Here's my summary of the key events overnight that affect New Zealand, with news China is tightening its grip on its major enterprises as their economy slows.
Firstly in New York however, local Fed President William Dudley signaled overnight that market expectations that the US central bank would begin trimming its balance sheet were not unreasonable. He also said another rate rise is on the cards this year, a view not shared by markets.
In Japan, their economy grew much more strongly than expected in the June quarter, extending the longest streak of uninterrupted growth in 11 years. It was up +4.0% year-on-year. In the recent past, much of the growth they have had under the stimulus of Abenomics has been in trade and exports. But now we are seeing strong local consumption growth driving this latest data. And that is fundamentally different, and better. Exports were down, imports were up, private consumption was up, and even private residential investment starred, up 6.0%. That is a big change for them.
In China, the Communist party is writing itself into the articles of association of many of the country’s biggest companies in a blow to investor hopes that Beijing would relax its grip on the market. More than 30 Hong Kong-listed state-owned enterprises, representing more than US$1 tln in market capitalisation, have this year added lines to their constitution that places the party, rather than the Chinese state, at the heart of each group. Investors in these companies are buying into a party machine and it invalidates Beijing’s claim they want market forces to play a greater role in these SOEs. There is no transparency on the Party officials controlling these businesses. Claimed SOE reforms will be a mirage.
And economic data out of China indicates a bit of a deceleration in July as Beijing’s crackdown on property speculation and rising debt levels started to filter through into the world’s second-largest economy. The pace of Chinese industrial output, energy production, retail and housing sales, and fixed-asset investment all slowed in July from the previous month. In some cases, it is a growing trend. Some see the end of a cycle.
And in Europe, industrial production fell unexpectedly in June and at its sharpest pace in 2017, suggesting their economic recovery may be settling down after an acceleration in growth during the first six months of the year.
In New York, the UST 10yr yield is up marginally, now at 2.22%.
The price of oil is down more than US$1 today and now at just over US$47.50 a barrel, while the Brent benchmark is now just over US$50.50.
The price of gold is also lower, down -US$10 to US$1,280/oz.
And the Kiwi dollar will start today also a little lower at 72.9 USc. On the cross rates we are unchanged at 92.8 AU¢, and at 61.9 euro cents. As a result the TWI-5 index is at 75.5.
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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26 Comments
For all the mainstream talk of “robust” or “strong” economy especially in “global growth” terms, it remains conspicuously elusive in trade – both outbound but especially inbound. More than a year after what was nearly a recession in the US, consumers here continue to be constrained even though the unemployment rate suggests it should be the opposite.
It therefore cannot have been a business cycle (singular or plural), which is how an economy can lose a decade. And be poised to lose another one still. Read more
In return we are subjected to this relentless, tiring nonsense:
Dudley said that he expects another rate rise as long as economic data meets his expectations. "I would expect — I would be in favor of doing another rate hike later this year" Read more
The common theme for all these indications is not really consumer prices, it is instead Dudley’s forever unchanging expectation for them. It is the epitome of central bank circular logic; consumer prices will have to behave at some point because consumer prices will have to behave. The error is as glaring as it is basic; the monetary system is not what they think it is, which is why global consumer prices have become so durably synchronized. Read more
Why are we so surprised when the CCP acts like a communist party? All their actions and so forth are communist and any market reforms are there to further the interests of the party. Remember, this is a country that doesn't have a military but the CCP does - the People's Liberation Army.
I'm starting to wonder though, are they in actual fact more fascist than communist?
As you say, these measures are to further the interests of the party, but hardly the people. And their company model is hardly communal, but more state-private corporatocracy.
E.g. from an admittedly simple resource:
Union between businesses and the State, with the state telling the business what to do, with nominally private ownership.
http://www.diffen.com/difference/Communism_vs_Fascism
Obviously politics is a spectrum and they are in fact neither extreme. I'm not some nutter who yells "stalinism" at every mention of Labour, or similar with National.
Well, I don't think so no, although that was an attempted fallback position.
In any event, sainthood is a description of character traits. Nation states, as somewhat arbitrary groups of many people, can't have character except in the most generalised (read inaccurate generalisations) sense.
To point out *any* country is not a saint is like saying an oxymoron is true.
China has been slowing down for years and the Party is scared of losing their grip on the economy. We have Chinese students, one being a teacher aged late 30's. We have shown her via google whats going on in her country and she was amazed about the number of demonstrations from different parts of the community there. They know that there is corruption throughout the Chinese govt system but they feel they cannot do anything about it. Just seeing the demonstrations showed her that some people are trying to change the system.
China is a riddle wrapped in an enigma , placing State owned enterprises under party control is a foreign concept to most of us, and if this were to happen in the West, or any democracy , it would signal a sense of panic.
Not so in China ?
Are we missing something ?
Is there a bigger story ?
Or is it just the authorities cracking down on corruption and malfeasance ?
When worlds collide...
China wants the growth capitalism has provided (Shenzhen as an example) while maintaining iron fist control.
Invest your foreign capital in our bonds but kindly don't rate them, just trust our domestic agency....
China wants to have its cake and eat it to. The next few years will be fascinating. So far every time things have slowed there has been massive stimulus to keep the people in jobs but this has resulted an insane amount of debt.
As blogger Houses and Holes on Macrobusiness.com.au likes to put it "China is driving with one foot on the gas and the other foot on the brake"
I don't think it is much of an enigma.
The Party owns all the land.
The Party appoints and controls all the "judges".
The Party appoints all local government.
The Party approves economic statistics.
The Party controls the media and internet, there is no free speech.
The Party directly controls the police, people go missing.
The Party decides if you get a promotion.
The army is an extension of the Party.
Nothing happens in China without the direct or indirect approval of the Party. Who you know ifs vitally important.
You may not dissent.
But not the downtrend.
Private FAI in China has not only failed to hasten in recovery, it has actually slowed somewhat from early in the year. The latest estimates from China’s National Bureau of Statistics show an accumulated growth rate of just 6.9% in July 2017, meaning that Private FAI in just July was only 5.2% more than in July 2016 at the trough. State-owned FAI has stabilized the past few months at around a 10% rate of expansion.
That means Total FAI, Private plus State-owned plus a few remainders, continues in 2017 at a growth rate less than a third of what it was and was likely expected as late as 2012. “Reflation” can pick up no further upside because the one part most tangible in all of it has like everything else only disappointed this year.
The others of China’s big 3 statistics, Industrial Production and Retail Sales, were similarly disheartening in July. IP grew 6.4% year-over-year, about the same pace as all of 2015-16 when people were thinking outright recession in China. And despite all rhetoric about rebalancing the Chinese economy toward consumers and services, retail sales were stuck yet again less than 11% last month, rising 10.4%, which is less than the average growth rate during this curious sideways trend for these two statistics. Read more
As odious as communism is, continuing this system of government while allowing free enterprise significant space, has enabled China to maintain cohesion in a nation with a long history of internal turmoil.
The alternative would have been civil strife as the great leap forward crashed to its ignominious end and the country fracturing or evolving into an oligarch controlled, stagnant society like Russia.
History will demonstrate the gradualist phasing out of communism as applied by the Chinese, delivered a better outcome than the convulsive Russian transition.
Has there ever been a real example of communism? I don't think so...and it's most likely because it's simply not possible to achieve. We generally just end up with silly dictatorships with a nominal level of subscription to the ideas of communism, i.e. "gonna slap a nice label on my dictatorship here".
Maybe Israeli kibbutzes were an example, but on a very small scale? I don't know a lot about them, so not sure.
"The final stages of capitalism, Karl Marx predicted, would be marked by global capital being unable to expand and generate profits at former levels. Capitalists would begin to consume the government along with the physical and social structures that sustained them. Democracy, social welfare, electoral participation, the common good and investment in public transportation, roads, bridges, utilities, industry, education, ecosystem protection and health care would be sacrificed to feed the mania for short-term profit. These assaults would destroy the host. This is the stage of late capitalism that Donald Trump represents.
-Chris Hedges
Sound familiar?
@David Chaston , any chance we can see more reports about the surge in electric vehicles .
I may be way off the mark , but there is every bit of evidence that this is akin to way back when Steve Jobs said he would revolutionize the phone , and everyone thought 'yeah right ' .
GM has just announced the launch of the Baojun e 100 , which costs just $7,000 but is only going to be sold in China . The new price is less than half that of a secondhand Corolla , so it has all the elements needed to be a winner
Importantly , it has a range of over 150 kms , which is about 20% more than most e-cars .
Recently I saw Fedex courier vans in France that were electric , and a driver I spoke to said they were "la parfecion " and that he had done 56,000 kms without a hitch and had almost saved the original purchase price in fuel savings .
It seems to me that this is the next big tech thing ...........
Boatman
Have you considered
- what part of the electric car is "made" of or by electricity?
- what part of the infrastructure to support its use is "made" of or by electricity
- what actually goes into making electricity and supporting the grid
- how convenient is charging over hours versus filling a tank in minutes ...
- the scalability issues around batteries
- the cost in infrastructure required to scale
- what you actually use a car for ... ie frivolous consumption or for a purpose .... A purpose which is only provided by a complete functioning industrial economy powered by fossil fuels
In other words, despite the hype, electric cars are not some panacea for our energy & resource issues..
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