US durable goods orders drop sharply; Canada GDP growth weakens; China slashes import tariffs; equities mark time; BNPL eats Aussie personal credit; UST 10yr yield at 1.92%; oil and gold up; NZ$1 = 66.3 USc; TWI-5 = 71.4

US durable goods orders drop sharply; Canada GDP growth weakens; China slashes import tariffs; equities mark time; BNPL eats Aussie personal credit; UST 10yr yield at 1.92%; oil and gold up; NZ$1 = 66.3 USc; TWI-5 = 71.4

Here's our summary of key events over the weekend that affect New Zealand, with news the year is winding down without a Santa rally this year. (And there will be no video version for the rest of 2019.)

First in the US, there has been an unfortunate and sharp drop in durable goods orders in November, down a startling -5.7% on an actual basis year-on-year. (Most reports however will be the seasonally adjusted number which is -2.0%.)

American capital goods orders actually fell an even more startling -13% year-on-year, while the more widely reported non-defense component was down -9.2% (and sanitised to a +0.1% gain when seasonally adjusted).

New home sales data delivered much better data, up almost +17% year-on-year, even if this aspect of their housing market is only 12% of their overall housing market. (The existing home-market was up +2.7% in November year-on-year.)

Also turning positive was the Chicago Fed's National Activity Index and that was up a bit more than expected.

The Atlanta Fed's GDPNow model is showing that American GDP growth probably inched up in the fourth quarter of 2019 to +2.3% and that is slightly above most analysts' estimates. (For comparison, Massey's GDPLive model shows New Zealand's Q4 growth at +2.4% although weakening a little.)

In Canada, they report GDP growth monthly, and in October it was running at a weaker +1.2% and well below the +1.6% in September.

In China, they announced lower imports tariffs on more than 850 products ranging from frozen pork, hi-tech components and vital medicines next year, as Beijing looks to boost imports amid a slowing economy and a trade war with the United States. They are adopting temporary import tariffs, which are lower than the most-favoured-nation tariffs, on 859 products, according to a statement released by their Ministry of Finance, citing the State Council’s Tariff Commission.

Overnight, equity markets were pretty stable with only minor gains or losses in most of the major ones. However the exception was Shanghai which dropped -1.4% yesterday in a move not matched elsewhere in Asia and probably related to the tariff drop. Locally, the ASX200 dipped -0.4% while the NZX50 was up +0.6% and both of these were among the larger movers globally.

And although there is no Santa rally this year, we should note that the equity market bull run, which started in March 2009, looks like it will continue well into 2020. The S&P500 is up +250% in those almost 11 years, and that is equivalent to an annual gain of +9%. Of course, the rise hasn't been smooth as most readers will know.

In Australia yesterday, the release of private sector credit data showed some large negative moves in the 'personal' category. This is where you see Buy Now, Pay Later schemes eating into traditional consumer credit, and the Aussie moves are large (and larger than in New Zealand). For the year to November, this category fell almost -5% taking a toll on traditional credit card and store credit transactions.

The UST 10yr yield is unchanged at 1.92%. Their 2-10 curve is also little-changed overnight at +27 bps. Their 1-5 curve is at +20 bps. Their 3m-10yr curve is at +35 bps. The Aussie Govt 10yr has risen +2 bps overnight to 1.33%. The China Govt 10yr is down -3 bps at 3.21%. The NZ Govt 10 yr however is now at 1.63% and small -1 bp dip overnight.

Gold is at US$1,483/oz and up another +US$5 overnight.

US oil prices marginally firmer at just on US$60.50/bbl and the Brent benchmark is now just under US$66.50/bbl.

The Kiwi dollar will open firmer today at 66.3 USc. On the cross rates we are also firm at 95.8 AUc. Against the euro we are likewise firmer at 59.8 euro cents. That puts our TWI-5 at just on 71.4 and that is a six-month high.

Bitcoin is up +2.5% today, now at US$7,346. The bitcoin rate is charted in the exchange rate set below.

Merry Christmas to all our readers. We will be back with the next update on Friday.

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

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13
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Merry Christmas everyone, its been a fun year reading different view points and contributing to the conversations.

Christmas wishes
1. reduced immigration
2. decent wage growth
3. an organised resolution to the extreme debt issues worldwide
4. a coalition that delivers what is promised (as long as it doesnt include National (aka The Sell Out to China Party)
5. World Peace

Probably all are equally possible/impossible

:)

.. all good , except for point number 4 : in 2020 I want the voters of this fine land show the government what we do if you repeatedly lie to us , burden us with more taxes , delay our infrastructure renewal ..

... if you stuff up and endlessly delay ... we boot you to the kerb ... " one term wonders "

NEXT !

Something about raising the GST comes to mind, but I take your point!
And if we discount all the political liars, who is there remaining to vote for?

One term wonders to be relaced by the Soyaman party...gangs must be worried?

With number three. There is an organised resolution, it is called quantitative easing and lowering interest rates :-P

Except that isn't really a planned solution, it is the only practical and politcally acceptable way forward. Until it isn't.

4 and 5 are somewhat related. If a solution is found to political division then world peace will surely follow.

World peace will only come when the utopic visions / dreams of the left and right are shattered as unworkable / un-achievable and a more pragmatic , realistic goal is chosen.

Number 2 is number 1.

Nah ... it's the other way around ... Number 1 is number 2 ... but , they're both alotta fun ... even when you're freedom camping ...

In Australia yesterday, the release of private sector credit data showed some large negative moves in the 'personal' category. This is where you see Buy Now, Pay Later schemes eating into traditional consumer credit, and the Aussie moves are large (and larger than in New Zealand).

If Aussie personal savings are close to those estimated in the US, Pay Day loans maybe a necessity to address unfortunate expenditure demands.

If Aussie personal savings are close to those estimated in the US, Pay Day loans maybe a necessity to address unfortunate expenditure demands

The ME Bank Financial Comfort Report covers this for Australia. 50% of Aussie h'holds have less than $10,000 of cash savings while 70% have less than $30,000. Remember, this is at the h'hold level.

The above looks much better than the U.S. However, we need to be careful with this report as 65% of h'holds claim they wouldn't easily be able to access $3,000 in an emergency. Something doesn't add up to me.

https://www.mebank.com.au/getmedia/b59491c6-778e-4fca-83c2-a3d11936eff1/...

All that money Big Oil has paid me to comment on interest.co.nz has really paid off.
"A major market milestone has been reached on Wall Street. Tech giant Apple, following a 70% share-price surge this year, has eclipsed the value of the entire US energy sector, says Robin Wigglesworth on ft.com."
https://d1btnptfa0r0eu.cloudfront.net/wp-content/uploads/2019/12/978_COT...

I'd be interested to know how much individual investors are putting into stocks these days, and whether they feel like they are playing musical chairs. Thing is even if you don't, innovators out there do. I would say the rise in the S&P 500 is inversely proportional to new investment in new innovation.

There is nowhere for the printed 'money' to go, barring stock-betting and real-estate betting. Nothing else can soak up the numbers needed to run the currently-needed 'doubling' size. And inversely, we have to be betting further and further away from the number of chairs left when the music stops. I think the cascade will be quite rapid.

Agreed powerdon.
While cash rates are so low and - US especially - continuing to print money, there are few alternatives other than assets.
The comment above "we should note that the equity market bull run, which started in March 2009, looks like it will continue well into 2020" seems likely even though equities seem well overpriced by historical measures.

Pretty tough of Bunnings to make people redundant just before Christmas.

https://www.stuff.co.nz/business/118427633/bunnings-in-waikanae-and-te-a...

This year saw my work make redundancies and not replace people who left. I drew the short straw which was to stay behind and be worked to death. Never expected at my age that this would happen. I have almost unlimited overtime although I would swap it to mentor a NZ born young person to take over my role. Genuinely not sure that I can carry on working twelve hour days for much longer and retain my sanity.

My work just refuses to train the staff we do employ. I spend a lot of time "fixing" jobs because people don't understand how services are provided.

I find it interesting your qualification about a NZ born young person (and I don't think you are being prejudiced).

I haven't seen any fresh young Kiwis start in my company for quite a while now. I wonder where they all are, it's almost like they don't exist any more. I do run across them occasionally working for smaller companies I work with, usually when helping a customer transition to another service provider. There has been a push to get everything documented in a form that can be easily followed. The idea being that everything you know can then just be handed over to a crowd in India or the Philippines and they can run with it. I'm more interested in helping my fellow countrymen earn a living though. I'm a bit "old school" and a localist.

Talking about training I have noticed a trend these days for management to be highly optimistic about the competence and energy of their staff. Anyone can do anything if they apply themselves (and have documentation to follow). The idea is that all staff together are only 80% utilized. That means you can reduce head count by 20% right? Doesn't matter that people have different skill sets and experience, just follow the documentation. Don't like it? If you raise concerns they tell you to find another job if that's how you feel. Of course the best workers do just that. The old workers and less capable staff get left holding the baby.

It's quite a circus. I think this is happening in many companies. Reduce staff levels and make those that remain run at 100-110%. Also reduce management by getting staff to manage themselves. If your workload is 105% it's your job to find someone who is working at 95% and offload some work to them.

Well Zachary– this is quite concerning.

I might have to look a lot more closely at the behaviour and online activities of my few remaining work colleagues.

Because from the sounds of it, you and I currently work for the same company.

In my career I’ve seen several people - once former stars - fry, crash and burn – and it’s not pretty.

In my experience the best time to do something about it is when you can still see the tidal surge in the distance.

Once it completely engulfs you, it’s too late.

Thanks for the advice custard. I have always coped with higher workloads in the past by putting in extra time and when it quietens down taking it easy knowing that the balance is fair. But what do you do when there is no longer any prospect of a quiet time, the workload is impossible and you have lost most of your expert staff? Burn out I guess.

JMO but i think there will be more redundancies thru next year as minimum wage regulations come into being.

... yes ... there is no " free lunch " .. as minimum wage is forced up , more Kiwis will lose their jobs ...

Question is : why do we need to push wages up ?

Answer : cos the cost of living has escalated...

Q : which is the biggest component of that increase in living costs ...

A : house prices and rentals .... ahhhhhh.... come the full circle ... the nub of our problem is the OTT price of a home in NZ ...

And why is housing so expensive. Because we have inflation targeting, and (almost) everytime we are below that inflation target range the RBNZ drops its pants on the OCR, credit gets cheaper, houses get more expensive, saving for the deposit gets harder...

(its not the only reason, but its a big one)

I think this is a real problem with the RBNZ mandate.

According to the RBNZ M1 table Sept 2019 quarterly non-tradeable inflation y/y% was 3.2.

For many the bulk of their expenditure revolves around the non-tradeable sector – not the tradeable.

Try having a slice of laptop for dinner – or making an appointment to visit a flat screen TV over a sore tooth.

Not even close...neoliberalism the main reason

And the 'no new taxes' pledge which translates as 'swingeing increases in Existing taxes, fees, levies and Gubmint Imposts'.

"The Asian Century is effectively over because nearly all of Asia has borrowed against the next 30 years to fund the last ten years…"

10
up

in their defense, while they borrowed to build businesses we borrowed to buy each others houses. Hmmm...

I'm pretty sure they borrowed to buy real estate as well.

https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis....

That is where 'we' are all off to....More debt that takes us nowhere good.

Marvelous Merry Christmas news.
We are moving in the right direction.
Full alarmist is a fool alarmist.
We have time to spend money wisely.

Remembering our 5 trillion $ buys a less than the measuring instruments margin of error temperature reduction.

https://www.google.com/amp/s/www.bloomberg.com/amp/opinion/articles/2019...

the IPCC’s commonly cited doomsday scenario looks like a rash flight of imagination. A group of climate scientists recently got together on Twitter and tried to figure out what a more realistic scenario looked like. They fed energy predictions from the International Energy Agency into climate models and found out that 3 degrees of warming is a much more likely business-as-usual scenario than 5 degrees. But as the climate scientists noted, the IEA has consistently underestimated the growth of solar power; each year the international agency predicts that growth in solar-power generation will slow, and each year it grows rapidly. If renewable technologies continue to surprise on the upside, warming could be limited to 2.5 degrees.

Two things.

Firstly, those temperature predictions are 'by a date' - they're just milestones on a continuum, if you don't stop what's causing the trend.

Secondly, the growth of solar power (I've lived off-grid for 20 years, was a co-Chair of Solar Action, and champion solar generally) is not displacing the growth in fossil-fuel usage, no more that the exponential growth in electric cars is displacing total vehicle production. You have to compare apples with apples.

And I'll tell you, you don't run a growth economy going down to solar from FF - yet even now, that 'economy' is incapable of clearing its debt.

Oh - and 2.5 degrees gets into feedback-loops (tundra methane, lack of ice-reflection, bushfire carbon, that sort of thing. By 2.5, the process is cascading out of our hands - making it a nonsense measure. As Australia is demonstrating. What is slightly scary, is that when societies face stress, they seem to throw up Morrisons and Trumps, Johnsons and Bolsonaros. Who - history tells us - fiddle while Rome burns.

3 degrees, of course, we're statistically dead. I wonder how many people realise this? Less than a billion struggling inhabitants of higher latitudes, malnourished and fighting over food, is 3 degrees. And 3 degrees is only a marker on the continuum....

Last time I heard someone with on the ground knowledge of whats actually happening, he admitted the climate modeling to date was wrong. Hardly surprising because we have not been here before and the feedback loops could be exponential and worse still, irreversible. Have we already gone past the point of no return ? quite possibly. A few weeks ago I said that Australia could be uninhabitable in 10 years, a few weeks later and parts of it already look uninhabitable to me with record temperatures and fire.

Modeling could be wrong both ways, you show one way, there are two ways.
Can't find anyone that thinks modeling is science. Not the same thing.

Hi pdk, have you expressed these words in numbers. Like a schedule of costs, to outcomes to benefits.

Of the outcomes and benefits, what's the order of priority and associated risk assessment of those.

Is there a top 3.