Here's my summary of the key events overnight that affect New Zealand, with news that geopolitical risks rose dramatically this morning with Turkey shooting down a Russian warplane that strayed over the Syrian border. It is possible risk aversion will be rising in markets today.
In the meantime, it was reported that the American economy grew at a stronger +2.1% pace in the September quarter than the +1.5% initially reported, but a strong rise in inventories in those 3 months could be limiting growth in current quarter.
The updated GDP expansion was pretty much as analysts were expecting, but the personal consumption component 'only' came in at +3.0% rather than the +3.2% expected which raises a small query on the future direction by a key driver.
In fact, a closely watched consumer confidence survey out overnight revealed a solid dip in American confidence in their November reading, continuing a softening trend.
VW's diesel scandal is widening. A popular Renault model has now been fingered as another serious culprit, as we await the results of broader, official tests by the German agency that oversees the official testing. And all this is happening on the eve of UN climate talks about to start in Paris. Very much a black-eye for European engineering and policy makers.
China has announced the building of six new high-speed rail services over the next five years. These infrastructure projects are expected to boost investment by at least US$100 bln. China has about 25,000 kms of high speed rail. The system's economic viability is unknown as it is entirely managed, planned and financed by the government.
China will need projects like this as the early indications of current factory activity are not encouraging.
However, according to an HSBC report, we are about to enter the "third wave of globalisation" that will help quadruple the value of international trade by 2050.
In New York, the UST 10yr yield benchmark slipped slightly to 2.24%. Following the shooting down of the Russian jet this is likely to fall further.
The US benchmark oil price is slightly higher for a second day in a row, now just over US$43/barrel, while the Brent benchmark is just over US$46/barrel. Expect a jump in reaction to the Russian jet downing.
The gold price followed oil higher, now at US$1,076/oz and probably on the way up today.
The New Zealand dollar starts today at 65.4 US¢, at 90.3 AU¢, and at 61.4 euro cents. The TWI-5 is at 71, a level it has been at all week.
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 today is by following our Economic Calendar here »
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24 Comments
Interesting graphs on oil consumption,
the developed nations all "reduced" oil consumption at a dramatic pace...kind of mimics how the economies have done.
http://peakoil.com/consumption/a-surprising-look-at-oil-consumption
All that shows is that energy intensity is probably falling faster in developed economies. Economic activity is at record highs, energy use is slumping. An impressive transformation and adaption. I doubt energy use will pick up, even with cheap oil. The 'second machine age' changes everything.
Retail is struggling in the USA
The Commerce Department reported that retail sales increased by a miserly +0.1% in October, below the +0.3% Wall Street was expecting. Additionally, sales for the month of September were revised downward from +0.1% to 0.0%.
So this is what the last three months look like:
August 0.0%
September 0.0%
October 0.1%
That is plain wrong. The Dept of Commerce Census Bureau data shows year-on-year increase overall at +2.1%. That masks a wide range of changes; autos up +7.7%, food services up +8.2%, furniture up +5.5%, petrol down -20%, electronic goods down -1.9%.
This data is all dollar based, and not volume based. Cheaper energy, cheaper electronics is not a sign of 'retail struggling'; it is a sign of enhanced consumer purchasing power.
Check the data here.
The Gap reported that its October same-store sales dropped by 15% at Banana Republic and by 4% at Gap stores
Urban Outfitters reported Q3 sales of $825.3 million, well below the Wall Street pipe dream of $868.9 million.
The Port of Long Beach handled 307,995 containers in October, down from 310,482 and 0.8% less from the same month last year. More troublesome is the 14% plunge in imported containers since August.
Under Armour (UA): Inventory ballooned to $867 million at the end of Q3, a 36% increase.
Anecdotes. You may well be right, but you can't tell from a sample of 4 chains, plus POLB. As you may well also know, the POLB competes with the Port of Los Angeles (which is bigger; I know, I used to work there.) There is strong competition between them, so perhaps the POLA is winning more share?
And besides, the Census data showed that Apparel sales were up +2.8% y-on-y. But Apparel is only 4.5% of all Retail. Your 4 store sample is minuscule, even though they may be all national chains. Retail is not just clothing.
And besides, I suspect the stronger US dollar is making imported clothing less expensive, which will hold down the $ value of retail sales in that sector. Overall volumes are undoubtedly growing however.
Perhaps we should put our trust in dr copper
http://finviz.com/futures_charts.ashx?p=d1&t=HG
Just a moment David - you said
"Cheaper energy, cheaper electronics is not a sign of 'retail struggling'; it is a sign of enhanced consumer purchasing power."
What do you mean by "Enhanced"
And do you mean consumers are more picky about what they buy and what they pay? If this is so how does that relate to increased consumer spending?
And if consumers are buying more how does that PUSH prices down?
I find your reply confusing by using that word.
Fair enough. The main measures of retail spending are up in $ terms. But prices for some key items are down. When you factor in higher pay levels, overall that surely means incomes can buy more 'volume' (goods and services).
I am not saying that is the same for everyone, just that overall the data shows it is true.
It is clearly true in the US. Incomes are up 2.5% y-on-y and retail sales are up +2.1% y-on-y. You would expect saving to be higher too, and they are according to the data. I am certain it is not equally distributed; I am sure the well-off are benefiting more than the less well-off. But I don't know that from current data - just a guess. You can find anecdotes for every econo-political position. The key is to keep the big picture in mind.
And I think the local NZ data shows the same situation. Incomes buy more in the fuel/energy sector and the electronic goods sector than ever before even without adjusting for tech advances. The really big change is the relentless decline in energy intensity. But the full impact wont be obvious to researchers for a few years yet.
Not really, there is no good evidence that the economy has decoupled from energy. Its far more likely that the drop in energy shows the state of teh real economy and not the financial wizardry part.
Otherwise, sure can you show actually examples of such mass transformation?
The energy graphs only show a part of the picture, they show the use of fossil fuels but do not include renewables. So this could also be the natural result of excessive oil prices as countries looked to alternative sources of energy. Thus linking economic activity to oil use could produce a skewed result.
America’s Great Lie. Europe’s Great Shame. Russia’s Great Case
http://www.strategic-culture.org/news/2015/11/21/america-great-lie-euro…
Here is how it started — the original sin of the post-Cold-War West, which has produced the problems of today and the future:
Let’s start with the results of a 2009 investigation by Germany’s Spiegel, or Mirror, magazine, which is a mainstream German news site, that’s a bit more honest than America’s equivalents:
They headlined, very directly: «NATO's Eastward Expansion: Did the West Break Its Promise to Moscow?»
http://www.spiegel.de/international/world/nato-s-eastward-expansion-did…
Baltic Dry Index bumping along the bottom:
http://uk.businessinsider.com/baltic-dry-index-hitting-record-lows-2015…
And for those who think the BDI is irrelevant:
https://www.bondvigilantes.com/blog/2014/07/31/collapse-baltic-dry-ship…
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