Here's our summary of key economic events over the New Year holiday break with news that with the western new year behind us, we are now counting down to January 29, Chinese new year - and the year of the snake. (Given the US election result, it seems appropriate.)
In the US, they ended the year with another cracker rise in retail sales, up +7.1% last week from the same week a year ago. That was only beaten by the +7.3% rise on this basis during the Thanksgiving weekend sales events. These two surges were the best since early 2023, but better when you realise those 2023 results were off a low base. Prior to the pandemic distortions, you have to go back to 2005 to find as strong as these two latest ones. Bricks & mortar store sales gains like these are clear evidence that employment and income gains are widespread, and not concentrated for just a few.
Confirming this, the regional Dallas Fed services index which started rising in October, put in another very good gain in December, matching November. This is also quite impressive.
But the people at the top of the tree are doing exceptionally well. Bloomberg is reporting that the world’s 500 richest people got vastly richer in 2024, with Elon Musk, Mark Zuckerberg and Jensen Huang (Nvidia) leading the group of billionaires to a new milestone: a combined US$10 trillion net worth. This is a stunning level given the world GDP is about US$110 tln.
But for most others, higher benchmark interest rates have weighed heavily on their home loan market, with mortgage application volumes down a very sharp -12.6% last week, on top of the -10.7% drop the prior week. That puts them at a ten month low.
The news was much better on the initial unemployment claims front however. They rose as was expected seasonally, to +283,000, but only marginally and by very much less than seasonal factors would have expected. That allowed the headline 'seasonally adjusted' level to be reported as a decline. There are now 1.87 mln people on these benefits and very similar to the level at the same time last year.
Mid-January is looking like the focus of some crunch events. The US waterfront issue was resolved a few weeks ago on a pay basis, but it left the 'technology' issue unresolved. They are in a "fight against automation'. A new strike threat looms again over this matter on January 15. And the recent short-term 'fix' of their debt-limit crisis isn't lasting very long. "Treasury currently expects to reach the new limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures." Mid-January could well be a very messy time in the US, even before the presidential inauguration.
Across the Pacific, markets there are delivering their own messy verdict. China's 10yr Government bond yield has taken another steep dive lower overnight, now down to just 1.63% in a mad scramble for safety. And the shift is driving large gains for holders. A year ago this rate was 2.56%. Four years ago it was at 3.28%. At the same time, the Shanghai stock exchange fell a very sharpish -2.7% yesterday. All this is despite Beijing's warning to traders not to be "irrational". It is their worst start to the year since 2016.
Meanwhile, China's official factory PMI slipped slightly from a marginal expansion, but even after the slip it was still expanding, although barely now. And the private Caixin survey reported a very similar result.
However, the official Chinese services PMI delivered an unexpected very strong result, a sudden surge from barely expanding, to a full-on roaring situation, the best since early 2023 which was helped by a low base. But observers will now wait until it is confirmed, first by the Caixin equivalent, and second by waiting for the January result.
Taiwan’s factory sector ended 2024 on a positive note, and its strongest in five months built on rising new orders.
Singapore reported its advance Q4-2024 GDP growth rate at +4.3%, better than the expected +3.8% but a small downgrade from the Q3-2024 expansion of +5.4%.
It was only a minor rise, and to a level that isn't all that special on an international comparison basis, but the local Singapore PMI is now at its highest level since January 2019. That is based on faster growth in new orders, new exports, factory output and employment.
The Philippines, Indonesia and Thailand all recorded small improvements in their factory sectors, all expanding marginally faster. But Malaysia stood out with a small contraction.
South Korean exports rose +6.6% in December to a 31 month peak, their 15th straight month of increase and the fastest rise since June. Despite than, their overall factory PMI also recorded a minor contraction.
In Japan, here's an odd item. A convenience store chain is hiring remote workers to handle customer check-out duties.
India’s manufacturing activity ended a strong 2024 on a soft note and a slowing trend - and not the improvement expected. This was because the expansion in new orders was the slowest of the year, suggesting weaker growth in 2025.
In Australia, average house prices fell -0.1% in December from November, marking the first negative movement in nearly two years, according to CoreLogic. This shift followed a surprisingly strong period of growth between February 2023 and October 2024, despite high interest rates, cost-of-living pressures, and reduced borrowing capacity. On an annual basis, Australian home values rose by +4.9% in 2024, adding approximately AU$38,000 to the median home value. However, three capital cities saw declines in values over the year: Melbourne (-3.0%), Hobart (-0.6%), and the ACT (-0.4%). Sydney only rose +2.3%. In contrast, mid-sized capitals experienced strong growth, with Perth home values surging +19%, Adelaide increasing by +13%, and Brisbane rising by more than +11%.
And it is not only housing turning lower. Their factory PMI contracted too, on weak new orders.
Globally we should also note that temperatures reached their highest level in 2024 since intensive monitoring started in 1970. The limiting targets are now almost impossible. Insurability of many risks will be a new stress point.
The UST 10yr yield is now at just on 4.57%, and up +2 bps from this time Tuesday. The key 2-10 yield curve is more positive, now by +34 bps. Their 1-5 curve inversion is also more positive, now by +24 bps. And their 3 mth-10yr curve is also more positive at +29 bps. The Australian 10 year bond yield starts today at 4.50% and up +3 bps. The China 10 year bond rate is now at 1.63% and down a very sharp -8 bps. The NZ Government 10 year bond rate is now at 4.59% and unchanged.
Wall Street is ending its Thursday trade down -0.8% on the S&P500 and a reversal from earlier gains. Overnight, European markets were very mixed with London up +1.0%, Frankfurt up +0.5% and Paris up +0.2%. Yesterday Tokyo was closed for the holiday. Hong Kong was down -2.2%. Shanghai fell an even sharper -2.7%. Singapore rose +0.3%. And the ASX200 was up +0.5%, but the NZX50 was closed yesterday. It reopens today.
The price of gold will start today at US$2659/oz and up +US$61 from New Year's eve.
Oil prices are a bit more than +US$2.50 higher that this time Tuesday at just over US$73.50/bbl in the US while the international Brent price is still just under US$76.50.
The Kiwi dollar starts today just on 56 USc and down -40 bps from Tuesday. And that is its lowest level since October 2022, and prior to that, the GFC. Against the Aussie we are down -50 bps at 90.2 AUc. Against the euro we are up +30 bps at 54.6 euro cents. That all means our TWI-5 starts today at just under 66.9 to be only -10 bps lower than this time Tuesday.
The bitcoin price starts today at US$97,158 and up +3.5% from this time on yesterday. Volatility over the past 24 hours has been moderate at +/- 2.0%.
There will be no podcast version today. That will restart on Monday, January 6, 2024.
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52 Comments
Carrying capacity is a real concept but we are far, far away from it being a meaningful economic limiter.
There could in theory be a catastrophic climate related event but that won't show up on consumption, production, or any of the other statistics nor as a felt reduction in living standards.
PDK can never answer the obvious question: why isn't the running out of resources reflected in prices? Always some handwavey explanation to avoid having to confront this reality which invalidates the entire hypothesis. But chicken littles crying "the sky is falling" will always find a few frightened chooks to cluck along with them.
"PDK can never answer the obvious question: why isn't the running out of resources reflected in prices?"
I dont know what PDKs response would be but will submit my own...you are assuming that markets correctly price scarcity, and we know that they do not as markets are the cumulative reckons of the (largely) uninformed, or at least uninformed in real time. What may occur is rather than a price signal products/goods simply disappear...maybe not entirely but in particular markets.
What may occur is rather than a price signal products/goods simply disappear..
A fair enough perspective theoretically, however at a certain point people who support the limits to growth view have to actually identify commodities/goods that have actually disappeared.
There are isolated incidences that can be highlighted like specific species of fish or bananas etc. But these are due to isolated resources mismanagement and/or tragedy of the commons scenarios.
PDK highlights energy as the major limiter but there is simply no evidence that we are running out of this, quite the opposite.
Theory is all well and good but at a certain point needs to actually make contact with reality to see if it holds. Limits to growth types will never actually do this because the evidence isn't there.
One issue is we expect to see consistency in price rises are scarcity bites. Instead we see prices of some things as a race to the bottom, via technology reducing production costs, access to cheaper labour, reduced quality, etc. Things that are less subject to these influences often see static, or rising prices, fruit and veggies, things of actual quality, etc.
Not sure what you mean by this. Fruit and vege are impacted by all the normal production improvements etc including tech improvements (better irrigation, tractors, etc). And in inflation adjusted terms food of all sorts is pretty much at historic lows as a percentage of incomes.
Nevertheless, in inflation-adjusted terms the price of food is at historic lows as a percentage of incomes.
https://ourworldindata.org/grapher/food-expenditure-share-family-dispos…
Denying technology driven food deflation is simply denying the data. And I suspect that GMOs etc can continue to drive this process but even if it plateaus, if this is the strongest argument for the Limits to growth argument it is very weak.
Nevertheless, in inflation-adjusted terms the price of food is at historic lows as a percentage of incomes.
The nature of food has also adjusted to suit. We eat a lot less animal protein these days (humans in the west, total animal protein consumption is still rising), often replaced with cheaper carbohydrates. The actual cost of beef has increased, over the past 50 years. Likewise things like stone fruit, berries etc.
Things seem cheaper because the qualitative nature of things has diminished.
I'm talking Western nations in general since the 1950s. It's down by over 1/3 over the period (would be a lot lower if not for the rise in cheap poultry), much of that amplified by now debunked theories regarding the dangers of fat intake via meat, in favour of more favourable sugars and refined carbohydrates.
Hence bodies in the 50s/60s were quite a bit leaner and lighter, despite consuming a decent amount more animal protein/fat.
PDKs pitch about limits to growth hints at it happening with a bang, my contention is it is occuring as a much longer whimper that's harder to notice.
Fruit and vege are impacted by all the normal production improvements etc including tech improvements (better irrigation, tractors, etc).
On NYE, vertical growing business Greenleaf Fresh appointed administrators, citing recent financial challenges.
https://www.rnz.co.nz/news/top/537923/vertical-farm-that-received-publi…
One of my gigs is growing things at scale (that and the refinement of it into secondary goods), I understand vertical farming and wider agriculture fairly well.
The range of viable produce is fairly limited, and the costs and complexity to produce it struggles to compete with more traditional methods. The whole movement seems spearheaded by minds who had little practical knowledge of agriculture, and pitched to investors who knew even less.
"Theory is all well and good but at a certain point needs to actually make contact with reality to see if it holds."
When it occurs in reality it is too late....we are all wise in hindsight.
You may note that the real experts (those dealing with specific materials, commodities etc in a professional capacity) are the greatest proponents of the uncertainties and are at great pains to point out that 'it depends'. Take oil, who knows the true state of Saudi reserves?....probably not even the top geologists employed by Aramco, but they certainly are not going to make the information they do have available to their competition, the same applies to shale in the US. How many companies claim everything is fine and the future is bright right before they close the doors and stiff their creditors?
This is exactly what I mean by "handwavey explanations".
Name me some specifics commodities/goods and the price shifts overtime. Would be vastly more persuasive than these sorts of comments which are inherently unprovable (e.g. we are all being lied too but can't find the data to support it).
At this stage only the most important one...crude oil...handed a brief lifeline by tight oil. If some experts are correct then that lifeline is likely to also decline before the end of the decade.
Ethanol will be petrols David and Goliath moment I suspect .... whilst the oil producers can and often gang together to control supply and extract value ...they are bound by the cost of Ethanol production ...and if they price too high they open a door....already hard to see why we are not blending more ethanol into our auto fuels a recent study in the US found it could save 77c a gallon
"The analysis concluded that “adding ethanol to gasoline decreases the price paid by U.S. drivers at the pump. We estimate the average discount per gallon to be $0.77 between 2019 to 2022 and averaged across our models. … this would add up to total savings of $95.1 billion per year for U.S. consumers.”27 Feb 2023"...
https://ethanolrfa.org/media-and-news/category/news-releases/article/20…
Some quick facts .. "The United States is the world's largest producer of ethanol, having produced over 15 billion gallons in 2021 and 2022" , "Ethanol is a renewable fuel made from various plant materials collectively known as "biomass." More than 98% of U.S. gasoline contains ethanol to oxygenate the fuel. Typically, gasoline contains E10 (10% ethanol, 90% gasoline), which reduces air pollution." The U.S. government subsidizes ethanol production. "Ethanol and feed co-product production provide a valuable market for corn grown in the United States. A typical dry mill ethanol plant adds nearly $2 of additional value – or 55 percent – to every bushel of corn processed."The federal government provides an array of subsidies to increase the consumption of biofuels such as corn ethanol. The subsidies include tax breaks, grants, loans, and loan guarantees. The government also imposes a mandate to blend biofuels into gasoline and diesel fuels" (2017) Ethanol adds two to three points of octane to ordinary unleaded gasoline, so it boosts the performance of your engine." Because of its high oxygen content, ethanol burns more completely than ordinary unleaded gasoline and reduces harmful tailpipe emissions. Ethanol prevents gas line freeze-up."
"What are the downsides of ethanol?
For example, the production of ethanol requires large amounts of water and energy, which can contribute to water and air pollution. In addition, the crops that are used to produce ethanol require fertilizers and pesticides, which can harm the soil and nearby waterways. "
"Why is ethanol bad for humans?
Ethanol is harmful by ingestion, inhalation or by skin absorption. Repeated contact can dry the skin resulting in the skin cracking, peeling and itching. Ethanol can depress the central nervous system, the eyes and upper respiratory tract (nose and throat).30 Jun 2022"
Can ethanol be used as aircraft fuel?
"Ethanol can also be converted into jet fuel through additional processing. Since jet fuel has a higher energy density than ethanol, 1 gallon of SAF requires 1.7 gallons of ethanol. So, SAF presents even larger demand growth than simply increasing ethanol consumption by an equal number of gallons.26 Feb 2024"
'The global ethanol car market was valued at $567.9 billion in 2021, and is projected to reach $1,207.6 billion by 2031, growing at a CAGR of 7.8% from 2022' ...
Ethanol will always be an option ...its nice too have options... the more options the better .....
JJ: "PDK how do you explain why the Americans can buy 7.1% more crap than they could last year? "
PDK doesn't do 'economics'. PDK does do doomsday. Should PDK respond, expect more 'doomsday' stuff. (Is PDK going to be part of the solution? - PDK is not.)
JJ, David's statement, that you've quoted, is highly suspect as a statistical indicator. (And David's conclusion, in the same sentence is, IMO, pure hokum, and/or lacks substantial qualifications.)
In Australia, average house prices fell -0.1% in December from November, marking the first negative movement in nearly two years, according to CoreLogic.
2025 is the year for calling the BS on the Ponzi - within reason.
I'm convinced that you could drop atomic bombs on Aussie and Aotearoa and they would still claim prices are only down 0.1%. It could be Aramageddon and the servers would still be churning out the press releases.
In all seriousness, house price data is directional but people tend to think of it as somehow a reflection of market reality, net worth, etc. No disrespect to the people at Corelogic, but they should be more open about the limitations of their methodologies.
LOL. Your post would have been 'groundbreaking' in 2000.
Now? It just confirms you don't get out much.
OECD data shows population change from 2005-3023 is greater in Aotearoa (+26%) than in Canada (+24%). Aussie is +32%.
https://www.perplexity.ai/search/population-change-2005-to-2023-0cewgIm…
I've spent quite a lot of time in Melbourne and Brisbane this year. The type of migration that is occurring is very obvious. I used to live in Melbourne from 2001 to 2014 - and the Melbourne of today is vastly different to the one I left. As for Brisbane ....
"Queensland is experiencing the fastest population growth in Australia, particularly across the South East.
Annual population growth was 2.7 per cent (year to Q3 2023) - the highest growth rate in more than 15 years."
38 residential lots in a new subdivision took just 12 hours to sell out. https://www.goldcoastbulletin.com.au/property/housing-crisis-first-lots…
I looked up the data on my old house in Melbourne that I sold in 2016 (inner suburb, 6km from the CBD). Its currently worth less than I sold it for - and had been downwards adjusted by 6.7% in December alone. I thought this must be some statistical mistake, so I looked at what was for sale in the area, and it wasnt.
Dan Andrews really did a number on the place, and people cant get out of there fast enough. Fortunately there are hundreds of thousands of new immigrants each year to replace them. But they all live 4 to a room in a CBD apartment. The whole CBD has turned into an ethnic ghetto though. There is no longer a "Paris end of Collins".
Supermarkets in my area currently have no eggs in stock. Have all the chicken farms succumbed to bird flu and the wholesale slaughter of hundreds of thousands of chickens? Ahh, the benefits of free range chicken farming!
I suppose we can now expect egg prices to double, and purchase limits being reimposed again. Brings back memories of the Covid good times eh?
"In Japan, here's an odd item. A convenience store chain is hiring remote workers to handle customer check-out duties."
Not that odd. Well, odd in NZ, perhaps.
Ordering through an intercom is unusual in NZ but common in many markets where square feet in floor / frontage space, at a premium location, is gold. Thus, having the staff at a completely different location saves $$$. (I part owned a startup company that did this with a few locals before selling for a very satisfactory return.)
A PR campaign by US banksters to get an SLR exemption is in full swing announced while people on holiday. This allows banks to buy USTs with infinite leverage and easily fund the insane amount of USG debt issuance.
This financial circus will only drive the interest in BTC.
https://www.bloomberg.com/news/features/2024-12-30/federal-debt-grows-a…
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