Here is a great infographic about the iPhone that I got from colleague David Parr. It shows the impact the iPhone has had on the global supply chain, jobs and the world in general. Some statistics from it are as follows:
1. To assemble 1 iPhone = 600 workers
2. 500,000 iPhones produced in 1 day (at peak)
3. 307,250 jobs have been created by Apple
4. 44% are sold in North, Central and South America. 9% are sold in Japan alone.
5. There are 330 manufacturing locations in China.
The graph from National Australia Bank below shows the components of Australian GDP March Quarter 2014. This is particularly useful when doing GDP Expenditure approach in Unit 5 of the A2 Cambridge course where you can breakdown the equation C+I+G+(X-M).
C = Private Consumption
I = Business Investment
G = Government Demand
(X-M) = Net Exports
Consumption is still the largest contributor to Australia’s GDP. Over the next couple of years GDP is expected to grow around 3% but key to meeting that target is a solid consumer sector. Household consumption growth in recent quarters has been solid, contributing 0.3 percentage points to growth in Q1 – only exports have contributed more to growth over the past year. However sustaining solid consumption growth in years ahead requires the labour market to improve and consumer confidence levels to recover from their recent lows.
Interesting graphic from the National Australia Bank showing productivity levels in Australia and the US. Labour productivity is a partial measure of overall productivity. The Australian Bureau of Statistics ABS also measures capital productivity and multi-factor productivity.
Labour productivity is calculated by the (ABS) as Gross Domestic Product per hour worked, and can be measured across various industry sectors or over the whole economy. The national Accounts, which show GDP per hour worked increased by 2.2 per cent in the year to June 2013. That compares to a 2 per cent increase in 2011-12, and a 0.4 per cent decline in 2010-11. The last time GDP per hour worked exceeded 2.2 per cent growth was in 2001-02 when it reached 3.6 per cent.
Brian Gaynor in the NZ Herald wrote a piece on the amount of debt in the New Zealand economy and the fact that the Reserve Bank needs some fresh ideas to stem the increasing trend. With the OCR increasing this week to 3.5% the disposable income of the floating mortgage holder will reduce and ultimately impact on their ability to spend – floating mortgages represent 33% of all mortgages in dollar terms. Although higher rates help those that have money in the bank however a lot of this is from overseas investors so interest payments leave the economy. Furthermore the elderly tend to have savings in banks but they are not seen as significant spenders. The higher interest rates also attract ‘hot money’ as NZ’s rates are higher than most other industrialised countries.
The amount of debt in the economy is a major concern especially when you consider how much is mortgage debt – see below. Also the fact that debt as % GDP is now 88.5% and 145% of disposable income – this is putting pressure on inflation not forgetting that people are living very much beyond their means.
The RBNZ is concerned with this debt and introduced restrictions on high loan-to-value residential mortgage lending. They see that there is too much emphasis on housing which is being fuelled by greater access to debt. One only has to look at the Irish property to see how things can wrong – house prices dropped 50% between 2007 and 2012.
New Zealand Dairy farmers are bracing themselves for some tough times ahead with 3 pieces of bad news. There are as follows:
1. Last week saw a 8.9% drop in the Global Dairy Trade (see graph below) which has meant that prices have dropped 35% since February – their lowest level since December 2012. Farmers can expect revised payout forecasts of less than $6 a kilogram of milksolids to follow the 35% fall.To give you an idea of how the lower payout will influence the rural economy – a forecast of a $6.25/kilogram of milksolids would take $3 billion out of dairy incomes – Con Williams ANZ Bank.
2. The high NZ$ is still hindering farmers revenue. With the latest drop in the GDT you would expect some sort of relief to farmers with a fall in the value of the NZ$. However the NZ$ only fell from US$0.88 to US$0.87
3. On Thursday RBNZ Governor is making an announcement on the OCR (Official Cash Rate) and famers are hoping that Graeme Wheeler will not hike interest rates as originally indicated in the June Monetary Policy Statement. Inflation has been somewhat benign but interest rates seem to be influenced more by Auckland house prices and the Christchurch rebuild.
Why have prices dropped?
There has been a world supply shock especially in Europe. It is estimated that if Europe’s 27 milk-producing countries maintained their current volume increase this could knock New Zealand off the perch of top dairy exporter. Below are some supply figures which show that approximately 16bn litres will be added to the market:
New Zealand – 2013 production up 2bn litres
Europe - with the removal of milk quotas, European milk production is forecast to be 7.5bn litres more
China – Milk production is said to have recovered and could be up 15% this year which adds 4.5bn litres to the market
USA – higher milk prices and lower feeds costs are said to add another 2bn litres this year.
Therefore big surpluses accompanied by weaker demand would hit NZ dairy export earning considerably.
Source: The NZ Farmers Weekly July 21, 2014
Following on from a previous post on the Chinese Property Market. Property is the principle source of investment for most Chinese, who do not trust their banks or the stock market. But fears of a serious real estate slump are growing as about 50 million homes are empty. Chinese investors are therefore looking to invest in property markets overseas – Australia, New Zealand, USA to name a few. See video below from Al Jazeera.
Just attending the New Zealand Association of Economists 55th Annual Conference and it was great to hear Diane Coyle present as one of the Keynote speakers. I was originally alerted to her work by Geoff Riley – an economics teacher at Eton College and co-founder of the Tutor2u website – while I was on a Fellowship. He recommended her book ‘The Soulful Science’ back in 2007. The book aims to show how the discipline of economics has changed over the last decade and brings together economic growth and human behaviour.
Her talk was based on the research into her new book GDP: A Brief but Affectionate History. She goes right back to the Domesday Book which was a manuscript record of how much each landholder in England and Wales had in land and livestock, and what it was worth. This was completed in 1086 on orders of William the Conqueror. Further mentions of Adam Smith and Karl Marx and what they tended to focus on as an economic indicator. Interesting to note that Holland has included prostitution in its GDP calculations and that the Italian statistical body recently announced that it will include prostitution, drug trafficking, and alcohol-and-tobacco in its calculation of GDP. However Italy is just complying with international accounting standards and reporting illegal economically productive activity is required under European Union rules. But as it is part of the informal economy how do you actually measure drug deals, prostitution etc and therefore its contribution to a country’s GDP?
There is also the intangible economy – how do you measure the output of Vodafone v Skype? Also how are sustainability, variety and innovation measured? If her talk was anything to go by her book seems well worth it.