Here's our summary of key economic events overnight that affect New Zealand with news the world's second largest economy shows more signs of losing its expansion mojo.
China's exports rose in September but at an unexpectedly slowish pace. They were expected to rise +6% from a year ago, but only rose +2.4%. This was the fifth consecutive month of export growth, though at the slowest pace since April. Cut price (dumped) steel exports were a factor, a trade that is worrying may countries. And as expected import growth was weak, barely more than a year ago and well less than the +0.6% rise expected.
China's new yuan loan growth also came in less than expected, rising almost +¥1.6 tln but much better than the 'modest' +¥1 tln in August. Banks are making more debt available. However it was a slower rise than the +¥1.9 tln expected. And in September 2023 they rose +¥2.3 tln, so well down on that basis too.
A lot now depends on issuing a lot more debt. Some this is an additional +¥6 tln is on the way, but to be fair much of that won't be direct commercial bank lending. But sovereign money-printing (bond issuance) may well flow through to this channel.
In a side note for China, we can report that their ETS carbon price rose to its highest-ever level yesterday, ¥103.5/tonne. The reason is that 'tougher' emissions standards are on the way there. But this ETS tax is low by New Zealand standards, equivalent to just NZ$24.40/tonne. Currently our ETS is pricing carbon at NZ$63/tonne. In the EU, that same price is €64.60/tonne (NZ$116). China's disincentive to pollute is cheap by comparison.
Singapore said it's economy grew +4.1% in Q3-2024 from a year earlier. That is its fastest pace in two years and accelerated from +2.9% growth in the Q2-2024 quarter.
Meanwhile in India, consumer inflation rose sharply in September to 5.5%, much higher than the August 3.7%. Driving this change were food prices, up at the rate of +9.2% in September and a far faster jump than the already-high +5.4% rise in August. This data may inhibit their central bank from starting an expected rate cut cycle. They have a mid-point inflation target of 4%.
In the US, recent days have brought sharpish falls in food commodity prices as it becomes clearer that US and international grain harvests will be very good this year. Wheat, soybean and corn prices are all falling on excess supply worries.
Overnight, the Nobel Prize in Economics was awarded. The prize was given to Daron Acemoglu, Simon Johnson and James Robinson for work that advanced the understanding of differences in prosperity between countries. Two are the authors of a book, 'Why Nations Fail'.
The UST 10yr yield is now at just on 4.12% and up +5 bps from yesterday. The key 2-10 yield curve is positive, now by +18 bps. Their 1-5 curve inversion is still inverted by -31 bps. And their 3 mth-10yr curve inversion now less at -70 bps. The Australian 10 year bond yield starts today at 4.33% and up +10 bps. The China 10 year bond rate is at 2.16% and little-changed. The NZ Government 10 year bond rate is just over 4.48%, up +5 bps from this time yesterday.
Wall Street has started its week on an 'up' note with the S&P500 up +0.7% in Monday trade - and yet another new record. Overnight, European markets were also up, but only Frankfurt managed to match Wall Street. Tokyo was on holiday yesterday. Hong Kong fell -0.7%. But Shanghai zoomed higher in their afternoon session ending up +2.1%. Singapore rose +0.8%. The ASX200 ended its Monday session up +0.5% but the NZX50 fell -0.6% on the day.
The price of gold will start today at US$2647/oz and down -US$10 from this time yesterday.
Oil prices are down -US$1.50 at just on US$74/bbl in the US while the international Brent price is now at US$77.50/bbl.
The Kiwi dollar starts today at 60.9 USc and down -20 bps from this time yesterday. Against the Aussie we are little-changed at 90.6 AUc. Against the euro we are also little-changed at 55.8 euro cents. That all means our TWI-5 starts today now just under 69.3, and marginally lower from yesterday at this time.
The bitcoin price starts today at US$65,786 and up +5.0% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.
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41 Comments
Ah, the fake Nobel Prize for economics. Previously given to titans like William Nordhaus for his work assuming that 80% of the world's economy would be unaffected by climate change because productive activities 'mainly take place indoors'.
This time it goes to some geniuses that reckon that the heavily-armed, colonising, pillaging, slave-laboured, trade-protecting, countries of yesteryear succeeded because they had such fine upstanding institutions. In 2012 they argued that China was doomed to fail because their institutions are not conducive to creative destruction and innovation! Economics is a joke.
Bringing enlightenment, magna carta, science, technology, democracy, rule of law, sanitary plumbing...socialism to the previously slave laboured, pillaged & mass murdered misery of the global masses
- who then benefited from the structured employment, jobs & wealth generated by capitalism & distributed such that 100s of millions were lifted from poverty & global population increased from 1B in 1800 to 8B today.
What's not to like?
I strongly recommend that you expand this nonsense into a lecture and take it on a tour of global south countries that are still trapped by the hegemonic power of the world's institutions - watching their labour and materials mercilessly exploited by the global north (who celebrate the fact that a few more people now have a few dollars per day to live on).
I think you will find that what characterises the impoverished global south countries is: i) a lack of protection for private property, ii) corruption at all levels of government, but especially at the top, iii) absence of investment in education, iv) general lawlessness.
Ask yourself why Botswana has prospered, and its neighbour Zimbabwe has gone backwards.
Thanks. Fun facts: Initially Britain banned the trade of slaves following the efforts of William Wilberforce, then subsequently outlawed ownership. Slave owners were recompensed by the Crown who borrowed from the Rothschilds. During this period there was significant non-European activity in slavers including China, Ottoman Empire and the Barbary pirates. This is conveniently forgotten.
‘If we have to make an intervention ... we will’: Luxon on Wellington council
https://www.stuff.co.nz/nz-news/350451403/if-we-have-make-intervention-…
Just to think the Act party used to be proudly on the edge of libertarian. Now it fully supports State intervention in micro-managing communities and parents. Not to mention its unabashed support for the Israeli state murdering tens of thousands of women and children as it embarks on the most blatant land grab of the 21stC. No shits given for Palestinian property (or human) rights.
The current chaos coalition parties were never what they purported to be.
They are masters of lies and deception and it was clear to every thinking person with half a brain when they revealed the thin veil of minimalist policies with only $20 tax relief for the plebs & million dollar returns for the biggest landlords fleshed out.
The previous Labour govt has been careless with taxpayers money but it has been relatively honest (as in I do what I say) and generally focussed on investing the money into this country's people.
The previous Labour govt has been careless with taxpayers money but it has been relatively honest (as in I do what I say) and generally focussed on investing the money into this country's people
If it was honest it would have stuck to when they said there would be no mandates, and followed through on the many promises it made. Some of their ideas were indeed investing in it's people, but the execution was lacking or non existent. Labour were more of a do as I say party than many remember.
NZ has one of the most centralised governance structures in the world and no political leadership in their right mind would willingly devolve their powers. Decentralising decision making comes with sharing fiscal revenue with local government, i.e., less money for the centre to spend on its voter base. Yeah, not going to happen.
Question. If China have vaults full of trillions of dollars of financial assets and gold etc is their fiscal stimulus really issuing 'debt' at all - or are they just giving a tiny slice of the spoils to their people? Seem preferable to their usual trick of getting banks to issue debt into the economy (via businesses)
I got interested in this when I looked at why Australian households appear to be stacking up the cash. I thought it would be export-related, but it appears to be the result of their Govt and business sectors running continuous deficits. Their exports make very little difference at all.
" If China have vaults full of trillions of dollars of financial assets and gold etc..."
When you say 'China', were you referring to their government and it's many institutions, cross holdings, opaque ownerships, etc.? I expect you were. It gets a tad tricky to firmly establish where public China stops and private China begins, right? Quite different to western countries where the demarcation lines are far clearer because we have largely independent court systems where governments vs private enterprise enter on an even standing, and much tracing of information can be done through public records.
Thus to me, when you say, "their usual trick of getting banks to issue debt into the economy (via businesses)", the tricky party is establishing how much of each business is part of the 'public side' and how much is really private. And the other tricky part is whether the truly private side decides they must compete to hold market share or simply to be a good corporate citizen. Complex vertical integration throughout China by their 'public ownership' side has many advantages when driving an economy in a direction. And comes with not a few risks.
China is much more Borg-like than many westerners - who have grown up with private property rights, legal challenges against governments being commonplace, (supposedly) free and fair elections, public having rights to public records, etc. - would likely understand. For example, in the US they say, "Don't fight the Fed", with the actions of the Fed being pretty clear, and the Fed being a relatively easily identified and demarcated institution, with specific objectives. There is no equivalent to "Don't fight the Fed" in China. Some may claim it is "Don't fight the CCP". But that's not, from what I've seen and understand, right either. It's much more 'hive like' and this is evident between suburbs, cities, regions, etc. Do I claim to understand it? Hell no. And any person, western or Chinese, that claim they do is unlikely to be 100% correct. And that includes Xi who probably has no clear understanding of where his power starts or stops. Likewise most in positions of authority. But he is certain to know that should he cross the line, just like everyone else, the response will be swift. 7,000 years of culture gets you to this situation - we've a long way to go in the West. ;)
(In advance, my apologies if my personal understanding of China, or the west, has offended anyone. It is but one person's view among billions.)
"Annual price rises expected to be below 3% for first time since 2021" Cool! But what has been the now embedded accumulated CPI number over that time? Way above anything that resembles a Target of between 1%-3% p.a. But no matter. We'll look through that bit. The answer is the same as it was last time, and the time before that, and the time before that. Get citizens to take on more Private Debt to stimulate the economy. Don't worry about how they will repay it. They will never have to. What could possibly go wrong? As is suggested above and elsewhere, "If Beijing cannot raise China’s animal spirits, the world could feel the consequences". And as we are part of that World, that's going to be us feeling it.
The time to take an umbrella on your walk is when it looks like rain; not waiting until you're soaking wet, miles away from home. And if we ever needed to take out the economic umbrella for our nation on what is looking like an ominous day, it's today.
China's disincentive to pollute is cheap by comparison.
In nominal comparison yes but I wonder if this is a fair statement to make, most things are much much cheaper in China.
Perhaps on a GDP at Purchasing Power Parity (PPP) per capita adjusted basis things look different?
China: NZ$24.40/tonne (around 100% PPP)
NZ: NZ$24.40/tonne * 2.5 = NZ$61/tonne (250% PPP)
Germany: NZ$24.40/tonne * 3 = NZ$73.2/tonne (300% PPP)
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