Here is an image from the recent Westpac Economic Overview. As New Zealand is the world’s largest exporter of dairy products any disruption in the supply from New Zealand can impact on the global dairy prices. The last few droughts saw world dairy prices increase considerably as milk supply from the rest of the world was unable to adjust to market conditions. However supply capacity in the US and the EU has increased and with Russia’s import ban there is a much greater supply on the global market. Nevertheless, this doesn’t disprove the possibility that prices rise when supply falls short. The overall signs are that supply and demand are coming into line as Chinese buyers run down stocks. The drought in New Zealand will further boost prices from current low levels. Westpac expect the milk price to rise to $6.40/kg for the next season. Below is a useful video clip from Dominick Stephens – Chief Economist at Westpac – about the primary sector in New Zealand. It is very good on fundamentals – supply and demand.
This is the fourth time Queensland fruit fly has been found in New Zealand since 2012. The Queensland fruit fly is one of the most worrying as it infests more than 100 species of fruit and vegetables – including commercial crops such as avocado, citrus, feijoa, grape, peppers, persimmon, pip fruit, and stone fruit. If establish, it would have serious consequences for New Zealand’s horticultural industry which accounts for around 7% to 8% of NZ merchandise exports. So, while a risk seemingly as small as the fruit fly itself, it needs to be taken seriously for the impacts it could potentially have, as a very worst case scenario.
Source: BNZ Markets Outlook
Below is an image I got from the Business Insider site that shows the extent of monetary easing and tightening by Central Banks around the globe.
Just been going through this part of the course with my A2 class and came across a table from some old A Level notes produced by Russell Tillson (ex Epsom College Economics and Politics Department) to help them understand the principal differences.
Over the last year oil prices have fallen by 55% with the price of a barrel of oil around the US$48 – see graph. China is the world’s second largest oil consumer (behind the United States) and largest net importer and is set to benefit from lower oil prices as consumers have more disposable income. Firms can also take advantage by reducing costs and boosting profits.
Since 1995 China’s oil consumption has been driven by the country’s rapid rate of growth especially in the manufacturing sector. By 2002 China had overtaken Japan as the second largest oil consumer. However oil’s share of China’s primary energy consumption has declined since this time – from 23% in 2002 to 18% in 2013 – as other energy sources have grown more rapidly. For most developed economies oil makes up approximately 37% of energy needs. China is still quite reliant on coal for around 70% of the country’s energy needs – see graph.
Last year China imported oil to the value of US$228bn which equates to 19% of total imports and 2.5% of GDP. With the lower oil prices there will be a reduction in money leaving the Chinese economy which should boost more domestic consumption.
With euro area finance ministers meeting to discuss the Greek debt issue there has been positive news with regard to the the overall growth in the euro economy. Driven by consumption (C) and Investment (I) the German economy grew by 0.7% in the Q4 which makes the annual figure 1.4% in 2014 – see graph below. This helped the overall growth rate of the euro zone area 0.3% in Q4. The German figure is surprising when you think of the economic sanctions against Russia which has hit hard the German export market (X) – export volumes contracted 2% in Q4 in 2014. By contrast the DAX (German Stock Market indicator) recorded an all time high of 11,013 and German real wages rose 1.6% which was helped by falling oil prices.
Other euro areas didn’t do as well as their German counterparts but the important fact was that figures were more optimistic and better than expected for Q4 2014:
Source: National Australia Bank
A report out by Deloitte’s identifies Real Madrid as the world’s highest-earning football club for each of the last 10 years with revenue of €549.5m ($745m) in the 2013-14 season. The world’s top 20 clubs earned over €6.2 billion with broadcasting rights and commercial sponsorship becoming the biggest earners. With lucrative television deals in the English Premier League 20 of the top 40 clubs are from this competition. Ticket sales now have the lowest share of the main revenue streams. See table below from Deloitte’s.