spectrum, if ACT are far right, then The Greens are far left.
Growing up I would have thought Far Right = Fascists , as in unelectable.
Act - Right
NZ First - Lost in the woods about here.
National - Center Right
Labour - Center Left
The Greens - Left
mmmm no right in France just far right? Clearly many sick of the center.
In recent French parliamentary elections, the vast majority of second-round contests have been head-to-head duels between the two leading candidates from the first round, with fewer than a dozen so-called “triangular” run-offs.
However, the combination of a very high turnout - estimated at nearly 70%, the highest since the 1980s - and fewer candidates (because they are concentrated into three main blocs, the left, the center and the far right) means that number is likely to surge dramatically.
The pollster Ipsos has estimated that there will be between 285 and 315 three-way contests, up to four times as many as the previous record in 1997. Traditionally, in triangular runoffs where far-right National Rally (RN) is in the lead, the third-placed candidate has pulled out so as not to split the opposition vote.
100% this.
Little wonder why mass immigration has been such a ubiquitous phenomenon in Western countries, and why until recently it has been the one thing you cannot question in mainstream opinion lest you are accused of being the dreaded "R" word, because both sides of the political spectrum benefit for the reasons you have outlined
I think also you can't overlook for the Left the weird obsession with multiculturalism as a means of destroying traditional Western/European social identity in order to atone for the sins of naughty white people from the past ... as long as the new immigrants don't wind up living/working near those making the calls. E.g. New Labour in the UK and the "rub people's noses" in immigration approach.
I think you can now, but go back not that far and seemingly any questioning of immigration in any context was racist/xenophobic behaviour (of course there are undoubtedly genuine racists in the anti-immigration camp which doesn't help). I find it interesting even in my social circle - mid 30s, mostly NZ European, typically well educated etc - how much more common it is for friends/family to now be fairly vocal about what they perceive as the negative impacts of immigration when it comes to things like wait times for the doctor, or traffic on the roads, or competing for housing.
Of course all of this fear-mongering about the evils of the far right in Europe etc could be avoided (and I suspect the average punter who feels they have no other choice at present would be happy to avoid voting for them) if centrist/leftist parties just closed the borders, or at least made some attempts to reign in immigration.
Even top-dogs across NZ Inc sentiment haven't shied away recently from openly voicing their concerns with migration patterns.
Meridian's boss recently said skill departures to Australia are a big concern and inward migration has been so poorly executed that the net skill availability is worse off despite a high net influx of migrants.
Why care what Meridian has to say, because the company has a lot to gain from mass migration into NZ. The demand for electricity has a relatively strong positive correlation with population growth, even if many new low-skilled arrivals are bunking with several other roommates and use basic items sparingly.
This whole discussion is essentially meaningless and pointless. What we have in reality is politicians saying what ever they can to woo voters, and then committing to do things that are harmful to the economy and the people as a whole, all in the name of their own power, privilege and aggrandisment.
The economy can only work when working people have surplus funds to spend. what this requires is for there to be real jobs, paying decent wages for people. Immigration does nothing for and economy except create the opportunity for politicians to do something to the people they won't like - reduce their living standards. Fundamentally this also requires real jobs to be available too. The 'free market' globalisation exporting of jobs by out sourcing manufacturing in the name of short term profit in reality undermines the economy in almost every aspect.
Within a finite world, the persistent fixation with growth is destructive, but in NZ there is scope for the reallocation of resources away from imports to create manufacturing industries to improve national resilience.
Are you an anarchist Frank? That's what you're espousing.
The real problem is that politicians don't seem to have a solid grasp of the role of government, or for how the economy should work. Too many have bought into the 'free market' globalisation BS theories peddled by the US.
Ask yourself what the word 'Democracy' means. Essentially it is about the people. And now ask yourself if our government is actually serving the people? I'd suggest not. The politicians of all ilks tend to talk down to us. They act as though they believe themselves to be fundamentally superior, which bodes the question; are they fit to represent us?
I believe in part that the problem is the 'party' system where political parties tend to suppress true representation. Fiddling with it in the move away from FPP has essentially exposed us to the risk of a 'tyranny of the minorities'. Educating people to challenge their politicians, not idolise them. Even in parliament the politicians seek compliance. An example is the waka jumping provisions. We need to find ways to make politicians and parties more accountable to the people not less.
None of this will be easy, but it'l never get done if we don't try.
I believe in part that the problem is the 'party' system where political parties tend to suppress true representation.
I'd agree in part to this, however I tend to slant more towards the voter has much of the responsibility as well. We have a lack of true leadership in government and a disasterous culture in parliament of doing what is necessary to get votes instead of doing what is right for the country, and educating the voting public as to why this is. Coupled with a lack of education in the average voter and a lack of engagement with politics, leaving many voices unheard due to being disengaged int he overall responsibility to steer the ship that is NZ via putting their votes in.
I agree with you here. That's why I indicated educating people to challenge the politicians. But yes in truth too many of the people are too gullible and to willing to 'hero worship' politicians.
I think a big part of this could be a 'partisan' MSM that is focused on challenging the politicians, being the voice if you will, of the people rather than the other way around.
Yes challenge the politicians, and also politicians should be challenged by their peers to educate the public and understand the value of this towards their goals. They have the wrong marketing strategies which focuses too much on their own gain, than the wider public. That or they're too disconnected from us commoners to give us what we need instead of just a bit of what we want.
tyranny of the minorities
I would like the threshold lower (1/120th of the vote). To my mind we don't get enough minorities in parliament so the few we do get can be more extreme since there aren't any other options for Nat/Lab. Once people could vote for a new party/new idea with a decent hope it would get in, I think we'd get more people voting for the party/idea they want instead of worrying about 'wasting their vote'.
Competition, in the form of alternative parties in parliament, would also do wonders for accountability.
Rubbish. The majority of voters determine the centre. The centre in France is quite different to the centre in the US because the voters in France aren't as stupid. Personally I find NZ's centre almost perfect, I am not really a fan of either Labour or National for various reasons, but somewhere inbetween them is about right.
There are usually parties just to the right and left of centre (think Labour and National), and "extreme" parties quite far from the centre (think ACT and Greens).
I suspect ACT would be more right if they could be, but they wouldn't get as many voters and they couldn't form a coalition. Same with the Greens.
"the whole spectrum has shifted left" in the last 20 years. I don't agree, I think the centre is roughly the same (depends on the country of course), but the centre parties have become less centred, probably because there are bigger generation differences these days. For example in the UK, rewind 20 years I reckon the centre was the about same, but both Labour and Conservative were closer to centre than now (these days they are both a bit weird IMO). Same in NZ, JK was more centre than the current mob, he even built cycleways. And in Aus, I don't really remember, but I feel like Howard was probably more left than Sco Mo (I don't even know who their right wing candidate is these days).
In France, Marine LePen's RN party (previously called "Le Front National" is a Nationaslistic party, meaning France first, not foreigners. So there's definitely an element of racism there. They intend on coming down hard on illegal immigrants (which is a huge problem in France), they want to remove all government subsidies for non French residents. They also want to limit islamism in France, and they are considering banning women wearing "burkas" in France, as they claim it helps islamist terrorism by hiding behind the all covering clothing. They are totally opposed to sending troops to Ukraine and they will generally be less supportive of Ukraine. Economically, they are likely to be more protectionist and less trade friendly.
Finally the far-right party has not just "improved" their polling from 2022 they have doubled their support to over 33% in 2 years, which is an astonishing increase and a sign of the times.
This is a momentous shift because France has always been a left leaning country, where even right wing J Chirac would have been considered to be centrist in other countries.
Over the weekend, Japanese industrial production data was released showing it rose +2.8% in May from April, beating market forecasts.
The main reason for the excessive Yen weakness is the Bank of Japan money creation on instruction of the US, to bolster the US dollar and allow the US to devour the Japanese economy. Endgame of a failing empire Link What is happening with the yen? The dollar/yen exchange rate is presently one of the biggest macro stories. My new report on Substack is out - longer than expected with lots of charts and material... https://open.substack.com/pub/rwerner/p/ Read full article free in substack mobile app
Really..?
https://data.oecd.org/money/narrow-money-m1.htm#indicator-chart
Do interest rates ( carry trade) play a role?
https://data.oecd.org/interest/long-term-interest-rates.htm
https://www.brookings.edu/articles/japans-falling-yen-and-fiscal-space/
And thinking of vising China with their new visa-free offer? Just be prepared to have your mobile phone 'inspected' on entry. You may be interested in what you get back after the 'inspection'.
Mr Chaston, I have long been a proponent of the work you do here, and have no more fondness for China than one might expect. The full text of your linked article makes no mention of anything being 'given back'. That being the case, I am compelled to ask whether your comment here strays beyond editorial opinion, and into the realm of fear-mongering and conspiracy.
Are you prepared to state publicly the basis and substance of your assertion? Or are we to accept your Non Grata Sinophobia as the price to pay for consuming the otherwise valuable and factual information you provide?
Just because you're a nobody HM doesn't mean You won't be used as bargaining at some point
https://www.politico.eu/article/chinese-abductions-of-foreign-nationals…
Sorry, I didn't mean it as an insult. Most of us are nobody's (including myself), I just mean that because you're not on a risk list doesn't mean China will not opportunistically detain you if they need some bargaining chips. The law gives them cover and evidence they can use to provide cover.
Imagine if I wrote something like the following on my phone and took that phone to China:
"China forces would be annihilated if they attempt to invade Taiwan, trade would halt overnight and no mainland Chinese would be welcome anywhere in the West."
Can you imagine what would happen to my phone/me?
Let me assist -
China Is Installing Spyware on Tourists' Phones | PCMag
Border guards then install an app called Fengcai or BXAQ, which proceeds to collect all personal information including text messages, calendar entries, phone contacts, call logs, and a list of the installed apps. All the data is then sent to a remote server for review.
As well as collecting personal information, Fengcai has been found to check the content against a list of 73,000 items flagged as being suspicious or worth further investigation.
Thank you rastus.
Here is a link to the fine penetration test, outlining the findings of a Cure53 assessment targeting the integrated Feng Cai mobile application. https://cure53.de/analysis-report_bxaq.pdf
This is a GitHub repository detailing the collaborative investigation by Motherboard, Süddeutsche Zeitung, the Guardian, the New York Times, and the German public broadcaster NDR. In brief, BXAQ (also known as Feng Cai) collects all of the phone's calendar entries, phone contacts, call logs, and text messages and uploads them to a local server. The malware also scans the phone for over 73,000 files. It does so by matching MD5 hashes, and comparing them to a predefined list (mostly containing files identified as Islamic and Pro-Taiwanese in nature).
Again, I ask on what basis Mr Chaston makes the assertion that China is installing spyware? The app in question does not connect to any external servers, and conceptually, the app is rather simple: one button offers to start checking our phone and another allows us to uninstall the app after it has performed its task.
Unpalatable, perhaps. But a far cry from the assertion made in the above article.
if you are concerned then dont go to china. You should consider researching the tools your own goverment uses for mass surveillance, NSA GCSB all collect our metadata and have many tools when it comes backdoors, compromised certs or malware to access your private information.
Good Morning from Germany, where the labour market is deteriorating significantly. Germany's seasonal-adjusted unemployment unexpectedly rate rose to 6% in June, up from 5.9% in May. The number of unemployed individuals in Germany grew by 19k in June, against prior 25k rise and the expected increase of 15k. Link
If le Pen doesn't get in this time, will the French burn the place to the ground? We are about to find out.
"What happens next? ...the Left-wing New Popular Front and President Macron’s centrist Renaissance party intend to withdraw their candidates for seats where they’ve made it to the second round but don’t expect to win. The aim is to consolidate the anti hard-Right vote and block the National Rally."
"In the US, the inflation measure the Fed prefers, the personal consumption expenditure price index (PCE) was unchanged in May from April following a +0.3% rise in April. This was what markets were expecting. That means the annual PCE rate slipped to 2.6%, its lowest since March 2021. (The May CPI was 3.3% and we get the June CPI on June 13 (NZT)."
If we had a PCE equivalent in this country, what would it read? Well below 4% I would think.
And I wonder what our RPI would be? ("If the statistics don't say what you want them to, change the calculation!", and all that). And from the UK,
"What is the RPI?
The Retail Price Index (RPI) is a statistic that measures consumer inflation.... It was first introduced in 1947 and officially implemented in 1956, after which it became the official means of measuring consumer inflation...it remained the official measure of inflation until it was replaced by the Consumer Price Index (CPI) in 2003... the RPI (is calculated) by putting together a “shopping basket” of over 700 consumer products and services and tracking the average price year-on-year. The specific goods and services change over time to reflect contemporary spending habits. It also takes the cost of mortgage payments into account, making it heavily influenced by house prices and interest rates.
How is the CPI calculated?
CPI is calculated in a similar way to RPI .... comparing the average price to that of the previous year. However, it does not include housing costs as the RPI does."
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