Good morning, wherever you are. Here's our summary of key economic events overnight that affect New Zealand, with news of generally stable economic conditions worldwide.
Housing starts in the US took off in December, up +40% from the same month a year ago, which admittedly was unusually weak. But it may be a short-lived boost - building permits for residential construction are starting to tail off from recent rises although they are still +6% higher than a year ago.
American industrial production wasn't so flash however, coming in a full -1% lower in December 2019 than December 2018. There are many sectors with large declines, and without gains in IT and especially defense spending, their manufacturing sector would have been in a crisis situation.
Job openings are shrinking, and actually shrinking fast. They fell more than -7% in November from October, and are down -11% in a year.
Despite that, consumer sentiment remained virtually unchanged in early January, differing by just 0.2 Index-points from December.
Yesterday we reported that the Atlanta Fed's GDPNow calculation has economic growth shrinking to just +1.8% pa for Q4-2019, a fast retreat. Today we can reveal that similar tracking by the NY Fed has it even lower at +1.2% pa.
Balancing off the American weaknesses are still-healthy Chinese gains, even if they are lower than in recent years. The percentages may be lower but the absolute gains are still large.
China reported that its economy grew +6.1% in 2019 ending the year with Q4 growth slightly lower at +6.0% which was the same expansion at Q3. A slew of other December data was released at the same time showing industrial production was up at the rate of +6.9% in December and the second highest month in 2019. Coal and oil production hardly rose at all, but electricity generation was up +3.5%. (Many see this electricity growth data as a better reflection of actual economic activity.) Fixed asset investment - another key economic marker - rose +5.4% in December. Retail sales were up +8.0% in December compared with the same month in 2018.
Fast economic growth and no population growth will mean China is making quick gains in per capita income levels. China recorded its fewest births in 58 years in 2019, with down to +14.7 mln, and lower by -580,000 from the previous year, according to official data. Their population has just nudged 1.4 bln people, a rise of just +0.3% in 2019. Their working aged population is 64% of the total. (That compares with New Zealand where the same data is 65%. Our population grew by nearly +1.7% in 2019.)
The Australian bush fire news is seriously undermining their tourism industry. An internal survey conducted among its 850 members of the country's peak export tourism body showed that 70% of them were seeing a lot of cancellations from their big key markets – America, Britain and China. They estimate the cost is -NZ$5 bln already and things are likely to worsen from here.
Wall Street is ending the week up +0.3% today, bringing the cumulative 2020 rise of the S&P500 to +2.0%. European markets were much more positive overnight, up +0.7% or so, and the DAX30 is now +1.0% higher in 2020, the CAC40 is up +1.0% and the FTSE100 is up +0.9%. Yesterday, Shanghai ended flat, but is down -0.3% in 2020 while Hong Kong is up +1.8% and Tokyo is up an impressive +3.6% for the year. The same movement for the ASX are a ytd gain of an even more impressive +5.6% while for the NZX50 Capital Index it is a more modest +1.8%.
The UST 10yr yield is exactly where it was at this time last week at 1.83% although that is +2 bps since this time yesterday. Their 2-10 curve has moved little, now at +27 bps. Their 1-5 curve is flatter at just +7 bps. And their 3m-10yr curve is unchanged at +30 bps. The Aussie Govt 10yr is down -1 bp overnight at 1.17% but very similar to where it was a week ago. The China Govt 10yr is unchanged at 3.14%. And the NZ Govt 10 yr is up +3 bps overnight and +6 bps higher for the week at 1.55%.
Gold is higher today, up +US$7 from yesterday, now at US$1,558/oz although that is exactly the same level as a week ago.
The Fear & Greed index we follow is still hard over on the 'extreme greed' side. Volatility is low, with the VIX now at just over 12. The average for the past year has been 15. Neither represent a change from last week.
US oil prices are also little changed, now just over US$58.50/bbl and the Brent benchmark is down too at just over US$64.50/bbl. The US rig count rose surprisingly this week, but only by the amount it fell last week and the levels are still approaching a three year low.
The Kiwi dollar has settled back a bit overnight and is now at 66.2 USc and broadly similar levels to this time last week. On the cross rates we are at 96.2 AUc. Against the euro we are at 59.6 euro cents. That puts our TWI-5 at 71.4 and almost the same level it was this time last week.
Bitcoin is up +2.3% from where we left it yesterday to US$8,883 and it is up another +10% from this time last week, up +24% since the start of the year. 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 ».