Information breakfast; Inflation with stagnation
Here is our recap of the main economic events of the weekend affecting New Zealand with news sharply rising in commodity prices caused by shortages plaguing economic activity. Inflation with stagnation.
First of all today, the copper price leaves again. Its price hit an all-time high at the end of last week as soaring electricity prices threaten to dampen supply at a time when stocks are at their lowest. The tightening will affect China the most, as it consumes more than all other countries combined. However, it controls little production and is in a quick hunt for the supplies it can control, especially in Africa.
And the price if zinc has increased dramatically by + 30% in the last ten days. This is due to the sharp increase in electricity prices in Europe which are forcing foundries to close.
Prices are in the spotlight this week. Today, New Zealand CPI data will be released for the third quarter and is expected to show prices will rise north of 4% year on year, and possibly at an annualized rate of 5.3% in the third quarter. trimester.
Then China will unveil its economic growth rate in the third quarter. Raw material prices, supply chain issues, Evergrande and Delta can all impact the bottom line for the quarter.
Northern hemisphere winter is approaching and every country from China to the United States is grappling with high energy costs that will dramatically increase winter heating costs this year. In the USA, a new analysis shows that fuel oil consumers will pay more than 40% more than last year; those who use propane + 50% more.
Each country is fuel hunger, and nothing more than China.
Globally, future energy use will be dominated by electricity generation, and the large increases needed until 2050 will come from solar power, it was planned. The same estimates also show that even if they will not expand, the use of coal and natural gas will remain an important and important fuel source for power generation for at least the next 30 years. These estimates do not foresee a return to nuclear power.
In China, there was a rare public comment of Beijing on the Evergrande situation, and it was to crush fears of systemic risk. Their central bank has reprimanded the company by calling it “badly managed” and wants Evergrande to speed up asset sales and resume its stalled projects. And the official said most individual financial institutions don’t have very concentrated exposures to Evergrande.
Despite these soothing comments, the Chinese Communist Party’s anti-corruption unit has sent inspectors to 25 financial institutions, including major state-owned banks, in what appears to be a crackdown sparked by the Evergrande debt crisis.
In the United States, data released this weekend for September shows retail sales were stronger than in the previous indications. They rose + 0.7% from August, and August was revised to + 0.9%, both beating market forecasts slightly lower. This is another sign of consumer resilience despite supply constraints affecting vehicles and computers. The largest increases were seen in sales of sporting goods, general merchandise stores and gas stations.
But American buyers don’t feel so dynamic. The University of Michigan, much watched investigation fell back slightly to levels that were also low at the start of the pandemic. Something is wrong between spending freely and feeling apprehensive.
Even though the Empire State of the New York Fed the factory survey has declined at August levels, they point to growth above its long-term trend, widespread price increases that appear to be passable on, and optimism for the future.
However, American companies generally find that it almost impossible to pass these rising costs on to in their export prices, and just have to absorb it with sharply rising import prices.
Canadian factories face the same cost pressures with producer prices up + 15% year on year through September, although there has been a slight slowdown in recent months.
The economic consequences of being excluded from the global economy worry Australians. Their prime minister seems ready to adopt some kind of soft carbon target, but not because it’s the right thing to do for the global climate, but because “climate change is as much about the global economy as it is about the environment, and Australia will be left behind if it doesn’t respond” . And it also seems he was ashamed to go to the COP26 climate summit in Glasgow.
And stay in Delta Australia case in victoria rose to 1,838 cases reported yesterday, even peaking at a very high level. The deaths were 7 yesterday. There are now 23,376 active cases in the state and there were six deaths yesterday, bringing their total to 964. In NSW, there was another 301 new community cases reported yesterday. They now have 5,121 active locally acquired cases, which is lower, but they had 10 more deaths yesterday, bringing their total to 524. Queensland is still report zero new cases. ACT has 33 new cases. Overall in Australia, over 68% of eligible Australians are fully vaccinated, and 17% have only had one injection so far.
The 10-year UST rate opens today down -1 bp to now stand at 1.57%. The US 2-10 yield curve is slightly steeper at +118 bps. Their 1-5 curve is also steeper at +101 bps, while their 3m-10 year curve is steeper at +153 bps. The benchmark ten-year Australian government rate is down -2 basis points to 1.66%. The 10-year Chinese government bond is unchanged at 3.00% and its highest for 3 months. The ten-year New Zealand government is also unchanged at 2.18%.
The price of gold slipped from US $ -1 to US $ 1,767 / oz.
And oil prices are even higher by +50 USc to just US $ 82 / bbl in the US, while the international price of Brent is now just below US $ 84.50 / bbl. Number of new American platforms in production has almost doubled in the past year. But despite the recent rapid comeback, it’s still only a quarter of what it was a decade ago.
The Kiwi dollar opens today at just 70.7 USc. Against the Australian dollar, we are at 95.3 AUc. Against the euro we are at 61 euro cents. This means our TWI-5 starts the week at just 74.4, up +130bp from last week and now well above the 72-74 range of the past eleven months.
The price of bitcoin has strengthened very slightly from this time on Saturday, up + 0.7% to now sit at 61,771 US. Volatility over the past 24 hours has been modest at just under +/- 1.1%.
The easiest way to stay on top of the risks of events today is to follow our Economic calendar here ».