US PPI rising, wholesale trade stalls; new gig-economy law; China bank debt rises sharply; China drought worsens; Aussie consumer sentiment falls; UST 10yr yield at 1.74%; oil drops and gold up; NZ$1 = 64.2 USc; TWI-5 = 69.5

US PPI rising, wholesale trade stalls; new gig-economy law; China bank debt rises sharply; China drought worsens; Aussie consumer sentiment falls; UST 10yr yield at 1.74%; oil drops and gold up; NZ$1 = 64.2 USc; TWI-5 = 69.5

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Here's our summary of key events overnight that affect New Zealand, with news key data in both the US and China has weakened.

American producer prices unexpectedly rose in August, up +3.0% from a year ago. But that doesn't seem to have shifted market expectations that the Fed will cut its benchmark interest rates again next week to support a slowing economy.

US wholesale trade has stalled in July, unchanged (up 0%) from the level it posted in July 2018. Just as concerning is that inventories are now more than +7% higher than a year ago. Production is not being sold, it appears.

In California, they have passed a landmark law that makes gig economy 'contractors', employees of the platforms they work for, with all normal employee rights.

In China, bank debt growth rose sharply in August, up more than +14% from July. While that was more than expected, it is up only +11% from a year ago and analysts suspect it may not be enough to support their slowing economy.

We should also note that eastern China is in the middle of a drought. Rivers and waterways are drying up in a serious way, and that is hampering trade and economic activity. It is another key reason, along with international trade, and swine flu, that China's economy is slowing.

The Hong Kong protest movement has taken a sharp new turn - from street action, to singing. And it might annoy Beijing more.

OPEC has cut its forecast for growth in world oil demand in 2020 due to the economic slowdown. Oil prices fell on the release of their report.

In Australia, the Westpac-MI consumer sentiment survey has lapsed back into slight negative territory again with continued pressure on family finances and concerns about the near term outlook weighing on sentiment. It is not the only sentiment survey that is pointing downward.

And an ATO Commissioner is personally warning the big four audit firms about their tax advice, saying they are so big and so influential, they are a systemic risk to their tax system. Tax advice from these four firms may now be counterproductive because it will attract direct scrutiny and pushback, making these clients an ATO target.

The UST 10yr yield continues to rise, up another +4 bps and now at 1.74%. Their 2-10 curve marginally more positive, now, at +6 bps. Their negative 1-5 curve is narrower at -20 bps. Their 3m-10yr curve is also narrower at -29 bps. The Aussie Govt 10yr is up +1 bp at 1.14%. The China Govt 10yr is also up +1 bp at 3.06%, while the NZ Govt 10 yr is up +6 bps, now at 1.28%.

Gold is marginally higher today, up +US$3 at US$1,495/oz.

US oil prices are sharply lower today, down -US$2 and now just over US$55.50/bbl. The Brent benchmark is also down at just on US$60.50.

The Kiwi dollar is little-changed at 64.2 USc. On the cross rates we are softish at 93.5 AUc. Against the euro we are little-changed at 58.3 euro cents. The TWI-5 still at 69.5.

Bitcoin is now at US$10,082 and -1.5% lower than this time yesterday. The bitcoin rate is charted in the exchange rate set below.

 

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

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33 Comments

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13
up

"The Hong Kong protest movement has taken a sharp new turn - from street action, to singing. And it might annoy Beijing more." I'll bet it does. The Chinese Government are looking for excuses to send the troops in and to firmly squash the protests, so they want more violence and damage. Singing, no matter how untuneful, will fall somewhat short of that threshold. Good luck to the protesters!

In California, they have passed a landmark law that makes gig economy 'contractors', employees of the platforms they work for, with all normal employee rights

Ironical when you consider that most of the companies that employ and exploit those 'gig' workers are based in the valley region of California.

Well, they may shift to another state or even to another nation. Remember Halliburton shifting to UAE and Boeing shifting to Florida. These moves are par for course for these mega companies. Astute in law dodging, they are.

Remember last year's Amazon HQ2 drama? States and cities around US and Canada embarrassing themselves and their taxpayers with "sweetened" tax deals and moronic ad campaigns to seal the deal.
Or the part where companies based out of Kansas city keep jumping over the state boundary between Missouri and Kansas within the urban area every few years to get a better bargain on state taxes?

I think the tax kicks in were contractor is working on the ground - so even if HQ is based in Bongo Bongo the employee would still fall under the local tax laws and have entitlments - HP etc.

This story looks like David has probably drawn the wrong conclusion. He has drunk the Official Kool-Aid from the State of California Central Planning and Propaganda Committee. It is probably a tax and power grab in disguise, tax deducted from payments at source rather than after legitimate business deductions, and extension of employment law to the self employed. The fallacy is that the State of California will use the money and power they gain in a wise and useful manner. Corruption in California? Surely not?

Do you think that it could be described as a battle for unearned income?

No, I suspect it is just Those That Know Best imposing their will on their subjects. It sounds like an exercise in State Control of the masses under the pretence of "looking after the workers".

This is a very interesting law change indeed.

I was reading a while back on NZ legal cases underway regarding courier companies' treatment of contractors and whether they can realistically be regarded as contractors when they appear for all intents and purposes to be functioning as employees. I haven't kept up to see what has eventuated.

But the legislators and adjudicators have a point. The gig economy has been morphing from something where people can use their spare resource in their normal course of events, to what is often one or more "jobs" in the traditional sense, just without the benefits, security and regulatory cost associated with employees. I.e. it can easily become just another exploitative business model for the benefit of shareholders without regard for the societies in which the company participates and from which it benefits.

https://onezero.medium.com/the-unhappy-middle-of-the-gig-economy-5b845d2...
https://www.forbes.com/sites/elainepofeldt/2019/03/31/a-deep-dive-into-t...

16
up

Don't worry about the drought we will send them some of our free water. It's ok we can drink our farming polluted water from our rivers and streams.

I hope you are sticking to your guns and not eating anything that comes off NZ farms then, wouldn't want to support them financially and all.. And boycotting imported food, cos, ya know, food miles and such..

We are supporting them, and I am sure we will support them more than enough in the next few years! Unfortunately it is what happens when an economy rely only on one industry they did make sure to lobby for 9 years and still do. As to imported food I do make sure to stay away from anything coming from China.

Pragmatist - its like all the city folk screaming dirty dairy or cruel sheep and beef whilst sipping their latte and eating beef ragout

Nah mate gave up dirty dairy years ago and plant based meat is used in our ragout. Delicious ...

Weren't you poking urban elites the other day for their proclivity for soy lattes?

Where does soy milk come from, a soy cow? Kao soi is a lovely Thai soup, not a bovine friend.

no wasnt me - even an imbecile like myself knows where soy milk comes from. Interestingly, soy cropping isnt all that eco friendly either

... oh .... not from miniature Asian soy cows , then ?

Who knew !

Also grows one's moobs, so the conspiracies suggest.

other side effects include a tendency use climate change as an excuse to persecute anyone who doesnt agree with you

China cut down its forests, along with a lot of other countries, it needs to replant.
http://factsanddetails.com/china/cat10/sub66/item389.html

China is dominating global greening. "Taken all together, the greening of the planet over the last two decades represents an increase in leaf area on plants and trees equivalent to the area covered by all the Amazon rainforests. There are now more than two million square miles of extra green leaf area per year, compared to the early 2000s – a 5% increase.

“China and India account for one-third of the greening, but contain only 9% of the planet’s land area covered in vegetation – a surprising finding, considering the general notion of land degradation in populous countries from overexploitation,” said Chi Chen of the Department of Earth and Environment at Boston University, in Massachusetts, and lead author of the study."

https://www.nasa.gov/feature/ames/human-activity-in-china-and-india-domi...

....... over the past week the pump price of 91 and diesel has dropped over 30 cents per liter... is this a countrywide situation . ..

Or is it because our little town now has a brand spanking new NPD . . a little competition for the two incumbents ... meebee Taxcinda was right about the price gouging !

is that in the south island? where I am its still around the 1.40 mark for diesel

Your town has a new Narcissistic personality disorder? well.. that'll be fun :)

Mentioned a few weeks ago that a new Gull bought desiel down to $1:15 and 91 down to $1:75 in Opotiki.

. . near Christchurch ... diesel at 1.179 / l. ... thanks NPD ! .. ( Disclaimer : I'm not affiliated with them in anyway , shape or form )

Oh nice thats a bargain

And on the kapiti coast we are still paying $2.30 for 91.

Hopefully a link to Synlaits latest.
$6:40 base milk price plus another 18c average. Synlait itself made in excess of $1/kgms profit.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attac...

"In China, bank debt growth rose sharply in August, up more than +14% from July. While that was more than expected, it is up only +11% from a year ago and analysts suspect it may not be enough to support their slowing economy."

Need.... more..... bank credit creation....

It solved the problem for every other economy....

As long as you can set the $$ value of "wealth creation" higher than the $$ value of debt creation, everyone must win.... assuming your able to measure all debt....

Asb report out this morning questioning if NZ will be recession by the end of next quarter. They are guestimating the last quarter saw contraction.

And yest still there will be 7% house price growth ...

And in other news the Rob Report for Q2 came out. What was noticable was that considering the amount of new builds in the top end suburbs the amount of sales was very small. Separately only 6 apartments sold for above 2mm - now contrast that with the number of new builds in the CBD asking for more than that with prices well above 20k psm.

Forget official measures of recession, or price growth, and watch credit/money supply growth. The residential mortgage could be a proxy for about 2/3rds of it. It is still up.

However my own sales dropped to half this year, and were also down a little last year. As a new technology it does fall under the diffusion of innovation, and I am presuming that behaves differently to normal consumer goods.