Here's my summary of the key events overnight that affect New Zealand, with news some central bankers are reassessing the importance of current inflation.
But first in the US, data out for June car sales is weak. They slid for a fourth straight month as car buyers pulled back due to higher vehicle prices and car makers balked at dumping unwanted vehicles into rental car fleets. And it won't get any better soon. Millions of low mileage, off-lease vehicles are due to hit the market between now and the end of 2019 and that will weigh on future new vehicle sales.
Across the border in Canada however, car sales were very much stronger in June.
Inflation in the OECD slipped in May to +2.1%, bolstered by oil prices, but the overall growth was actually lower than the +2.4% in April.
But how important current inflation is to central bankers was assessed by an ECB board member who urged fellow policy makers to be 'flexible' and focus on long term expected inflation rather than current levels.
In China, they reported a larger trade deficit - yes a deficit - in services trade. In the five months to the end of May it widened to -NZ$138 bln with the export of their services rising by +4.6% while they imported services at an +11.5% faster rate. In the same period their trade surplus from goods was +NZ$206 bln.
In Sydney, the RBA kept its policy rate unchanged. That was as expected. But the tone was much more neutral than many had expected and turned around the strength of the Aussie dollar rather than the inflation outlook.
In Adelaide, it looks like the South Australia bank levy will get blocked by political opposition.
With the holiday in the US, the UST 10yr yield remains at 2.35%.
The price of oil is higher again today, rising to just over US$47 a barrel, while the Brent benchmark is now just under US$50.
But the price of gold has stayed down after yesterday's big slump although it did make a small +US$5 gain today to just US$1,223/oz.
The Kiwi dollar is stable against the US dollar at 73 USc. On the cross rates we are generally firmer at 96 AU¢, and at 64.3 euro cents. The TWI-5 index is at 77.1.
If you want to catch up with all the changes yesterday, 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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6 Comments
In Adelaide, it looks like the South Australia bank levy will get blocked by political opposition.
Do said politicians have a mandate to act either way, and in the interests of whom do they act in this instance? Voters they represent or those that presume to finance their election?
In Sydney, the RBA kept its policy rate unchanged. That was as expected. But the tone was much more neutral than many had expected and turned around the strength of the Aussie dollar rather than the inflation outlook.
I would have thought picking currency pair winners was not a mandate for a central bank to address. It does not possess the resources to defend the USD in respect of AUD/USD. Furthermore, the USD Index (1Y tab) has hardly rallied as the Fed hikes the Fed Funds rate. So what is the real excuse other than protecting those deeply in debt?
I suspect that the RBA still believe they have control over inflation. From my perspective the only real concern is the reshuffle in resource extraction jobs. A lot of people have taken much lower pay in the contracts they've taken on. A lot of large multi million dollar contracts just disappeared with the downturn. That said there are plenty of people that still have jobs and income albeit lower pay. So it's mostly protection of the housing ponzi.
But first in the US, data out for June car sales is weak.
Currently, it's a case of extend and pretend - which never ends well.
As car buyers’ obsession with bigger, pricier vehicles grows, so does their willingness to take longer to pay for them, says new analysis from Edmunds.com.
The average auto-loan length reached an all-time high of 69.3 months in June. That’s 6.8% longer than five years ago, said the site that provides auto industry statistics and news.
The average amount that buyers financed was hit with the biggest uptick for the year last month, at $30,945, or up $631 from May. The financing trend also lead to the highest monthly payments for the year, now averaging $517, which increased from $510 in May. Read more
The same is happening in the UK:
Undercover Investigation Exposes Deteriorating Auto Lending Standards In Europe; No Job, No Problem
http://www.zerohedge.com/news/2017-07-03/undercover-investigation-expos…-
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