Insights from the Trail - 13/1/23

Happy new year! While we were away, we welcomed a new year, and a new Covid strain – what’s new. Say hello (if you haven’t met personally already) to subvariant XBB 1.5.

Meanwhile, markets have started 2023 on a positive note. US CPI came in bang inline overnight, at 6.5% y/y. The slowing trend in core inflation has raised hopes for a softer landing. And increased the likelihood that the Fed will try the pivot sooner rather than later. Australia’s CPI came in slightly higher than expected, at 7.3% y/y. Housing, which incorporates the cost of building a new home and rental prices, was one of the biggest contributors. But global food prices ended 2022 roughly where they started the year, according to the UNs FAO.

And for the first Friday fun fact for the year – equity markets may have had a tough year in 2022. Particularly the US. But back-to-back down years for US equities are pretty rare. Last time it happened was 2000-02, while before that was 1973-74, 1939-41 and 1929-1933.  

Three other things that got the team talking this week –

1.      The Chinese tourist returns…

The China border finally reopened this week. Just in time for the start of “chun yun”, the 40-day period of Lunar new year travel. Some 2 billion trips are expected this season!

As a reminder of just how big the Chinese tourist market is – in 2019 Chinese travelers represented the #9 most populous country in the world (or >155 million people). And spent over US$255 billion, or basically Vietnam’s GDP. They represented 17% of the global outbound travel market, and made up 50% of overseas luxury spending. 

It looks like China has stopped googling Covid and started googling travel, like the rest of us!

2.      Tesla bargain…

Amongst all the inflation talk, we’ve found you a deal. Tesla’s are on sale!

Tesla has trimmed as much as $3,400 from the cost of its Model Y and $3,100 from the cost of its Model 3 electric vehicles in Australia. They also cut prices in Japan, South Korea, and China.

An entry-level Model 3 fell to $63,900, cheaper than its 2019 launch price. And Model Ys are back to their original launch price of $68,900. Australian sales of electric vehicles nearly doubled in 2022, according to the Federal Chamber of Automotive Industries.

But this hasn’t stopped the Tesla tumble. It’s fallen out of the top 10 companies in the S&P, as its market cap dropped by as much as the combined market cap of other major car manufacturers. 

3.      Around the Australian grounds…

As we kick off 2023, we’ve rounded up charts showing the state of Australia:

• Nominal retail sales rose in November at the fastest pace since January 2022 due to strong black Friday sales and promotional activity. But retracement is expected in the December period…ANZ card data has indicated consumer spending declined 4% y/y through the first week of 2023, which marks the worst start to consumer spending for 5 years 
• Overseas travel by us Aussies picked up sharply from November, hitting 80% of pre-Covid levels despite the increased fare costs
• Freight costs on imports into Australia fell 18%m/m in November, as global freight shipping costs continue to fall heavily. Shipping costs from China to America’s west coast are down 93% from their peak in September 2021, according to Freightos.
• Australia had its first net migration loss since the second world war in 2020-21. But we are well on track to return to pre-pandemic levels in 2022-23