PM backtracks. Another captain’s retreat from PM Tony Abbott yesterday, days after his skipper’s call supporting Twiggy Forrest’s request for an inquiry into iron ore pricing by BHP and Rio Tinto. That was after BHP and Rio Tinto turned both barrels on his government and let go at the cack-handed idea of an inquiry into iron ore prices — which was only suggested to appease Fortescue Metals and Forrest. After BHP CEO Andrew MacKenzie called it a waste of taxpayers’ money, and Rio’s executives warned Australia could lose market share to Brazil, the Prime Minister backtracked, claiming the inquiry wasn’t his idea and he did not support “witch-hunts” into BHP and Rio. But the strongest supporter of an inquiry, Senator Nick Xenophon, continued pushing the idea uphill. It’s probably a coincidence, but since the talk of an inquiry intensified last week, global iron ore prices have tumbled — down 6.6% in the last six trading days to US$58.40 a tonne (a fall of 1%) overnight. Most of that fall has come this week. Helping push the price low has been a strong rebound in the value of the US dollar, but the inquiry has added needless static, all thanks to Abbott’s support last Friday. — Glenn Dyer

What oil dividend? When oil prices tumbled in late 2014 and earlier this year, economists and other analysts of all types made all sorts of forecasts about the impact of the so-called oil or petrol dividend on consumer behaviour — most fearlessly forecast consumers would spend the savings, so investors hopped into retail shares. After nearly five months of 2015, there’s scant sign of consumers spending their petrol savings. Household consumption has risen modestly, retail sales here and in the United States and UK for example, have recorded a gentle improvement — but nowhere near enough to boost economic growth. First-quarter retail sales growth was anaemic and the results so far from major US retailers, such as department store groups like Macy’s and Kohl’s for the first quarter have not been startling. Overnight, the biggest of them all — Walmart — produced an uninspiring first-quarter result. Its US sales growth up 1.1% on a same-store basis, and profits down 6%. But the most telling comment was from CEO Doug McMillon who said on a conference call with analysts: “Based on recent surveys, we know that many of our U.S. customers are using their tax refunds and the extra money from lower gas prices to pay down debt or put it into savings.”  — Glenn Dyer

Inflation, deflation, its all transitory to me. For some reason, Australian media got all excited this morning at the news that UK inflation had turned negative, ignoring the fact that it has been widely expected and forecast to occur sometime in the June quarter. It appeared last month with consumer prices down 0.1%, but still up on a core basis — a tiny 0.8%. The headline rate is the lowest since the early 1960s (UK figures are a bit hazy), and the core reading was the lowest since the GFC. But unlike the eurozone, where there was a real fear deflation would take hold and prove Japan-like to shake, the UK’s brush with deflation will last only a month or so and the Bank of England and other analysts see a 1% rate by the end of the year and 2% by 2017. In fact, the price fall is more like disinflation (falling real prices). The Bank of England is still forecast to lift UK rates in the middle of next year and wouldn’t be doing that if it thought deflation were more than just a statistical oddity. Eurozone deflation is also going away as the ECB’s big spending programs take root. If you want to worry about deflation, look to China, where producer prices have been falling for 38 months and there are growing signs consumer prices are sliding as well, hence the interest rate cuts and moves to spend more money and to bailout trillions of dollars worth of local government projects. — Glenn Dyer

A message from our sponsor. A report on the Financial Times overnight underlines the biggest question about online advertising: does anyone watch? Beleaguered video advertising company Blinkx, whose share price has fallen more than 80% since the start of last year, said it had taken a “decisive stance in addressing the industry-wide issue of supply quality and brand safety. Advertisers have become increasingly worried that many online adverts are ‘viewed’ by automated computer programmes known as ‘bots’, rather than real people, and that adverts are often displayed in parts of a web page that cannot be seen.” Earlier this month, Google produced a report claiming that 54% of video ads across the web were viewable. And reports a year ago suggested that part of an online campaign for Mercedes Benz ended up on these bots (which have been around for almost as long as the internet has been going). A check on the MB online campaign found that 57% of impressions on an ad were made by these bots and not actual people in a three-week period in April of last year. The company that ran the MB ads online hit back claiming it was closer to 6%. — Glenn Dyer

Peter Fray

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