China PMIs surprise; India growth sliding; IMF downgrades Japan; US retail weak; Canada & Germany report weak growth; NZ starts stimulus; UST 10yr yield at 1.77%; oil down and gold unchanged; NZ$1 = 64.2 USc; TWI-5 = 69.6

China PMIs surprise; India growth sliding; IMF downgrades Japan; US retail weak; Canada & Germany report weak growth; NZ starts stimulus; UST 10yr yield at 1.77%; oil down and gold unchanged; NZ$1 = 64.2 USc; TWI-5 = 69.6

Here's our summary of key events over the weekend that affect New Zealand, with news many key economies are struggling to find meaningful growth and expansion.

But firstly in China, both of their official PMI measures reported improvements in November. These were better than expected results. The factory one was a surprise because it moved from contraction to expansion, even it its weak. The services one was more positive, moving up to 54.4 and a solid, moderate expansion. (The comparable US services expansion has an index of 51.6, the New Zealand one is at 55.1.)

However, a respected analysts is saying that growth in the Middle Kingdom will fall to only +5.7% in 2020 as investment levels stay weak.

In Hong Kong, there were more demonstrations on the streets overnight. This time students were joined by the elderly who came out in support because they claim the 'job is not done'. But the rally grew quickly into tens of thousands, and then descended into violence. October house price data shows that prices are lower now than this time last year. But the falls for micro and tiny apartments are modest. However the falls for large apartments over 70m2 exceed -10%. For those over 100m2, the drop is -13%. And for those over 160m2 the drop is even larger but the number of units selling has collapsed. The well-to-do are either selling up or just wanting to get out.

In India, their Q3 2019 economic growth is also sliding, down to +4.5% year-on-year and way below their official targets.

In Japan consumer confidence rose again in November continuing a trend that started in July and that was unexpected. But it still remains very weak. In fact, the IMF said that Japan's growth over the next two years is likely to be less than +1% in each year.

In the US, early reports are that shopping mall crowds haven't been at their usual Thanksgiving holiday levels, and that online options are strong. Some major retailers are said to be absorbing the cost of tariffs to keep prices unchanged. Not helping sentiment is that the slimmed-down 'phase one' trade deal with China still isn't done.

In Canada, their Q3 GDP growth slowed to just +1.3% above the same quarter a year ago. And that is even slower than the US which slipped to a +1.9% gain. But the Bank of Canada is not expected to change its 1.75% policy rate when they review it Wednesday night (NZT).

In Germany, their retail sales data for October was weak and way below what was expected. But at least their jobless numbers didn't weaken. Employment rose. But that might not last - Daimler said it would cut 10,000+ jobs as it shifts to electric vehicles. Audi is cutting almost as many. In transportation, going green is going to cost jobs in a major way. But Germany has dodged slipping into recession with surprise but small growth in Q3-2019.

In Australia, the RBA is signaling that buy-now, pay-later payments platforms aren't going to be allowed to prevent retailers surcharging customers for the fees they impose. This is because such rules 'no surcharge' rules raise prices for everyone including those who don't use the system.

Aussie private sector debt growth slowed in October to its weakest growth rate in almost ten years. Part of the reason is that the growth of BNPL schemes is siphoning off traditional personal credit growth and is not being counted. But there are also sharp slowdowns in both housing and business debt growth as well.

And the international media is noticing the recent New Zealand restart of government infrastructure projects, pointing out these come at a time growth is slowing and taxpayer 'investment' is required to keep it alive. It is the 'fiscal friend' that the RBNZ has been calling for.

The UST 10yr yield is unchanged at 1.77% and that is unchanged for the week. Their 2-10 curve is positive at +16 bps. Their 1-5 curve is weaker for the week at +3 bps. Their 3m-10yr curve is also less positive +12 bps. The Aussie Govt 10yr is at 1.04% and that is a -6 bps fall for the week compounding the same fall last week. The China Govt 10yr is now at 3.20%, and unchanged for the week. The NZ Govt 10 yr is now at 1.30%, and down -5 bps for the week. But expect NZ rates to rise after the NZ stimulus announcement.

Gold is at US$1,464 and little-changed for the week.

US oil prices are down further to just on US$55/bbl. The Brent benchmark is just on US$62.50/bbl. Fear of demand falls is behind the sudden reduction. And the price falls comes despite OPEC output cuts.

The Kiwi dollar remains remarkably stable, now still at 64.2 USc and is essentially unchanged in a week. On the cross rates we are now at 94.9 AUc and another +½c gain in a week. In fact for November it has gained more than +2c. Against the euro we are little-changed at 58.3 euro cents. That puts the TWI-5 at just over 69.6.

Bitcoin is lower today at US$7,321 and down -5.7% from where we left it on Saturday. 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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32 Comments

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Have Labour dropped the ball that National had already thrown away? Roads of national significance were a continuance of ‘growth’, and thus an anachronism. School upgrades might make sense if they include divestment of coal-fired boilers and passive-solar improvements, but maintenance (the parrying of entropy) is a question we have yet to understand. And triage will be writ large when/if we do.
It will be interesting to see if they come out with anything else, and if it’s re roading, whether it is forward-looking or car-centrically urban-sprawlingly rear-view-mirror stuff.

Fracking doesn't pay at those oil prices, yet growth is retreating even with them. This tells us we can no longer afford our way of life, given that the remaining options get sequentially worse. Which begs the question of whether Robertson can guarantee the repayment, even at "record low interest-rates". (Anyone notice the oxymoron on Morning Report? Cyclical, he claims it is, but 'record lows'. Ye canna'e have both, one would have thought....).

PDK even moving away from fossil fuels we will still need roads. A significant problem in NZ is that the state of the vast majority of our roads is just crap, and that is being significantly polite! The state of our roads cause our traffic to consume more fuel that they should have to. Our Government should have a programme to bring our roads up to a good standard, because we will always need them, even with electric vehicles. what they need to do however is stop subsidising the transport firms. During Helen Clark's Labour Government time, they admitted that trucking caused 90% of all road damage, but the cost of that damage is spread across all road users. Since then JK's Government even allowed the truck sizes to grow, making the problem worse. All this while Kiwi Rail was being starved into submission. Trucking companies should be made to pay the full cost of their damage to the roads. this will drive a lot more freight to the railways, a significantly more ecologically friendly way to move freight around the country.

Electric vehicles are gaining in popularity all the time, and as batteries improve this will only get better. So we will always need roads, but they need to be much better quality than they are now.

.. recall that it was the Greens , Julie Anne Genter , who stopped the Gnats upgrading roads of national significance programme ... because ... she has a morbid hatred of the internal combustion engine ... she hates cars ...

Regardless how much we need and rely on them ... her ideological passion to get us onto public transport ran roughshod over commonsense ...

Murray86 - roads are currently made of bitumen, delivered and placed by fossil energy. Do you know of a PlanB at that scale?

That's just to maintain the existing, let along grow.

But I suspect society will disintegrate to the accompaniment of ignorant bleatings from the temporarily-advantaged.....

That is a challenge PDK, but any future will still require travel. Perhaps recycling existing waste? Or even a yet to be developed surface. But consider this good quality roads will actually enable more efficient forms of travel, not prevent them. This is in part also about the background regulation.

A UN report released over the weekend identified that greenhouse gases released in the last year increased by 15%, really pointing the finger at global Governments. I have always argued that the only way to make a change of behaviour happen is to regulate. But successive Governments have continually and consistently avoided this. Instead preferring the soft approach or applying a cost to less desirable activities. This approach is just BS, and it is clear the lobbyists are getting traction! The money doesn't want the Government to regulate away their easy profits. The ETS is a BS way of doing this. All the costs applied to these activities impact the lower two thirds of society the most, the people who can afford it the least! But that does not change things.

Any future that I can imagine will still have a need for travel, not just around the towns and country, but also around the world. How we do this will need some debate, but better infrastructure will enable more efficient methods.

What would you do PDK - disinvent the wheel?

...... finally ... after 2 years of shutting down infrastructure projects set up by the Gnats , the Labour coalition has woken up to the desperate need for these works ...

And it's not just cosmetic work ... as the $ 400 m. for schools is ... that's ongoing maintenance , which the Gnats themselves spent nothing on ...

.. but , we need the big projects to be reignited , the bridges , tunnels , 4 lane roads ... improve this nations productivity by upgrading the transportation systems ... wakey wakey Taxcinda ... let's do this ...

A reversion back to the industrialist subsidy, perhaps.
'lotta spare capacity out there currently..
'lotta opportunity for trough feeding..

"we can no longer afford our way of life"
Of course we can! Just borrow more...(sarc/off)

Yep. at the risk of becoming like Japan or Greece.
Borrowing when rates drop is exactly the wrong thing to do: for prudent people when rates drop, you should be paying your debt down not increasing it!

Are you privy to some new energy source the rest of us haven't heard of?

.. no need for a new energy source , when there's ample abundancy of the existing ones ...

..if there were an abundance of useable we would not be still fighting wars over the stuff.

Who is this " we " of whom you speak ?

When you say 'energy', you obviously mean labor. Given we have a current abundance of 'energy'.

So, migrant labor?
We can live happily in the blissful ignorance that exploitation and corruption is a 3rd world issue.

https://www.stuff.co.nz/business/117551892/death-of-a-migrant-under-the-...

It is a national disgrace. We get apologies for deaths in air crashes decades ago but nothing about an unnecessary death last month caused by govt bungling in its INZ dept. $30,000 for a work visa to then be exploited in Auckland. INZ doesn't care otherwise it would employ a few labour inspectors - maybe IRD will notice lack of tax receipts from migrant workers?
PS Good reporting by Stuff!

Exactly, Lapun.
How we can continue to ignore the inexcusable conditions with which we subject our temporary workforce to bewilders me.

We somehow ignore it under the guise that "we need these workers".

Stories like these simply scratch the surface on migrant exploitation while scores of cases every year go unreported.
The problem is that the previous government legitimised migrant trafficking through low-skilled worker sponsorship programmes as well as the 'export education' sector. The current government seems more than happy to retain these awful settings for the sake of the tax dollars these sweatshops bring in.

So NZ is a place where labourers can go and die with almost no trace.
I did not know we had sunk quite so low. No doubt the new house owners will move happily into their new $2m house, none the wiser of how it came to be or the real cost.
Thanks to poly's of all persuasion of late.

maybe but someone needs to deal with the structural imbalances in the economy. Spending on roading is often poorly spent. I had a beer with a farming friend yesterday and his 700 acre hill country sheep and beef farm has a 18k rate bill, he's 20min out of town. Thats no rubbish no water, and declining infrastructure. That money is being very poorly spent, councils have used the asset bubble in farm land as an excuse to ramp up rates to an unsustainable level, even then our local council has borrowed money and intends to borrow more.
Someone needs to step up and spend this money a lot better, because one day we will have to spend a fortune on deferred maintenance and our world might not be as prosperous as it is now. Borrowing from the future is assuming a better wealthier future, that just might never arrive.

GBH seems to be on deck at the same time as someone else. Coincidence?

And parroting the same old hackneyed nonsense. Productivity is nowadays energy efficiencies, not labour-related. You're only 200 years adrift, 'GBH', wakey wakey yourself. Oh, and population is being increased on the back of resource draw-down, which means it's unsustainable. (That re your other nonsense comment over the weekend). Heck, I'm betting you're even a Lomborg-believer.......

Productivity is nowadays energy efficiencies, not labour-related.

Well, closing the economic distance is a labor efficiency.. So he can't be all wrong..

... the sun is shining, friend .. . Emerge from your cave ... summer is here .... the time is ripe to admit that the Malthusians have been 100 % wrong for the last 200 years ...

Life is good ... and getting gooder every day... everyday that is , that we allow real science to open up new possibilities to us .... and don't tune things out based on bad feelings and entrenched ideologies ...

In the cave everyone shares the same uncertainty about whether they will run out of oxygen or firewood first.
So it's always best to be alarmist about both.

The school spending is probably like Labours DHB cancer machine announcement - ring around to see what the DHB's were planning to buy, and announce it as a policy. No planning, no strategy, no idea.
At least by giving the funds directly to the schools it might get spent, funny though that future capex spending on schools will be placed in the hands of the central education agency Hipkins is setting up......

50 years worth of new infrastructure built fit for purpose in the last eight years.....the city and its people need to act now, or it risks going backwards....it estimates it needs 100,000 more residents .....promote the city, attract more people....like many western cities its population is ageing....it's at a tipping point.
https://www.stuff.co.nz/national/the-detail/117836844/the-detail-christc...

Christchurch, of course, and how just building infrastructure doesn't actually guarantee anything. It should, but it doesn't.
The answer to Christchurch is obvious. Shift Government to the city and away from a disaster-prone Wellington. It makes sense on any level except one - "what will happen to the price of Wellington property if that happens?" and the spill over effect into the rest of the country.
What a corner we have painted ourselves into...

"what will happen to the price of Wellington property if that happens?"

The same thing that happened to the price of New Plymouth property when the O&G exploration ban was announced - went up!
In both HPI and median terms, house prices in New Plymouth city centre are well-above their 2017 levels when the ban was first announced.

If relocating entire industries with their tens of thousands of workers were that easy, wouldn't Silicon Valley heavyweights have moved their global HQs out of the disaster-prone Western seaboard.

O&G is definitely having an impact. But in a different way.

New Plymouth is an aging city as evidenced by the latest census results. Most higher value houses are being bought by retirees, with many coming from out of town (Auckland/Wellington), who are also willing to pay above what a local will.

I have said in previous articles I would be interested to see residency stats by age, etc... As I firmly believe that the make up of the houses is changing significantly.

Swapping a working age family, for a few retired couples is not exactly sustainable for a city in the long term.

Shift Wellington from 1 disaster prone zone to another disaster zone? Welly works ..having just toured Christchurch the CBD is an urban mystery but loved the seagulls nesting next to the condemned 12 storey hotel still standing.

Perhaps the papers are trying to prepare the population of Christchurch for a massive new focus on immigration. Should go down well.

.The NZ Govt 10 yr is now at 1.30%, and down -5 bps for the week. But expect NZ rates to rise after the NZ stimulus announcement.

Maybe the derived, but nonetheless invisible, neutral rate (Box A page 10 (16 of 60).pdf) will recover from the doldrums and productive GDP qualifying economic growth will follow?

Weekend trivia: why #RBA policy of cutting IR is ineffective?

Official logic: cutting stimulates demand for credit -> econ activity up -> GDP up. Wrong.

Chart shows cutting IR follow credit contraction & slowing econ. Credit quantity drives the economy.Link

I wonder if interest rates were kept at "Normal" levels where the economy would be taking into account the massive shift in aging Demographics tho?
Its easy to look at one graph.