Here's our summary of key economic events overnight that affect New Zealand with news the EU has suddenly realised it is on the wrong track, with an unstainable mix of policies which are leading them into blind social and economic alleys.
But first, US consumer inflation expectations for the year ahead were unchanged at 3% in August, the same as in July and June. The five-year-ahead inflation expectations was also steady at 2.8%. These same consumers said median one-year-ahead expected earnings growth is expected to be +2.9% and up from 2.7% in July, and above its 12-month trailing average of 2.8%. There is nothing here suggesting consumers expect inflation to be a problem, or that it threatens their real earnings.
Also not a problem is the level of wholesale inventories which continue to run at normal levels in July, showing no early signs of business stress.
But perhaps some more current data points to an issue. Total vehicle sales in the US ran at the annual rate of 15.1 mlnn much lower than the 15.8 mln rate in July. That was softer than the expected dip to a 15.4 mln annual rate.
American consumer debt rose by more than +US$25 bln in August, about double what was expected and the biggest rise since the end of 2022. The outsized +6.0% jump was driven by higher 'revolving' debt, like credit cards. It is a change that is sure to raise a few eyebrows.
Across the Pacific, Taiwan said its exports were particularly strong in August at US$43.6 bln. That was more than +16% better than the same month last year and far more than the expected +7.4% rise. Imports rose too, by almost +12% but that was less than expected. Taiwan's economy is certainly starring in the region. And this data reveals another big trend. Taiwan's largest export market is no longer Mainland China. It is the US. The shift has been swift. It also mirrors what is happening in other east Asian nations.
In China, the threat of deflation, a risk high on Beijing's agenda, is not fading as fast as they would like. Their CPI inflation rate edged up to +0.6% in August from a year ago, from +0.5% in June, but less than market forecasts of +0.7%. Still, it was the highest level since February, mainly due to a strong pick-up in food prices, especially fresh food. However, beef prices are down nearly -13% in a year, lamb prices by -6.3%. Milk prices are down -1.7% on that same basis.
Meanwhile, Chinese producer prices fell by -1.8% year-on-year, the most since April, and steeper than the expected -1.4% drop.
And a large investment bank, China Renaissance, has seen its share price collapse after Beijing apparently arrested its chairman on unknown charges. The bank was an important funder of China's digital economy. Perhaps because State-owned banks are struggling with their property loans, this is a way to broaden their lending books? Just a guess.
Local economists aren't as positive about China's immediate prospects any more. Beijing is losing the hearts and minds of and important set of influencers.
Halfway around the world, a new EU report said they must be spending about €800 bln per year on investment if they are not to lag the US, China or Japan in productivity projects. Without that they would be “forced to choose” between climate, economic and foreign policy goals. That is about 5% of the bloc's GDP and would require a massive new commitment. Without this extra investment, the reports says the EU will be unable to finance its social model and will have to "scale back some, if not all, of [its] ambitions". It is a tipping point moment for Europe as their competitiveness wanes. They need to change direction.
In Australia, all eyes are on the fast-falling iron ore price. In some markets it is now below US$90/tonne which represents a -23% fall in the year, down a massive -38% since the start of 2024.
The UST 10yr yield is now at just on 3.70% and down -2 bps from yesterday. The key 2-10 yield curve is now a positive +3 bps. Their 1-5 curve inversion is little-changed at -64 bps. And their 3 mth-10yr curve inversion is also little-changed at -145 bps. The Australian 10 year bond yield starts today at 3.97% and up +7 bps. The China 10 year bond rate is at 2.14%, unchanged. The NZ Government 10 year bond rate is now just on 4.26% and up +6 bps.
Rather than the talked-about fall, Wall Street has opened its week with a strong +1.2% rise on the S&P500, deciding the non-farm payrolls miss isn't derailing the American expansion. Overnight, European markets all rose about +1.0% as well. But Tokyo ended yesterday down -0.5%. Hong Kong was down -1.4% and Shanghai down -1.1%. In contrast Singapore rose +1.2%. The ASX200 ended its Monday session down -0.3%. The NZX50 ended virtually unchanged.
The price of gold will start today up +US$5 from yesterday at US$2502/oz.
Oil prices are up +US$1 at just on US$68.50/bbl in the US while the international Brent price is now just under US$72/bbl.
The Kiwi dollar starts today at 61.6 USc and marginally softer from this time yesterday. Against the Aussie we are -30 bps softer at 92.3 AUc. Against the euro we are unchanged at 55.7 euro cents. That all means our TWI-5 starts today at 69.6, and little-changed from yesterday.
The bitcoin price starts today at US$56,426 and up +3.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.4%.
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52 Comments
Jeez,the new EV car market is tanking and along with that depreciation on recently bought vehicles.I am getting spammed on social media with deals for new EV's;
Nissan Leaf $29,990, Polestar 2, $79,990 reduced to 54,990+$5000 cashback, Fiat 500E,up to $35,000 off,OUCH!!
EV batteries are essentially an environmental disaster in waiting. Sure they can have a life beyond the vehicle but only a limited one and vehicle owners will have to carry the costs of maintaining/replacing the batteries. ICE vehicles can much more easily kept going at affordable levels. Hydrogen, despite all the nay sayers is rising. It offers the options of both fuel cell and ICE engines despite lower energy. There are still big problems to be solved to make hydrogen available and safe at affordable levels, but they're coming.
Plug in Hybrids make a lot of sense to me, especially in the short term. You can make 10 PHEVs with 50km electric range for every one EV with 500km electric range battery. For city folk the PHEV could be on battery probably more than 50% of the time, so the 10 hybrids could reduce fuel consumption 5x more than one EV. And without all the charging infrastructure etc, just plug it in at home overnight only using off peak electricity.
Our government should have encouraged PHEV by making them zero rated for RUCs (with a max battery size). Probably would have been cheaper than all the charging infrastructure they have promised.
I have to agree Jimbo. This approach make more sense for city dwellers, and likely a lot of smaller town dwellers too. The further away from towns though the more need for ICE vehicles. How not to penalise them?
Decent and efficient public transport in the cities still needs to be a priority too. But cities and governments need to get started on them sooner.
"How not to penalise them?" - I don't think you can reduce emissions without penalising the emitters.
Its like how the Greens think we should all have enough money to live a great life regardless of how much we contribute to society, while expecting that a doctor will do a 7 year degree and work 12 hour days even though he can have a great life on the dole.
I also agree that PHEV is a good solution for NZ conditions, but now with the RUC on top it doesn't make so much sense financially.
If I look at how we use our Subaru Outback, 90% of the time it's my wife doing short journeys in town (which could be replaced by the battery/EV component of a PHEV) and then the rest are long journeys e.g. driving to skifields, road trips to Queenstown etc where you need the range, the ability to just use petrol/diesel in an emergency, and ideally some AWD/4WD chops.
I'd like something like an Outlander PHEV to replace the Outback but it just doesn't stack up financially. Would be better to buy a used Leaf for $5k private sale, use and abuse it around town and keep the gas guzzler for road trips.
Can you explain the environmental disaster bit Murray? Perhaps with a quantitative comparison with fossil fuel emissions?
The troubles with hydrogen, you still need to produce it somewhere then distribute it - all incurring losses.
A battery is produced once then can be charged by cheap rooftop solar or grid when needed. Fewer losses, more efficient distribution.
"...recyclers rely on two techniques, known as pyrometallurgy and hydrometallurgy. The more common is pyrometallurgy, in which recyclers first mechanically shred the cell and then burn it, leaving a charred mass of plastic, metals, and glues. At that point, they can use several methods to extract the metals, including further burning. "Pyromet is essentially treating the battery as if it were an ore" straight from a mine, Gaines says. Hydrometallurgy, in contrast, involves dunking battery materials in pools of acid, producing a metal-laden soup. Sometimes the two methods are combined.
Each has advantages and downsides. Pyrometallurgy, for example, doesn't require the recycler to know the battery's design or composition, or even whether it is completely discharged, in order to move ahead safely. But it is energy intensive. Hydrometallurgy can extract materials not easily obtained through burning, but it can involve chemicals that pose health risks. And recovering the desired elements from the chemical soup can be difficult
...Both processes produce extensive waste and emit greenhouse gases, studies have found. And the business model can be shaky: Most operations depend on selling recovered cobalt to stay in business, but battery makers are trying to shift away from that relatively expensive metal. If that happens, recyclers could be left trying to sell piles of “dirt,” says materials scientist Rebecca Ciez of Purdue University.
...Recycling researchers, meanwhile, say effective battery recycling will require more than just technological advances. The high cost of transporting combustible items long distances or across borders can discourage recycling. As a result, placing recycling centers in the right places could have a “massive impact,” Harper says. “But there’s going to be a real challenge in systems integration and bringing all these different bits of research together.”
https://www.science.org/content/article/millions-electric-cars-are-comi…
I guess it depends if the EROEI losses are really _that_ big a deal? What's the EROEI on the steak you had for dinner?
Yes in many instances battery electric is fine, but in some applications it may not be a practical "fuel source".
What about industries that require quick refueling, long ranges, weight reduction etc? Hydrogen has a high energy density and would be produced to meet this specific need (if current fuel sources become scarce). If those industries scale up Hydrogen fuel production, it could potentially expand to consumer level.
ICE vehicles can much more easily kept going at affordable levels.
That assumes oil will remain affordable. Not going to happen.
The issue with current EVs is that they are designed according to the status quo market preferences (SUVs, Utes, big spacious cars). This design is completely inappropriate for urban areas and most short trips. In Europe and Asia they are putting in policies that encourage micro-mobility and micro EVs. You are rewarded for making that trip over other trips e.g. discount on congestion charges, parking spaces designed to accommodate more but smaller vehicles, exemption from a whole bunch of unecessary safety requirements (makes sense if the vehicles is being used for slow speed local trips).
As an example, there are micro cars in France that hold 2 and can be driven by 14 year olds, it allows rural kids to get to school easily rather than having to be driven by their parents (their speed is capped and they are branded to let other drivers know). And of course, the most effective way is to invest in walking and cycling infrastructure so that kids can get to school and to sport on their own, without having to rely on their parents driving them in the SUV.
Thanks Simeon Brown for killing the EV market.
Nissan Leaf
Kerb weight, 1,594 kg
Gross Vehicle Weight, 1,988 kg
Towing capacity 0
Ford Ranger
Kerb weight, 2520 kg
Gross Vehicle Weight, 3140 kg
Towing capacity 3500kg
A lot bigger footprint
He's thick as pigshit and has no experience in the real world, he is actually intimidated by experts, his whole life has been based on playing political games where you win by getting popular votes regardless of whether your position is based on fact or good for the country.
https://www.1news.co.nz/2024/09/09/auckland-whangarei-highway-could-cos…
Based on historic annual investment by central government and Treasury's projections of future GDP, we estimate this project alone could consume 10% of the total non-maintenance/renewal investment for the next 25 years across all types of central government infrastructure (roads, hospitals, schools, defence, justice, public admin, etc)
This is a stupidly expensive long distance motorway to an area with a population of 200k, about the same as Hawkes Bay.
Complete waste of resources. Much better off investing in improving the route South and to Tauranga, with the added benefit of improving access to Coromandel.
The Auckland/Tauranga/Hamilton triangle is going to be the growth engine, support it with better road infrastructure to Tauranga.
The infrastructure should be based on robust cost benefit analysis, that way it can be less apolitical and based on evidence, more likely to gain cross party support. The Greens would cancel this as soon as they got in and rightly so, not because it's a car project but because the whole programme is based on selling the public an impossible dream.
It's what Chris Bishop has said he wants to do with infrastructure, he can't do it with Simeon pushing unaffordable populist bollocks and doubling down on them when it's demonstrated that they are terrible terrible projects.
I can't see how Simeon and Bishop both stay in cabinet when what they are saying is completely contradictory. I'd take Bishop over Simeon any day.
"Vehicles weighing less than around 6 tonnes do almost no damage to roads and so they impose very similar costs on the road network. For this reason, all light RUC vehicles pay the same RUC rate – $76 per 1,000 km (from 1 July 2020)"
RUC-CAM.pdf (transport.govt.nz)
Wondering what they'll do regarding motorcycles/mopeds etc. Unless there's an exemption somewhere I could see them justifying a smaller charge based on the Common Costs part of the composition they use, which is the major component of the RUC under 3500kg:
Common costs (referred to in the model as “Powered Vehicle” (PV) costs) are shared equally between all on-road powered vehicles. Powered vehicles include both petrol and nonpetrol vehicles, but not pedal cycles, for example. Costs are allocated to all RUC vehicle types at the same rate per kilometre travelled. Common costs are costs that are not related to road wear, vehicle weight, or vehicle size. They include public transport subsidies, general road policing (not the specific heavy vehicle enforcement (HV costs) noted above), road signs and marking, emergency works, and most routine road maintenance. They also include 45 percent of the costs of building new State highways and 68 percent of the costs of new local roads.
It was a while back but I was having a bit of a heated debate with a young guy that thought he was a genius buying a $70k Tesla with one of those green loans from the bank. This was a few years ago mind you when Telsa was the big thing.
And this guy didn't even have a particular high income either. Must have been before lending got tightened up. He was so convinced he would come out on top just from fuel savigns
I used to do this but with the advent of 10year warranty on Mitsubishi we reassed and after seven years of owning a from new Ute it seems pretty good as we consistently spent $4k on r&m previously Expectation is it will last us 20+ years.
We still have one $3k vehicle, a 1991 bighorn bought 20 years ago. Still warranted and rego. Doesn't get out much now.
I'm being bombarded with the same ads too ... from a depreciation perspective, you'd be feeling a bit sick if you had paid the previous asking price on one of these cars (even if you'd enjoyed the rebate) only to find you could have had it for tens of thousands of dollars less by waiting a bit.
Obviously if you were happy with the purchase price at the time and get the "value" from the car it's not the end of the world - but not ideal.
I like EVs, but would probably just buy a dirt cheap old Leaf as a runabout (120km range enough for everything my wife and I do around town in a given week) and stick to something like a Land Cruiser for open road journeys where you don't lose too much on depreciation.
Yeah if the numbers stack up on the purchase and subsequent depreciation side, versus the ongoing running costs, then all good. But I personally know a few people who did horrific 'man maths' to justify chopping in perfectly decent paid off cars, then financing (albeit at low/no interest) EVs during the rebate period, who will now be massively underwater and are spending more on the repayments than they save on running costs.
Whether buying EV, or petrol, or hybrid or whatever not enough people "run the numbers" prior to purchasing.
I moved to a hybrid last year. 60% less fuel use compared to my old van, and even about 30% more fuel-efficient than my partner's similar size car.
I feel that the clean car rebate scheme was one of the better ideas of the previous government. Imagine the economic and health benefits if NZ reduced its overall fuel consumption by 30%!
This is one of the tactics that the coalition will use to try to hide the cost of their mega roads, they will cut State Highway status on existing roads which will then have to be funded by ratepayers. And tolls will only cover less than 15% (probably much lower on most of them) of the cost of those roads so the money will come from the general taxation fund which is supposed to fund things like schools and hospitals. Economic vandalism by the spoilt little weirdo Simeon Brown.
https://www.stuff.co.nz/nz-news/350399907/proposal-toll-highway-raises-…
Tararua mayor Tracey Collis also expressed her concerns at having to be responsible for local roads that will lose highway status once the new road opened.
At recent meeting of Horizons Regional Council’s transport committee, she told NZTA director of regional relationships Linda Stewart the thought of upkeeping the Saddle Rd, “paid for by a small ratepayer base ... leaves us with absolute chills”.
Auckland-Whangārei highway could cost 10% of infrastructure budget
https://www.1news.co.nz/2024/09/09/auckland-whangarei-highway-could-cos…
It's not good to see the IRD engaging in this kind of 'targeted' advertising: https://www.1news.co.nz/2024/09/10/concerns-mount-over-ird-handing-kiwi…
For a few reasons:
1) Should a government agency really be handing over citizens' information to private, foreign, for-profit companies e.g. Meta (with no ability for us to opt out apparently) - particularly as these ad platforms charge a premium to use this type of targeting so we are all effectively paying to have our data sold to Meta/Google.
2) Is there any evidence the IRD can supply that this type of targeted advertising raises more in incremental tax revenue than it costs?
Yes, the IRD is literally contributing to the rort that denies them far greater tax revenue than they'd probably ever raise from late student loan repayers or whomever is being targeted with the ads.
Not to mention (unless the IRD runs its advertising in-house) that there will be some fancy agency - perhaps multiple agencies - clipping the ticket big time on this as well.
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