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US productivity jumps; service sector expansion healthy; China services expand modestly; Germans to target tax havens; seafreight in strife, airfreght booms; UST 10yr yield at 1.81%; oil and gold down; NZ$1 = 73.3 US¢, TWI-5 = 76.9

US productivity jumps; service sector expansion healthy; China services expand modestly; Germans to target tax havens; seafreight in strife, airfreght booms; UST 10yr yield at 1.81%; oil and gold down; NZ$1 = 73.3 US¢, TWI-5 = 76.9

Here's my summary of the key events overnight that affect New Zealand, with news its not a good time to own ships, but it a great time to be in airfreight.

But first, American productivity jumped in the September quarter, up +3.1% with output growing faster than hours worked even as pay increased +2.3% in the past year. This was the first quarterly improvement in productivity in the past four quarters and erases the productivity declines of the past three.

Activity in the American service sector also expanded at a fast clip in October. There were two surveys out overnight, one suggesting a sharp rebound in activity, the other more of a moderation. But both recorded their expansion index at 54.8.

There was a similar services survey out for China and the expansion there was a much more moderate 52.4.

In Germany, a new bill before their parliament wants to force Germans to disclose their dealings with offshore firms in tax havens and make banks liable for lost tax income if they conceal their clients' business with such firms.

The glut of shipping capacity that has driven down ocean freight rates will worsen through 2020, Boston Consulting Group says. In contrast, data for global air freight markets in September shows that demand, measured in freight tonne kilometers, rose +6.1% year-on-year. This was the fastest pace of growth since the disruption caused by the US West Coast seaports strike in February 2015. Modern products are smaller and lighter and are updated with software.

In New York, the UST 10yr yield is stable today to 1.81%.

The US benchmark oil price is down again today, and is now just under US$44.5 a barrel, while the Brent benchmark is above US$46 a barrel.

The gold price lower too and now just under US$1,300/oz.

The New Zealand dollar is higher again this morning, now at 73.3 US¢. On the cross rates it is now up at 95.4 AU¢, and against the euro at 66 euro cents. The NZ TWI-5 index is at 76.9.

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

By the way, for users of our rate comparison tables, we have issues this morning displaying them. We are working on it and hopefully it will be back soon.

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

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11 Comments

I'm expected a big drop in petrol prices with the weaker USD/oil combo.

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LOL

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NZD at multi decade highs against the Canadian dollar , approaching parity. Next week the NZD could easily go thru 75 USD, and push towards parity against AUD. Quite frankly Rogers opining re NZD over past few weeks woefully at odds with current levels.

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I was in Sydney last week, you could get petrol for under A$1.00/ltr with a supermarket voucher. We are being rorted here on petrol.

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You completely misunderstand the differneces in taxes (excise especially, GST minorly) between the two markets. Adjust for that and the differences are not that great at all. Taxes are costs we impose on ourselves (for all sorts of reasons, including revenue raising, behaviour changing, etc. etc) and so you can't just compare based on retail prices in this case. (About half the NZ petrol price is tax. Last week, 91.6c tax of a discounted average pump price of $1.864/L)

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Big petrol price differences in New Zealand can't be explained by tax differences though. As a southerner I was stunned just last month by the low prices in some north island places - including quite remote places.
Interest.co has written informatively of the "Gull effect". But lots of the real cheap place weren't Gull either.
It's not just a problem for government to solve. Seems us Kiwi's are tame consumers.

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Friday laugh..Jon Stewart on stage on Trump.
https://www.youtube.com/watch?v=GEEgplXwNWk

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"Right now, the US is taking the path of serving the interests of transnational corporations. To solve their problems by economic means, Washington needs to create two global free trade zones – the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TTP). The TTP seems to be progressing, but that is not to keep the US afloat. To hold out for another 15-20 years, the US needs to 'gobble up' the Western European economies. Factually, it's doing the same thing that Western Europe did to Eastern Europe" in the 1990s. Read more

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If Clinton wins then it will be "Guns". If Trump wins then it will be "Butter". Butter made in America of course. Either way I think we are fortunate (?) to be witnesses to an empire unraveling before our eyes. Just like our grandparents got to see the BrIrish Empire go down the big white telephone.

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Really good article Stephen. But the yanks will need to completely change their understanding and use of economics to be able to make the change he is calling for. The adoption of Milton Friedman's economic theories led to considerable "adventurism" in the 60s and 70s that could be argued to be the primary causes of today's mess. The only way the yanks can keep up the current military situation is because those free market policies have destroy so many jobs that many Americans are volunteering for the military to get the benefits, even though George W gutted them during his presidency. Without those volunteers, the military wouldn't have the resources to do what is being asked of them. As it is the budget cuts still places them under pressure. But to counter it, how do we balance against Putin's "adventurism"?

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The New Zealand dollar is higher again this morning, now at 73.3 US¢.

Raising our rank in the currency carry trade returns table?

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