Here's our summary of key economic events over the weekend that affect New Zealand with news other than the crazy American political campaign which just seems to feed conspiracy narratives. We will ignore that and just concentrate on the data.
This coming week, all eyes will be on the New Zealand CPI rate for Q2-2024 which will be released on Wednesday. Preview here. Japan, Canada and the UK will all also release June CPI data. Later today we will get the China GDP result for Q2 and it is likely to confirm to the CCP designated targets. But of more interest will be their retail sales, industrial production, and electricity production data. We will also get Australia's June labour force data this week. And from the US it will be retail sales, housing starts, and industrial production. Also, Wall Street will get to see the second week of their Q2 earnings season. The first week was very positive.
Over the weekend, China reported new yuan data for June and it wasn't especially strong. Chinese banks extended +¥2.1 tln in new yuan loans in June, a sharp contraction from the +¥3.1 tln in June the previous year, and slightly below market expectations of ¥2.2 tln. The slip aligned with the sharp slowdown in outstanding loan growth, dropping to +8.1% in June from +9.3% in the previous month, to mark the smallest amount of loan growth since data started being recorded in 1998. A year ago it grew at +11.3%. Total 'social financing' in June was -22% less that the same month a year ago.
China's exports were expected to rise +8% in June ahead of new American tariffs. But they actually rose +8.6% to a 15 month high. Their imports fell -2.3% however when a +2.8% rise was expected. That divergence meant they reported another big surplus - which will undoubtedly spread the fear of Chinese dumping from its over-capacity situation.
They reported they imported almost -16% less from New Zealand in June than in the same month a year ago. They exported +2.4% more to us. For Australia, imports were down -5.2% and exports down -4.9%. For the US, their imports from them were down -4.9% and exports to them up +1.5%. Overall trading with China is pretty muted now. The only destinations that China has good exports to were Brazil, Vietnam, Indonesia, and surprisingly Taiwan. Everyone else - Russia included - is very ho-hum. And total trade (imports and exports) is only healthy with Vietnam, Malaysia, and Brazil.
Japanese industrial production rose +3.6% in May from the prior month to be up +1.1% from a year ago, solidifying the evidence of an improving Japanese economy. No doubt the recent lower yen has helped, especially as the pressure from energy prices has waned substantially.
India's inflation rate rose to 5.1% in June. up a rather startling +1.3 in June alone. From a year ago, food prices were up +9.4% however within that. This rise was not expected, although their central bank is not expected to react to it because they have given themselves a very generous 2% to 6% target range for inflation. But they are now well above the 4% midpoint and the froth developing in their breakneck economic expansion will need to be dealt with soon.
Industrial output in India rose +5.9% in May from a year ago, well above market expectations of a +4.9% gain and marking the highest growth rate since October 2023. Manufacturing which accounts for nearly 80% of total industrial production, expanded by +4.6% with surged growth noted in the pharmaceutical sector (+7.5%), basic metals (+7.8%), mining (+6.6%) and electricity (+13.7%).
American producer prices rose +2.6% in June from a year ago (+0.3% for the month), the most since March 2023, and rising from an upwardly revised 2.4% rate in May. Markets had expected a rise of 2.3%. Under the hood, inflation pressures still lurk but remain at a much more manageable level.
But despite all the vastly improved economic signals, American consumer sentiment still lags. According to the widely-watched University of Michigan survey, it fell for a fourth straight month in July to its lowest since November. Nearly half of consumers are still concerned about high prices and economic uncertainty persisting as their upcoming election looms.
In Australia, the number of permanent arrivals in the country is now almost at a new record high in a very sharp rebound. +12,680 people arrived in the country in May, taking the annual level to +161,000. The record high permanent arrival level was +163,400 in February 2009.
The UST 10yr yield is now at 4.19% and unchanged from Saturday. A week ago it was at 4.28% so a -9 bps net fall since then. The key 2-10 yield curve inversion is marginally less at -27 bps. Their 1-5 curve is still at -77 bps. And their 3 mth-10yr curve inversion is still at -118 bps. The Australian 10 year bond yield starts today at 4.34% and little-changed. The China 10 year bond rate is still at -2.26%. The NZ Government 10 year bond rate is now at 4.55%, unchanged from Saturday. A week ago it was 4.77% so down a net -22 bps through the MPR.
The S&P futures, which actively trade through the weekend, suggest Wall Street will open tomorrow with a +0.9% gain.
The price of gold will start today down -US$4 from Saturday at US$2410/oz. So far, no safe haven rush.
Oil prices are still at just under US$81.50/bbl in the US while the international Brent price is still at just on US$84.50/bbl. A week ago these prices were US$83/bbl and US$86.50/bbl respectively. Earlier today, Kuwait said it has discovered very large new oil reserves in a marine environment and it plans production "as soon as possible".
The Kiwi dollar starts today still at 61.2 USc and back nearer the week-ago level of 61.4 USc. Against the Aussie we are still at 90.2 AUc. Against the euro we are still at 56.1 euro cents. That all means our TWI-5 starts today at 69.9 but down from the 70.6 of a week ago.
The bitcoin price starts today at US$60,044 and up +2.6% from this time Saturday. Volatility over the past 24 hours has been moderate at just on +/- 2.6%.
Please note that we will be summarily removing comments that push American culture war talking points and related Chinese/Russian disinformation. This is not the place to prosecute or spread these infections.
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13 Comments
Chinese banks extended +¥2.1 tln in new yuan loans in June, a sharp contraction from the +¥3.1 tln in June the previous year, and slightly below market expectations of ¥2.2 tln
In China, a housing bubble was popped by the government who demands homes are for people to live in. In the US, homes are vehicles for speculation making them impossible for people to live in. Link
MH: Every country needs to know its own economic statistics. The problem is not sharing the statistics. The problem is that the statistical accounting formats that are promoted by the World Bank, the IMF, and by the sort of neoliberal economics are not the kind of accounting statistics that you need really to run your economy.
The whole idea of GDP and the national income and product accounts includes financial overhead, rentier overhead, monopoly rents as overhead, waste as overhead. In order to really develop their own economies, they need to have an alternative format to report. And if they would develop an alternative form of national income accounting, then they could track it much better and they wouldn’t have to make this artificial U.S.-sponsored national income accounting that says that all this financial sector, the overhead, the debt service, the increasing housing prices, actually doesn’t add anything to real accounting.
If you bring the economy of production and consumption to real economic output, it’s all an overhead. And if you do that and break away from this idea of GDP and you break out military spending and all of the other basically non-capitalist forms of spending, non-economic forms of spending, then you’ll have something completely different. So just for its own use, every country needs to, of course, you have to measure the volume of your trade. Of course, you have to measure what you spend and what you get.
The question is whether you consider this spending to be productive or unproductive. You need to reintroduce the central concept of classical economics, which was the distinction between productive and unproductive labor and earned income and unearned income between profit and rent, as you and I have spoken about so often. Link
Amen to that. I once had a contract looking at measures to use for an overseas local authority strategic plan. Most of the economic measures I looked at were literally crap. The name said one thing, but the measure did not measure that. For example, the local authority wanted to work out a labour productivity measure for their city. When I looked at it, labour productivity basically boiled down to sales minus expenses for industrial sectors (GDP-P) all added up together and divided by total hours worked. This is how that looks for NZ sectors.
Unsurprisingly, the key to increasing labour productivity is to have firms with high mark-ups and fewer worked hours. So, average labour productivity in NZ is $68 (2010 prices) but labour productivity in the real estate sector is ten times that at $680 per hour. In fact, without the real estate sector, our labour productivity drops from $68 per hour to $58 per hour. It gets worse! Half of the GDP(P) generated by the real estate sector is 'imputed rent' - a made up amount that rent owners would pay to live in a house like the one they own. So, the higher your rents = the higher your GDP = the higher your labour productivity!
So, yes, we 100% need different measures of success. The ones we have are designed (explicitly in my view) to create a strategic, political and regulatory environment that encourages and rewards rentiers. If you want a real xample of this, look at the productivity miracle post energy and water reforms in the late 80s / early 90s. Yes, labour productivity went up, but this was because they started generating a surplus (GDP-P) and they cut thousands of hours because they reduced maintenance (so more profits & less hours = higher labour productivity). Look at what happened once they had to start catching up with what they had neglected.
The price of gold will start today down -US$4 from Saturday at US$2410/oz. So far, no safe haven rush.
In light of events, going to be interesting to see what happens when China markets open today and more so when US markets open.
And the timing for Germany to dump all its BTC makes you wonder why they didn't just sit on it. When the UK sold its gold between 1999-2002, the price appreciated 600%.
Ans this slipped under the radar. discussions about reclassifying gold as a 'High-Quality Liquid Asset' - BIS, LBMA, and WGC (World Gold Council) - under Basel III happened last week.
The reclassification of gold, from its current status as a Tier 1 asset, as an HQLA would bring about enhanced market stability, improved liquidity, regulatory compliance benefits, greater confidence and trust in the financial system, and overall economic and financial stability. This would be advantageous for both financial institutions and the broader economy.
https://gjepc.org/solitaire/lbma-wgc-advocate-for-reclassifying-gold-as…
''Please note that we will be summarily removing comments that push American culture war talking points and related Chinese/Russian disinformation. This is not the place to prosecute or spread these infections.''
Cool - and yet you've been quite happy all these years to allow climate change denial disinformation to be freely plastered around these comment boards. I guess not all disinformation is equal. Go figure.
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