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US retails sales jump, but SME confidence falls; IMF sees growth but risks; India stars; El Niño warning; UST 10yr yields fall; NZ$1 = 75.2 US¢, TWI = 80.6

US retails sales jump, but SME confidence falls; IMF sees growth but risks; India stars; El Niño warning; UST 10yr yields fall; NZ$1 = 75.2 US¢, TWI = 80.6

Here's my summary of the key issues from overnight that affect New Zealand, with news of an IMF review of global growth prospects.

But first, American retail sales rose in March for the first time since late last year as consumers bought more cars especially, adding to views that a sharp slowdown in US economic growth in the first quarter was temporary.

Somewhat going against that news, business confidence of small companies in the US fell in March as hiring and capital spending plans weakened.

Meanwhile in their latest review, the IMF issued a Report overnight on world growth prospects. It said that despite improvements in the United States and Europe, threats remained from emerging economies, high levels of debt and fragile banks.

They say that New Zealand will see its exchange rate fall as our commodity export prices fall, but we will get better purchasing power from the lower oil prices. They also classed us in a region that will out-perform the rest of the world.

Interestingly, they also noted that India’s growth is expected to strengthen from 7.2% in 2014 to 7.5% in 2015, providing some impetus to world trade that China is giving up. Indian growth will benefit from recent policy reforms, a consequent pickup in investment, and lower oil prices. Those lower oil prices will raise real disposable incomes particularly among poorer households, and help drive down their inflation.

In Australia, their weather bureau has issued an alert about a major El Niño pattern developing this year. That means drought conditions will be more likely in the east of New Zealand - disappointing because we had those conditions over the past two years as well.

In New York, the UST 10yr yield fell overnight to 1.87%.

The US oil price has inched higher today to US$53/barrel and Brent crude to $59 a barrel. China is reported to be filling its boots while the prices are low.

The gold price however has fallen further and is now at US$1,193/oz.

The New Zealand dollar will start today higher as stock markets go risk-on following the good US retail data. It is at 75.2 US¢, at 98.6 AU¢, and the TWI is just on 80.6. 

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk is by following our Economic Calendar here »

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13 Comments

Don't know if Americans are opening their wallets, more like swiping their credit cards. It's all debt here, everything is on the tick and they own lots of toys.

 If the Fed tightens this place will collapse again.

 

http://www.telegraph.co.uk/finance/economics/11535849/IMF-fears-cascade…

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El Nino is only about 25% of the variance of our normal weather patterns, we've had some pretty bad droughts with or without El Nino.  More pronounced events are likely overseas.  This event is still not confirmed, just predicted as likely.

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They declared El Nino a month ago in the Philipines.  

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I think a weak El Nino is conformed but there is some comment its strengthening.  1998 was I believe a very large El Nino and set records, so its contempory when it arrives looks to like it will be a whopper.

I wonder what the effects on [re-]insurance will be.

 

 

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A spanish bank is now paying borrowers to borrow by deducting negative interest rates from the principal.  This is Spain, AKA one of the PIIGS.  This kind of situation is the result of the most powerful economists economists in the world trying to solve the problems of too much debt.  It's hard to see how this can result in less debt.

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Interest rates at negative 100%?

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No, you get 0.018% interest on your debt.  Said otherwise it costs you to have a deposit, and you get paid to borrow.  Figure that one out.

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An interesting comment.  Much of the problem is indeed "we" wasted the opportunity to fix the underlying issues before we got to zero interest rates, but Greenspan refused to accept he had a created a problem so he kept dropping the Fed rate to put the inevitable day off.  So the free market kings really are the ones to blame for this mess, but we let them do it....so whos to blame?

The theory of the more debt is it stimualtes our economy to grow and the bigger returning income pays this debt down.  Trouble is ppl dont pay the debt down they use the "freeboard"  created to buy more assets thinking they can make more $s.  So really dont blame the Fed for this, blame the ppl hell bent on making money via debt.

 

 

 

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Finished reading "The Kingdom" by Robert Lacey last week and what a fascinating read. Great for anyone that wants to know about oil and the make up of the middle east. A bit out of date, but that makes it even more interesting.

 

How about the USA realising in 1943 that they were supplying 65% of the worlds oil from their domestic supply. That equated to 3% of their reserves per annum. What is interesting is that they knew that.

 

Saudi found itself in a trap of receiving too much money than they needed to run their country. Trouble was they had invested heavily in the USA with their surplus. They wanted to cut production but if they did that it would crash the US economy and cause the value of their investments to crash.

 

So the Saudis keep pumping oil and use the income to buy investments that will give a return in the future. A future that requires the oil being burnt to supply the income they expect. That is going to be a good result eh?

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Just remember that despite a near operating surplus - NZ now has debt some $ 6 Billion greater - net of the asset sales than a year ago. Source RBNZ Stats.

 

So there's a surplus and there's a surplus ...  Just borrow and pray seems to be the in strategy around the world at the moment.

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While I agree that its borrow and pray. if you dont borrow and spend as a govn when the private sector isnt your economy goes into a recession and even a depression something like the 1930s becomes probable. 

 

 

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What do you call an economist who makes a forecast?

 

Wrong. 

 

If an economist tells me the sky is blue, I'll go outside and check.

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Some economists have not been wrong.  Ergo what you need to do is find the right economists. Steve Keen and Paul Krugman would be 2 to start with. 

 

 

 

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