Here's my summary of the key events over the weekend that affect New Zealand, with news Australia is copying the New Zealand approach to welfare reform.
But first, in the US factories are in a strong recovery mode and showed their sharpest improvement in July since November 2015. Their PMI rose to 52.9. Output growth accelerated to an eight-month high, new business volumes expanded at their fastest pace since October 2015, and the survey showed the strongest increase in manufacturing payroll numbers for 12 months.
In Britain, the first business confidence survey since Brexit reveals a dramatic drop, the biggest since the aftermath of the financial crisis. The latest PMI data fell to 47.7 in July from 52.3 in June and the lowest level since April in 2009. A reading below 50 indicates contraction. Both manufacturing and service sectors saw a decline in output and orders.
In France, the head of the International Monetary Fund, Christine Lagarde, will stand trial over a public payout to the French tycoon Bernard Tapie, a French appeals court has ruled.
In Australia, they have signaled they will be taking an 'investment approach' to welfare reform, using the Bill English model he is implementing here. It is targeting long-term cost reduction through a front-loading support system with the goal of beneficiaries being diverted from the welfare trap. In the traditional welfare industry, this approach is seen as 'radical' and favouring the young.
Back in New York, UST 10yr yields are unchanged at 1.57%. But local wholesale swap rates keep on falling and start today at record lows again. The flattening bias has returned.
The US benchmark oil price has slipped slightly further and is now just over US$44/barrel and the Brent benchmark is just over US$45/barrel. We haven't looked at rig count data recently but last week's number is notable. Not only is it the fourth consecutive increase but it is the largest rise in almost two years. Explorers are getting back into the game and could well be why prices are soft. The ending of the US summer driving season could be another factor.
But the gold price is lower, down to US$1,323/oz.
The NZ dollar will start today just on 70 US¢, at 93.8 AU¢, and at 63.8 euro cents. The TWI-5 index is now at 74.2.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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11 Comments
But first, in the US factories are in a strong recovery mode and showed their sharpest improvement in July since November 2015. Their PMI rose to 52.9. Output growth accelerated to an eight-month high, new business volumes expanded at their fastest pace since October 2015, and the survey showed the strongest increase in manufacturing payroll numbers for 12 months.
Our major trading partner chose an alternative interpretation, closely in tune with the US T10yr reflection of abjectly diminished forward growth prospects.
“G-20 countries should intensify consultation and coordination, forge policy consensus, and guide market expectation,” Chinese Finance Minister Lou Jiwei said Saturday at a symposium kicking off the meeting. He repeated comments from President Xi Jinping that it’s “vitally” important for the group to enhance how it works together, adding that the “global economy is at a critical conjuncture” as the “impacts of the international financial crisis are still unfolding.”
On Friday, Premier Li Keqiang said that against the backdrop of rising protectionist pressures and increasing challenges in international trade policy, “it is critical to enhance international economic policy coordination.” He was referring to the recent increase in protectionism between China and the US, leading to a surge in new tariffs and duties against Chinese commodity exports, such as a recent 522% spike in duties for Chinese cold-rolled steel exports, as Beijing seeks to quietly flood the world with its excess production. Read more
Australia's welfare reform is a concern for their population. The free market economy, adopted in NZ under the guise of "Rogernomics", included globalisation and saw many jobs exported. The end result saw many in the population lose job security, being forced onto part time casual labour pools that offer little in the way of benefits and security (National refer to this as "Labour or job flexibility" and spin it into lifestyle choice, although there is little choice in it unless you're already wealthy). Thus the majority of those on welfare have little choice, have given up hope of getting ahead and are being forced to literally beg for what scraps the Government will deign to give them. Getting people off welfare only works if there are secure, sustainable jobs at reasonable pay available, and sorry folks - most of them have been exported to places like China!
This is pretty common through out the world today, and general populations are getting angrier and angrier, thus the disenfranchised are increasingly turning to violence and crime.
It would seem support for such sentiment extends to the right wing UK press.
There is nothing good (or conservative) about low wages, insecure jobs and a mad housing market which offers nothing but cramped rooms and high rents to young families just when they need space, proper houses with gardens, and security. Read more
No shortage of examples in NZ.
Wellington apartment with makeshift cubicle bedrooms labelled 'unlivable' by students Read more
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