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US retail sales flat; China signals overcapacity plan; IMF lowers China growth outlook; China corporate borrowing stops; UST 10yr yield at 1.54%; oil prices jump, gold up; NZ$1 = 72 US¢, TWI-5 = 75.2

US retail sales flat; China signals overcapacity plan; IMF lowers China growth outlook; China corporate borrowing stops; UST 10yr yield at 1.54%; oil prices jump, gold up; NZ$1 = 72 US¢, TWI-5 = 75.2

Here's my summary of the key events over the weekend that affect New Zealand, with news the IMF is downgrading China's growth outlook.

But first, American retail sales were unexpectedly flat in July as locals cut back on discretionary spending, pointing to a moderation in consumption. There have been expectations of a sharp pickup in economic growth in the third quarter but this data casts doubt on that.

China will use the stricter enforcement of environmental, safety and energy efficiency standards as well as tougher credit controls to help fight overcapacity in key industrial sectors. Firms that fail to comply with new energy efficiency targets would be given six months to rectify and would be closed if they fail to make progress. Those that continue to exceed air and water pollution standards would be fined on a daily basis and in serious cases ordered to shut.

China’s economic growth is expected to decelerate to below the 6% level in 2020, partly due to structural problems such as rising corporate debt and structural excess capacity in the steel and coal sectors, the IMF said. Growth in China’s real gross domestic product is projected to slow from 6.9% in 2015 to 5.9% in 2020 and 5.8% in 2021, the IMF said in its annual assessment of the Chinese economy. “The medium-term outlook is clouded by continued resource misallocation, high and rising corporate debt, structural excess capacity, and the increasingly large, opaque, and interconnected financial sector,” the report said.

In addition, they said almost half of the shadow banking products that have fueled China’s credit boom carry an “elevated” risk of default.

However. that slowdown may come faster than the IMF thinks. Almost all of new mainland loans last month were taken out for home mortgages, while lending to corporate borrowers actually shrank, according to central bank data released over the weekend. This is an early sign of a Chinese “balance sheet recession”. “When corporates stop borrowing or stop getting credit, that’s not a good thing,” a Hong Kong analyst said after the data was released.

In New York, the UST 10yr yield was a little lower at 1.51%.

The US benchmark oil price is still rising and is now just under US$44.50/barrel and the Brent benchmark is just under US$47/barrel. In response, there has been yet another rise in the number of US working oil rigs brought back into production and that is now 7 weeks of consecutive rises, 12 of the past 13.

The gold price is down by about US$15 and now at US$1,335/oz.

And speaking of commodities, we will have the next dairy auction this week and market chatter is that it could be another good one, and showing gains exceeding the +6.6% increase we saw two weeks ago.

The Kiwi dollar will start the week at 72 US¢, at 94.1 AU¢, and at 64.5 euro cents. The TWI-5 index is at 75.2. After the March OCR cut, the TWI also rose, but it was only at 71.2 back then.

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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41 Comments

Being a Chinese colony, should we be concerned

http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11693…

How could our current government do this to NZ. Shame.

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Because the NZ Govt became soft.
Too scared to defend thier own country.
But to be fair, when a population becomes hooked on the residential property drug, it is hard to counter.

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all the normal people being rolled out to call the comments racist, quickest way to shut down the debate that needs to be had.
how many immigrants do we REALLY need?
what are the pathways/ are they set right i.e student to resident
and what skills do we REALLY need?
not what do employers want so they can underpay,
some of the so called skill categories are just taking the P---

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Im envisaging a country entirely made up of professional golfers

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The murmurs and muttering are comming out in open and is a matter of time before you see it in streets of NZ

How long will government be able to take advantage of people's fear of being termed as Racist if speak the truth.

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The thing is that this Govt (really started with the Labour Party, who are no better !) has "brainwashed" the NZ populace, that anything said about immigration or immigration levels shall be deemed "racist" !!

Good on Winnie for putting forward the truth with this email today, that to my amazement the NZ Herald actually published !!

The point is, this is not a racism issue, but an immigration issue ! ....Race has nothing to do with it, just the fact that most of the immigration is from 2 of the most populated countries of the world "taking advantage" of the laws of this country allows and these people, with all due credit, step right in and take advantage of these laws !! ......so who can blame them. I would if I was in their shoes too !

What ticks me off about these countries immigrants, is their attitude towards this nation as a whole. Most are here because they can not get into the USA, Canada, UK and Australia ....so we are dealing with people who don't really want to be here and are just using NZ as a "stepping stone" out of their own country, either to build their empires back in their home country or move on to the 4 countries above.

Look at the huge immigration numbers from NZ to Aussie when they bought the laws regarding Kiwis in Aussie in 2001, How many of those people had only been in NZ for a "few" years ? .... The Aussie gov't ain't stupid and knew what these guys were up to.

The Rt. Hon. John Key has stated he will not "adjust" immigration in anyway...... despite all the rhetoric how great this country's economy is doing, it is really being "propped up" through immigration, primarily being attracted by cheaper education to overseas students, who use the "student" entry visa to get established and get work through their friends cousin's uncle's takeaway restaurant ...then apply for residency.

I just want to say one thing to this group of immigrants ....the government may turn a "blind eye" but quite a number of us know what you are up to ! But 'goodonya mate" ..our stupid govt lets you do it !!!

The government maybe stupid about this issue, but the people aren't !!

Ok the Rt. Hon. John Key can you answer the immigration question again ? ..... I wouldn't hold my breath though ....

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I see that Chinese immigrants, including Chinese land agents are complaining to Winston Peters about all the immigrants. Surely this is a sign that things have gone way over the top. Clearly there is something else is motivating the National government and it has nothing to do with the interests of the New Zealand long standing or recent citizens. Surely this is an opportunity for NZ First to sponsor a referendum on the issue. I can't see it being anything other than a landslide result and boosting their election chances.

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The next global downturn is on the way. Get your house, business and investments in order.

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It's more the real McCoy one rather than the next one. We've just been collectively sticking fingers in the dyke to hold back the tide till nowish

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We really need to vote National out. Looking at the Curia Public Poll average; if Labour were to take a stronger stance on restricting foreign property buyers and reduce Immigration. I think we could final oust National and restore some much needed balance.

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Balance and Winston First and the Greens aren't often used in the same sentence. We had massive house price inflation and high interest rates under labour also. To offset migration we managed to upset enough citizens to move overseas. I just can't see Labour and the Greens along with Winston being a stable government. Winston is more popular than Andrew Little (most labour voters don't even want him). It would make him the most unpopular prime minister we have ever had.

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Stamp Duty 15% tax on the foreign buyers would reduce the numbers significantly and at the same time raise much-needed funds for NZ infrastructure.

This has to be aimed at ALL foreign buyers so include offshore buyers, students and temp visa workers
(as per Canada and Australia )

Taxation is allowed under free trade agreements with China and Korea. Banning isn't.

If Labour brought this in or the Greens I also believe there would be enough to kick National out.
Email the Labour leader and Green Leaders. Tell them to apply the Vancouver equivalent 15% purchase tax on ALL foreign buyers (offshore, students & Temp).

All those concerned will need to start voicing their concerns with those able to change the situation

Email address (public info)
andrew.little@parliament.govt.nz
metiria.turei@parliament.govt.nz
james.shaw@parliament.govt.nz

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While the union's control the Labour leader not the Caucus , (think UK Corbyn disaster....)

The people of NZ will never trust the NZ Labour Party.... meanwhile WP walks into the center area unopposed by Robinson etc... muppets cant even hide there overwhelming desire for power within their own party, not to be trusted......

Probably the best NZ can hope for is a WP/National alliance with WP dragging John Key nationals towards the centre

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We need a Green/Blue party.
i.e. NOT the greens, but a more conscientious national party that realises everything is moot compared to saving the planet... what’s the point of fixing the GFC if we don’t have planet to live on.
Period

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it makes no difference who we have in power now - the problems coming are not solvable through policy. Re a blue /green way forward ...
the solution to economic woes is now always MORE people.
The solution to environmental woes is always LESS people (although incredibly the Greens appear oblivious to this)

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Not 100% sure they are, but it does conflict with leftist commonly held views, however, we are ALL waking up to human over population of the planet, red, blue, green, pink or purple

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Oxymoron I'm afraid

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Almost all of new mainland loans last month were taken out for home mortgages, while lending to corporate borrowers actually shrank, according to central bank data released over the weekend. This is an early sign of a Chinese “balance sheet recession”. “When corporates stop borrowing or stop getting credit, that’s not a good thing,” a Hong Kong analyst said after the data was released.

Hmmmmm...

Economists setting their expectations for China and PBOC “stimulus” should have been paying attention to retail sales; not Chinese retail sales, but American. They keep seeing a rebound that just doesn’t exist. US consumers, as the central marginal marketplace for the world economy of goods, have steadfastly refused the invitation of the unemployment rate to produce a worldwide economic resurgence. While mainstream expectations are set as if US labor market data is meaningful for that future, everything about current spending and production (globally) shows them devoid of any significance at any time. Read more

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And this:

A recession is a temporary deviation from trend growth; a depression is a more-than-temporary reduction. Recessions are a normal course of the business cycle; depressions are monetary.

With the credit bubble causing an asset bubble this will end it tears eventually.

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This Vancouver Tax 15% would be an election winning policy .
Free trade agreements allow taxation not banning so any ban talk is just BS.

Just need someone to put their hands up and take some leadership. If they don't it will be another 3 years of National. You would think after 3 failed campaigns and public opinion focussed on housing that now is time to differentiate yourself from National in a meaningful way.

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For Petes sake!!!
Get over the overpriced Auckland only housing price issue for wanting to vote National out!
Why would anyone with half a brain ever think that Labour or the Greens and anyone else would be a far better option than National at this stage????
Little comes out with these vague vague things and has no idea of how to implement them.
Totally clueless!
Green Party have no idea of how to run anything except they are against business and would be a totally backward step,although some may love the fact that you could walk around in a daze legally.
Putting a stamp duty on sales will only increase prices.
The Auckland market will,right itself when the overseas buyers get the stitch and then it will tumble like a lack of cards.
Intelligent people are buying where there is value and that is Christchurch!

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"Why would anyone with half a brain ever think that Labour or the Greens and anyone else would be a far better option than National at this stage????" Umm good policy? Hands on rather than hands off approach?
Anyhow enough of your daily CHCH investment spruicking..its getting tedious.
Check out the local sharemarket today...gang busters

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We certainly need some good policy. Unfortunately for us, none of the extant politicians - of any colour - have any to offer.

I do wonder what would happen if we fired them all, prohibited them from being elected ever again, and started afresh with a whole bunch of new people. Couldn't be much worse...

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Frazz, are you saying that Labour has got Policy??
Not Chch property spruicking at all!
All I am saying is that anyone that is now buying property in Auckland as an investment and getting returns of 3 per cent can not call themselves investors. pure and simply they are speculators hoping that prices in Auckland will increase.
Chch is what I know and returns are positive and plenty of growth happening.
As for the sharemarket that is another story.

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"Why would anyone with half a brain ever think that Labour or the Greens and anyone else would be a far better option than National at this stage????"

They don't. It's people with a full brain that think this. Those with half a brain are happy with shonkey.

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Jolly Kid and his crew are the Slumber Party ... asleep to any problems , and bereft of any solutions ...

.... but , Labour are a little too useless to do any better ....

And the Greens are ........ sigh .... still the Greens ...

... we need a new alternative , someone 'like Gareth Morgan , someone with lots of ideas , to set up a new party ( as Bob Jones did , back in the 1980's ) to scare the sh*t out of our lazy incumbents , Sleepy Key and Way too Little ...

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TINA .......There Is No Alternative ...... to John Key , as much as anyone may dislike him.

I could never bring myself to vote for anyone who has even suggested a Capital Gains Tax .... NEVER .

Its a left-wing resentment Tax .

The Labour Party is a bunch of soft left-wing armchair academics and failed lawyers , who have never done a days labour in their lives , and have no right to collectively call themselves the Labour party.

New Zealand's forefathers would be turning in their graves if they saw these losers who represent the working class

The Greens are a bunch on Communists , hell bent on micro-managing our private lives

And Winston Peters is dishonest

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... the working classes need a party who will introduce resource taxes , such as a land-tax , and a tax on water use ..

Until then , the rich will keep having a free lunch on these national assets , and keep getting richer , and further distanced from the majority in our society ...

... and dairy farmers will continue to draw too much water , and to get away scot free after polluting it ...

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Oh and whilst on the subject of capital gains taxes, a version of which we have had now, for, well, quite a short time, now, so I wonder who you might vote for, ACT I suppose.
I sometimes think people just biff the word communism around so that they don't look so silly by saying what they really mean, as in, "I would not vote Green as I don't like them".

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I agree. The whole concept of a capital gains tax to stop house price inflation is stupid. If the tax works it doesn't collect any money and if it doesn't work then the point of having it to stop house price inflation is wrong too. Unless you are going to completely change the tax system then it is a waste of time. All it does is create complexity and loopholes for accountants and lawyers. Applying the current law with a little more vigour would be a better option. I would say that the intent of anyone buying a investment property that is negatively geared is to make a capital gain. Anyone buying at a yield less than the bank term deposit rate is expecting to make a capital gain. Anyone that buys a house and leaves it empty and then sells it is trying to make a capital gain. If I have an investment property and I want to sell it and buy another property because I've had issues with tenants or want the property to be closer to home etc, I shouldn't have to pay a capital gains tax. It is a bit like being charged a tax when you change banks.

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WP is dishonest while JK just has a bad memory I suppose?

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it's like akshully I guess from what I hear from other people is, and I'm sure people will have arguments against this, but if you look at what others are saying that I'm right when I say that I'm echoing that sentiment and listening to them when they say they agree with me.

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Pfsssst

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Speaking of slumber, what woke you up GBH? What ever it was, give some to Steven as he has been mighty quiet of late.

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Ditto Wolly..

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... and Walter K. from Kaikoura ... we havn't heard from him awhile , anyone know how to hold a séance ?

Les Rudd ! ... ruddy gone ...

Tribeless .... AKA Mark Hubbard .... always fun around here ... ... Powerdownkiwi ...

... Christov , Nicholas Arrand ... Iain Parker ... ... oh , the fun and jolly japes we had !

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Well you would need a seance to get Walter, he left us about three years ago. Iain is still raving about his silly honest money stuff on his facebook page, he has a point but I doubt he will get anywhere with it. Count got a bit crook I think, but pops in maybe once a year. Yes, and the rest....I guess there is always one constant and that is change.

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1) no cats
2) I control all sporting teams
3) I'll screw over anyone that saved money and reward those who didn't.
4) stuff the old people

I can't see that scaring the sh*t out of anyone except the voters.

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... so , we can't count on you to vote for the Morgan De-cat NZ Party ?

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Not unless we are voting him off the island.

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And Winston Peters is dishonest
Shades of gray in all politicians I think

Maybe none of us truely like any of the parties but we are voting for the least harmful right here right now

I think these interest rate cuts will lead to ruin, you can't keep stealing from the old to try and weaken the kiwi, when so much money printing is going on.

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