Dairy prices up. US retail rises. Canadian house prices zoom again. China gets tough jobs market. China FDI rise slows. Mineral prices jump.
Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news commodity prices are on the rise again, and this may be a decade long commodity super-cycle if you believe the big miners.
First up today, the overnight dairy auction saw prices rise +4.2% in US dollar terms and up +4.0% in NZ dollar terms. It is the third very good result in a row and prices have now risen +14% since the start of 2022. The dominant WMP price is up +4.2% and the SMP price is up +6.0%. We also need to give a shout out to the butter price, up +5.1% to reach more than NZ$10,000/tonne for the first time ever.
The farm gate payout price forecasts won't be hurt by this and may get a late season burst, welcomed because milk volumes are under pressure. We are on the downside of this dairy season with the milk peak well passed, so more attention will now be on the next season forecasts. With global foodservice markets ramping up again, things look bright on that front.
In the US, Wall Street is in a hesitant rally on mixed signs the Ukraine-Russia tensions may be easing. Or it might be a head-fake by Russia.
Meanwhile, US retail sales are rising, and last week the pace picked back up to be +15.4% above the same level a year ago, and clearly there are gains here far above inflation.
US producer prices are still rising and at a very elevated rate, up +9.7% from a year ago in January and about the same rate as for December. There is no respite yet and they rose +1% in January alone. Even their 'core' PPI was up +8.3% year-on-year. The case for a Fed rate hike is bolstered by this data.
The New York Fed's Empire State factory survey saw future optimism dip slightly and the overall situation not improve as much as expected.
Canadian housing start data continues to trend lower. But Canadian house prices continue to surge higher in a new frenzy.
In China, foreign direct investment is rising, but a a slower pace and the fall-off in pace is now quite noticeable. They like to report year-to-date data which masks the recent fall away.
China is facing a severe labour market crunch. Millions of graduates are entering the market just as some major companies are laying off workers. Beijing officials are concerned and are looking to SMEs to grow and pick up the slack. But SMEs are having their own rough ride at present.
Japan reported its advance Q4-2021 economic activity data yesterday. They say their GDP rose at an annualised rate of 5.4% in the period, lower than the 5.8% expected but much better than the -2.7% fall in Q3 (which was revised to be less than the originally reported -3.6% fall).
In Germany, economic sentiment improved in February (despite the Ukraine issues) but not by quite as much as was expected.
The price of lithium carbonate raced to a new record high yesterday. And China is reporting that prices for some of its rare earth minerals are also rising sharply.
The big Aussie miners are saying they see ten years of high commodity prices ahead of them.
The UST 10yr yield opens today at 2.04% and +4 bps higher than this time yesterday.
The price of gold starts today at US$1852/oz and down -US$10 from this time yesterday.
And oil prices are down -US$1.50 to just over US$90.50/bbl in the US, while the international Brent price is just over US$92/bbl.
The Kiwi dollar will open today marginally firmer at 66.3 USc. Against the Australian dollar we unchanged at 92.8 AUc. Against the euro we are holding at 58.4 euro cents. That means our TWI-5 starts today little-changed at just on 70.8.
The bitcoin price is up +3.3% since this time yesterday and now at US$44,110. Volatility over the past 24 hours has high at +/- 3.2%. In India, their central bank is calling for a ban on crypto currencies, likening them to a ponzi scheme and saying they threaten “financial sovereignty” and “undermine financial integrity” of a country given that there are no underlying cash flows.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again tomorrow.