Here's our summary of key economic events overnight that affect New Zealand with news China's battle with deflationary pressures shows no sign of being won.
But first, in the week ahead locally, we will get the REINZ result for October some time this week. And September migration data on Wednesday. Internationally, all eyes will be on American consumer and producer inflation data, retail sales, and speeches by Fed officials, as investors seek clues on their monetary policy outlook in the wake of 2nd Trump Presidency.
In China, new yuan loans, fixed asset investment, industrial production, retail sales, and the house price index will be all be released this week. In Australia, their October labour force data will come out, the NAB business confidence survey, and Westpac consumer confidence indexes are expected. Finally, we should watch Indian inflation data.
Over the weekend, China said its inflation rate came in at +0.3% in the year to October (and half the modest August level), still giving them disinflation as they stare deflation in the face. Deflation is already in producer prices, and it got slightly worse in October, at -2.9%. That's their fastest fall in almost a year. Both movements were small but they are going the wrong way for them.
Among the CPI items, we can see that food prices rose +2.9% in the year to October, so households are feeling some noticeable inflation pressure. Costs eased for fresh vegetables but they are still +22% higher than a year ago, fresh fruit was up +4.7% on that same basis, and pork up +14%. Prices fell however for eggs (-2.5%), milk (-1.7%), beef (-13%), and lamb (-5.9%). So not much for us to be encouraged about here.
And China has sharply raised (+40%) their local governments’ debt ceiling to ¥35.5 tln (NZ$8.3 tln) when they announced the total value of the current program increase will by ¥10 tln (NZ$2.3 tln). But officials did not announce additional measures to directly stimulate domestic demand, probably disappointing markets that had been hoping the package would also help consumers. They did say however they are 'studying' such moves, probably waiting to see the impact of the challenge from Trump.
Japanese households aren't feeling all that great either. Household spending fell by -1.1% in September from a year ago, a smaller decline than the -1.9% drop in August and better than market expectations for a -2.1% decrease. This marks the seventh month of reduced household spending in 2024.
Foreigners love the place however, not only as tourists, but as investors too, raising their equity investment stakes in each of the past six months.
Taiwanese exports rose +8.4% from a year ago in October, building from a +4.5% rise in the previous month. Imports were up +6.5%, a slower rate of increase than we have seen in the prior four months. Robust Taiwanese trade contrasts with what its unfriendly and jealous neighbour is able to achieve.
Across the Pacific, Americans remain cautious taking on new personal debt. That rose by only +US$6 bln in September, a slowdown from the almost +$9 bln rise in August and well below the expected +US$14.5 bln increase. Now the average balance is US$23,087, up from US$18,008 four years ago. These are not actually high levels. (The divisor we used is the total population 18 years and older.)
For the first time since May 2020, the US Fed saw its balance sheet assets fall below US$7 tln last week. That is a -US$53 bln fall in a month, a -US$2 tln fall since it peaked at US$8.96 tln in April 2022.
Before their election, consumer sentiment as tracked by the University of Michigan survey, rose for the fourth consecutive month, rising 3.5% to its highest reading in six months. While current conditions were little changed, the expectations index surged across all dimensions, reaching its highest reading since July 2021.
The November WASDE report from the USDA sees 2025 with more world wheat, slightly less coarse grains, and more rice. The world's ability to feed itself seems stable, without unusual price pressures. They expect to import more beef from Oceania. In a change they now expect more US milk production even though cow herd numbers might slip slightly. Access to this market now depends on the incoming capricious Administration.
The October Canadian labour market report showed a +14,500 rise in jobs, less than expected. But full-time jobs rose more than +25,500 and part-time jobs slipped -11,000, a virtuous twist.
In Australia, they released life expectancy data at the end of last week - and it declined for a second straight year. An Aussie born today is expected to live to 83.1 years (boys less, girls more). The years 2022-2023 saw the highest number of COVID-19 deaths with 15,982 in Australia, which was up by 4,100 from 2020-2022. (The emergence of the antivax movement and weird alternative approaches won't be helping either.) As a result, life expectancy has fallen by 0.1 years for men and 0.2 years for women over this period. Despite this decrease, Australians still have a higher life expectancy than many comparable countries, like New Zealand (82.8 years), the UK (82.2 years), the US (77.6 years), and Canada (81.5 years). Today, a 60-year-old Australian man can expect to live another 24.2 years, and a woman another 27.1 years.
The UST 10yr yield is now at just on 4.31% and up +1 bp from Saturday. A week ago it was at 4.37%. The key 2-10 yield curve is now less positive, by +6 bps. Their 1-5 curve inversion is inverted by -12 bps. And their 3 mth-10yr curve inversion is still inverted by -28 bps. The Australian 10 year bond yield starts today at 4.56% and down -3 bps. The China 10 year bond rate is little-changed at 2.12%. The NZ Government 10 year bond rate is also unchanged at 4.67% but up +18 bps from a week ago.
The price of gold will start today at US$2684/oz and down -US$1 from this time Saturday.
Oil prices are +50 USc firmer at US$70.50/bbl in the US while the international Brent price is now just under US$74/bbl.
The Kiwi dollar starts today at 59.6 USc and down -10 bps from this time Saturday. Against the Aussie we are down -10 bps at 90.6 AUc. Against the euro we have dipped -10 bps as well to 55.6 euro cents. That all means our TWI-5 starts today at just on 68.7, and down -10 bps from Saturday but unchanged from a week ago.
The bitcoin price starts today at US$79,831 and up +4.9% from this time Saturday. Volatility over the past 24 hours has been moderate at just on +/- 2.9%.
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58 Comments
Yes, let's hope the world's largest producer of milk opens up their market to NZ exporters.
India has the world's largest dairy herd with over 300 million bovines, producing over 187 million tonnes of milk
Rural votes make up 30-40% of India and any government there that tries to drop tariffs will be kicked to the curb within months.
Interestingly enough India is the fifth largest producer of beef. I work with a decent number of them and we get into some interesting discussions while working long hours. Seven states in India slaughter cattle, and how this is addressed seems to depend on one's religious standpoint. Some accept that it's cattle being slaughtered, while others excuse it as buffalo.
“probably waiting to see the impact from the challenge from Trump.” Aye, reminiscent of the old “ when America sneezes etc “ saying and indicative of how undeniably large and influential the USA is on the world stage. And here is just one man dominant, as infamous as famous, a walking, talking, living headline, about to assume command of the whole damn shooting box. Not just China, the whole world waits, wonders and breathes deeply.
Bitcoin breaks $81k USD / $135k NZD. I wonder when it’s not a useless ponzi anymore? When Microsofts shareholders want them to add it to their corporate treasury? When the US government starts to consider a strategic reserve? Both of those are currently on the table, earlier than I thought to be honest. We all know the RBNZ is late to every party, so don’t hold your breath for that one.
There really isn’t much average retail attention, the money coming in right now is a lot bigger than that. They're happy to accumulate under the radar if they can. The ETF inflows on Monday are going to blow peoples minds. To be honest that’s preferable to me, it reduces the magnitude of the bubble cycles. Your average investor loves to buy high into hype, and sell low in despair.
No proxy - crypto, cash, e, even gold - is worth a damn if there's nothing to buy. Traditional proxy is debt-issued, fiat-levered, and based on back-projections, not proven forward underwrite. Even the pretence of gold backing got dropped in 1970 - in reality it hadn't existed for 40-50 years prior, and maybe more. Crypto requires a s---load of energy (more than conventional proxy) and by inference, a functioning grid/internet (as do they both).
If energy flow recedes, then the 'table' you speak of will be of ever-reducing size. Put another way, an increasing number of bets will be off.
Put another way - no proxy is a store of wealth.
Fonterra upped the milk price forecast to a mid-point of $9.50/kgMS last night ... would be a new record high if achieved ... not even a mention in the media so far today. NZ's biggest industry by far and not even reported on. Do people take food and water for granted ??
“Those people’s efforts are in vain who, with unchanged lives, desire to come to the people’s aid by distributing the wealth they have first taken from them.” Way back Leo Tolstoy was onto it. The great famine of Russia 1891/2 in which reportedly some aristocracy were reduced to trading such as a diamond tiara for a loaf of bread.
I think you're on the right track pdk, as you say a number of bets are off. I'm just a little more optimistic than you. It's fairly obvious if you've been following for a long time, that what we are seeing is the slow start of a pivot from the fiat system many of us have all lived under our whole lives. It's failing at an ever increasing rate. In the scale of monetary systems the 50 odd years it's been dominant is the blink of an eye. I think you mentioned elsewhere real estate has also done its dash, thats because it's just been a proxy for store of value for the last few decades (way above it's utility value), as we have increasingly debased our currencies at greater speed. Does BTC solve this? Many believe so, and there's certainly no other options out there right now. "May you live in interesting times".
Take this article with a grain of salt, however it seems well researched and has plenty of references. The central banks will admit nothing.
Countries outside the eurozone but inside the European Union, i.e., those that one day might join the eurozone—like Poland, Hungary, and the Czech Republic, are positioning for a new gold standard.
To prepare for a monetary system based on gold, they are buying gold to equalize their reserves to the eurozone average. This balancing of gold reserves in Europe is a key topic I have written about extensively.
And now, additional evidence of these plans has come out, this time from Konrad Raczkowski, former Minister of Finance of Poland.
Raczkowski recently argued official gold reserves in Europe must be evenly distributed relative to GDP, which “in the near future … will be the new gold standard.” His statement adds to a vast body of proof regarding Europe’s preparations for a gold standard.
just curious if interest.co.NZ receives any $$ from this budget (https://responsiblestatecraft.org/china-cold-war-2669160202/).
Silence means yes.
Thankfully one of the benefits of not living under an authoritarian regime, is that you are able to file a request to find out under the Official Information Act.
(edit: Thought you were referring to the NZ government receiving some of this money. It’s pretty clear from just reading this website regularly, that it in no way has an anti China basis.)
Please explain. Your accusation makes absolutely no sense.
The editorial has been incredibly critical of Trump. How does that sit with a pro-USA, anti-China position?
The website has been presenting negative news on China’s economy. So what? The news has been negative!
The news on China is prominent in these briefings. I would suggest that is because of the global impact of the Chinese economy, and on the NZ economy. Not because of an anti-China position.
The global 'economy' is inextricably interwoven. Who holds what debt-proxy is part of it, but also who possesses what resources. No nation is materially- self-sufficient (making all but short-term war, an interesting proposition).
But combined, the global 'economy' is - and was always going to be - a Ponzi. The whole world turned from gold to Real Estate - because nothing else scaled to exponential growth. RE, to my eye, has shot its bolt. The US cannot afford US wages, China needs the US to honour its debt; who blinks first?
couple of responses;
"silence" does not mean yes. It means you're being ignored. You don't get to pre-interpret answers like that in NZ. It might work in China where people are intimidated into compliance. It won't work here.
The Interest.co.nz team will be dead chuffed that you put a lot of weight on their reporting and that China might be concerned that they are influenced by factors other than factual news and opinion.
And finally do you have any evidence that the reporting they do on China and the US is not factual? If so please present it? You have been a contributor to these streams for some time now and should know that virtually no one in these threads accepts what they are told at face value and usually challenge opinions and even 'facts', but especially sources in an effort to determine what is supported by evidence.
Agree with Xing here. If media is being influenced by monetary grants, it should be disclosed to readers. The readers can then understand editorial bias. That should work for no-matter where funding is coming from, left leaning governments or right leading autocrats or wherever.
But the comment section isn't really the right place for it.
Yes the ability to openly disagree and argue it out in a civilised manner is a right that has been earned in blood. Even today there are a few who seem to think we should not be able to do that, but fundamentally that a core of what freedom is.
In particular though, without dismissing any of the other sacrifices I would in particular like to identify the sacrifices of the Maori Battalion. Fought well where ever they were sent, and then treated shamefully when they returned home. Viet Nam vets too.
TK I would like to add as an ex-serviceman that it is my opinion that the Maori Battalion encapsulates the highest ideals of service, and although I was RNZAF I have many acquaintances who were army combat vets and to me the Maori ones stand head and shoulders above the rest for their attitude, their mana, and their fortitude. In many respects without actively endeavouring to do so, they continue the spirit of the Maori Battalion. That all veterans have been and continue to be treated shamefully by our governments, Maori all the more so, it is a sad blight on the mana of our politicians who will not fight for them, returning just a little of what was sacrificed for all.
From what I understand the Maori Battalion were mostly volunteers as the Maori were not subject to conscription? It is commonly accepted in the desert war, amongst the Commonwealth forces that they found themselves very much at the very busy end of the stick and if you read Major General Kippenberger’s account (Infantry Brigadier) you soon realise that the Maori battalion along with the Indian brigades were relentlessly placed in the fire at the sharp end of that stick. As with the situation recently with the Gurkhas, the home country powers that be have conveniently short term appreciation.
Going to the Māori Battalion display at the Treaty Grounds at Waitangi, you get the impression that a lot of the volunteers got buyer's remorse, because they saw volunteering as a chance to show Pākeha New Zealand that they were their equals. It made me sad that the Battalion's heroic contribution was valued, but the people who comprised it were not.
Still haven't tempered your bias against Bitcoin, still hiding behind the VolaTiLe excuse to not do the work?
2 years ago exactly everyone here was saying it is dead. Perhaps you should all look through the comments and see what the sentiment was. And then ask yourself, why did I think that, why didn't I do a bit of work and buy a little bit. And do I still think the same now, have I upgraded my mental processes?
The thing is BTC is not supported by anything other than demand. If you disagree please explain what supports it? what will BTC be worth if it is all owned by just a few big players, and it costs too much to 'mine' it? At least gold looks pretty.
FIAT currencies are supported by all the economic assets of the issuing government. Yes there are issues around the quality of the government and how the country is governed and politics in general, but that doesn't change the support.
What makes you think politics won't interfere with BTC or come other crypto?
What makes you think politics won't interfere with BTC or come other crypto?
You're asking good questions that I started grappling with 7 years ago. This was one of those questions I thought about quite deeply. It's aligned with these questions:
- Can't the govts confiscate BTC like they did with gold?
- Why don't the govts just make BTC illegal?
- Can't the govt just make its own version of BTC?
FIAT currencies are supported by all the economic assets of the issuing government.
In an ideal world, this would be a correct statement. Unfortunately, fiat currencies have become a function by which unelected bureaucrats rob people of their labor and time. Human worth is devalued. Those who pull the strings and closest to the money spigot are the primary benefactors. It's dreadfully broken, corrupt, and unfair.
Your last paragraph; I'm not sure I understand how you would say "unelected bureaucrats rob people of their labor and time"? But that the political interference in FIAT currencies. making the politicians and their minions more accountable to the public should be a goal to be achieve by any society. Unfortunately too many people don't want to know.
I'm not sure I understand how you would say "unelected bureaucrats rob people of their labor and time"?
What it means is that select bureaucrats get to dictate monetary policy, but the people have no say in all this. The detrimental effects of expanding the money supply is that people have to exchange more of their labor and time for a currency that loses its value in line with monetary expansion.
Ok I get that, and largely agree. The real issue here though is that the economic models that are applied dictate that there must be inflation, which is the underlying cause of the value of 'money' depreciating over time, intertwined with the interplays with politics. I disagree in principle with that premise on one level. On another PDK routinely points out that money is tied to available, scarce, resources, and from that perspective then money must devalue over time as the availability of those resources becomes increasingly strained.
As far as BTC is concerned those criteria do not apply, but put it into mainstream use and that will change overnight. Politics will dominate.
I don't disagree with your opinion and those of the mighty Power. What I'm really pointing out is that the politics involved is different to the idea of central bank independence promulgated by the banks themselves and through prevailing dogma. That the sheeple are kept in the dark and deceived are key problems IMO.
I don't think anyone really believes that the central banks are truly independent. I simply cannot see any politician wilfully handing over that much power to someone (the CB Governor) and a group (Its board) who could to all intents undermine any action taken by the government. Why would any government do that? So ultimately politics has a dramatic influence on economics and therefore the value of the currency in use.
Thanks Galloleus, that was a nostalgic trip back to the chaotic crazy days of FTX. Those of us who understand crypto knew it wouldn't be the beginning of the end for crypto. It was just normal fraud, in the same way Madoff made off with investors money. It can't be stressed enough, if you don't have the keys it's not your crypto.
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