China losing virus battles; faulty tests and panic buying; China's economic response weak; impact locally underestimated; US & Canadian payrolls rise; rains save eastern Australia; UST 10yr yield at 1.58%; oil down and gold up; NZ$1 = 64 USc; TWI-5 = 69.8

China losing virus battles; faulty tests and panic buying; China's economic response weak; impact locally underestimated; US & Canadian payrolls rise; rains save eastern Australia; UST 10yr yield at 1.58%; oil down and gold up; NZ$1 = 64 USc; TWI-5 = 69.8

Here's our summary of key economic events overnight that affect New Zealand, with news some think we are underestimating the economic risks China's coronavirus poses.

And first up today, there was another very large jump in the official tally of coronavirus confirmed victims and deaths yesterday, reaching 37,600 and 814 respectively. We are heading for a doubling in a week. (On February 4, the total confirmed was 20,600 with 426 deaths.) Now more people have now died from the 2020 coronavirus in three weeks than the 2003 SARS (774) in nine months.

And infection rates are now rising fast in economically vital Chinese coastal cities, far from the outbreak's epicenter, raising uncertainty over how many manufacturers will be able to resume production this week. Their Government is eyeing further delays is restarting their economy after the Spring Festival extended break. One new issue is revealing itself - the test they are using produces high levels of false negative results.

And in Hong Kong, with memories of SARS still around, panic hoarding of vital supplies is causing huge problem in the City. They are bracing for a surge in cases just like across the border.

Back in China, the economic impact of the disaster are becoming apparent. One third of SME's in a prestigious survey said they can only survive one month of this crisis before declaring bankruptcy. Another third said they could only survive eight week. Official interest rate cuts and instructions to banks to defer loan repayments are just not going to be enough to save most of them. And now experts are calling for rent reductions or rent holidays for businesses.

More locally, Westpac economists are saying we are greatly underestimating the likely economic impact in Australia (and New Zealand).

In the US, non-farm payrolls grew by +225,000 jobs in January (of which +34,000 were for part time positions) and far better than the modest +147,000 rise in December. It was also better than the 2019 average of +162,000 per month but far less than the same month a year ago (+269,000). Their participation rate remains weak at 63.4%. Manufacturing lost more jobs (-12,000) while the gainers were healthcare (+36,000). In fact, the healthcare industry alone has added +361,000 jobs in the past twelve months. Also strong gains were recorded for warehouse workers, couriers and messengers, and cafe and fast food workers. Average weekly earnings rose by +2.5%, which is marginally above CPI inflation (+2.3%).

And their wholesale trade sales fell -0.7% in December from November (+1.5%), a decline that wasn't expected. In fact they barely reached the same level of a year ago.

The Canadian labour data was a little better. They grew by +35,000 jobs and all in full-time work. Their participation rate is 65.4%. Average weekly earnings rose +4.6% in a year, which is well above their 2.2% CPI inflation rate.

In Australia, a kind of housing frenzy has burst into life from strong competition by first-home buyers who have lifted selling prices and boosted auction clearance rates to about 80% in Sydney and Melbourne last week and this weekend.

And heavy rains in NSW are seeing their water storage reservoirs re-filling fast.

And back in the US we should note that an important mortgage rate, the 15 year FRM has now fallen below 3% (plus points) for the first time in more than three years, and that is poised to help their housing market which has been lackluster for quite a while.

The UST 10yr yield is at just on 1.58% and a -7 bps decline from this time on Friday. Their 2-10 curve is down to +18 bps. Their 1-5 curve is more negative at -9 bps. Their 3m-10yr curve is barely positive, now at just +½ bp. The Aussie Govt 10yr is down -5 bps at 1.03%. The China Govt 10yr now at 2.86% and also lower by -2 bps. But the NZ Govt 10 yr has risen +2 bps to 1.35%.

Gold has risen again, up another +US$4 to US$1,570/oz. A week ago it was US$1,583/oz so that is a small net loss last week.

US oil prices are a little lower today at just under US$50.50/bbl. The Brent benchmark has also slipped to just under US$54.50/bbl.

The Kiwi dollar will start down -½c from Friday at just on 64 USc and its lowest level since November. On the cross rates we are unchanged at just on 95.9 AUc. Against the euro we are lower too at 58.5 euro cents. That takes our TWI-5 down to 69.8.

Bitcoin is still rising, up another +3.2% over the weekend at US$10,106 and its highest level since September 2019. A week ago it was US$9,237 so it is up almost +US$900 in a week. 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 ».

Our exchange rate chart is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

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I reckon there will be a fire sale of Chinese owned NZ properties.

That could be good, but I don’t see it. I guess some might be forced to sell to prop up struggling businesses in China, but surely most would value a safe-haven asset more than ever?

Depends if they are owned outright or have a large mortgage propped up by business earning

Why?

If it's as bad as it's sounding people will need cash. Obviously a way to do that is sell property.
It happened with the Japanese back in the day.
Some might also see us as a safe haven so it might balance out. Depends on how prolonged it is there. The longer it goes on, the more likely the sell up.

And they know that in their own country rent holidays are being talked about and it may happen here leaving them in a even bigger pile of muck.
Also they may want to take advantage of business opportunities at home.
Or put the dollars in Silver because it is going to sky rocket...... that bit is just me trying to bump the up the price for my own benefit.. but seriously cough sputter, it's the only place to be..

Chinese govt will change all rules of commerce in China to prevent businesses going to wall where-ever possible - rent holidays, price freezes etc. Takes months to sell properties, so I think it's unlikely we will see much impact in property market EXCEPT via the massive impact it will have on NZ economy- 10's of thousands of jobs are about to disappear, and we are about to have a big recession.

Or worse the D word...
May we should add another D to the three D's. Death, Devorce, Da Bank and Depressions... Some houses may hit three or more of these in the coming months..

I think you are jumping the gun abit

To me it still looks like a 50/50 scenario on whether the Chinese can contain the virus or not

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This virus and the strict quarantine measures aren't going away until an effective vaccine arrives or we are also overrun by it. Many months at an absolute minimum.

The one trick ponies at the RBNZ are no doubt furiously scheming how they can further blow up the housing bubble to compensate for our economy catching the revenge of the pangolin.

The irresponsibly low interest rates used to keep the property ponzi going may now come back to bite as there is precious little left to cut.

Ocr will be zero by mid year

Why so?
What sort of shock is this?

Possibly. But then the New Zealand dollar poops the bed and we get inflation?

Exactly. And huge capital flight.
I'm not sure that this is a shock to demand for exports for NZ. I think it is more of a shock to supply of imports, which, doesn't immediately imply loosening of monetary policy..

Tourism and International education are exports.

So you are suggesting we use monetary policy to stimulate foreign demand for these?

Works for China...

I think you'll find widgets are pretty different to services..

But it’s really hard to get inflation when every central bank has pushed rates down. Isn’t that the central dilemma of economics atm? Will the virus break that cycle through sheer force of panic? I can see that a sudden, complete stall in Chinese economic production could cause a liquidity crisis; but we know that the BoC will turn on the infinity taps to prevent that, and Western banks likewise in their own sphere.

If Chinese sweatshops are closed we might see rapid inflation in the price of imported goods.

Yes i think the virus is on the inflationary side. As in less goods available?

DP

Revenge of the pangolin, quite! Such karma.

Good call, I didn't see that one. It may extend to Chinise dairy and other land.

It will go viral.

It's far more likely that foreign owners will want to kick out the sitting tenants (42 day notice on periodic tenancy) and escape china and its heavy handed response. So this virus could actually reduce the number of available rental properties ... we know what happens to rents and property prices when that happens.
Regards shares, have you seen the huge price drops on some nz public companies... theres an opportunity for a bargain "where everyone gets a bargain" .... maybe. Napier Port Was 4.25 Now 3.68... what a plunge!

Not if they bought pre-FBB and they’re not entitled to be in the country they won’t, or indeed if they’re not allowed to leave their country of origin.

Visitor (tourist) visa easily obtained for up to 6 months from commonwealth country otherwise 3 months. Other options too like student visa and enrol for a course. Nz educational institutes will be crying out for their quota of international students if chinese enrolments down

Yep but they will need money for that. It's not cheap to live in New Zealand for 6 months without income. The tuition fees are also not cheap. Without a Sustainable job, it's not attractive to live in a such high living cost country. Not even mentioning about Government is banning foreigners from China getting into New Zealand. It will likely last quite a bit time.

The foreigners are rich beyond belief... they have no need to rent their homes even so they sit as ghost houses...

Not when a protential pandemic virus hit China and causing so many disruptions of its normal economic activities...

Still picking solid price gains this year?

Sure... are you? I think you last posted there will be modest gains this year. Dont ask me to put a percentage gain on it...

I was thinking 2-3%. I now think flatness, but could be worse.the RBNZ will do everythin it can to prop things up.

Of course it depends on the location... but who would've picked 20 percent gains for some SI locations last year. Friggin amazing for the property owners of dunners etc. Gore also did especially well but that could have been washed away by their flood

In a year and a half our house in Dunners is looking like it's gone up $150k to $200k.
Seriously thinking about selling up and getting something cheaper / or renting and being ready for whatever is coming.

Well done. I hope you're not on flat land in south Dunedin though. Coastal flooding issues in that whole area

Those houses aren't going up 150k, cant even insure some of them

The two main considerations on buying in Dunners is flooding and sun in winter. We nailed those.
I don't put much chop in house prices going up because if you sell you are buying in the same market at the inflated bucks that you sold for. Unless we sell now and buy / rent a house in a small town to weather this out and be able to come back in once it's over and the prices have dropped.... A very real prospect I'm mulling over at the moment.

But how can they escape China when they dont have New Zealand cityzenship and PR? Dont forget New Zealand has already banned foreigner (who have been to China) getting in to New Zealand!

Contacts and $$$$$'s to the right people to get out.
Investors visa or 6 months.
Visitor visa, get to the end of that and just overstay. They would get a slap over the wrist with a wet bus ticket for that and from memory NZ law says that they can it send people home if they are in life threatening danger.
Claim asylum could also be a way and tie it up in court if you've got the bucks.
A good lawyer and lots of cash will get you where you are going.

The impacts of the coronavirus pandemic are likely to be far-reaching economically within China and, in no small measure, globally. There may also be consequent impacts to the international trading order. If these are extensive, the impacts may continue into affecting the authority of the CCP - which rests on economic growth for its subject population. If this promise of increasing material well-being evaporates, no investment in social control will keep the CCP secure. And New Zealand is a cork - or a plastic milk bottle - afloat on this gathering tide.

Interesting times there, societal anger is growing.

Yes sure is, lot of unquiet before now too. Such a vast land, massive population if it all goes awry, runs amok, can only restore order by force, and plenty of it. But the whole world will be watching.

But the whole world will be watching.

The world is long past caring.

The United States no longer bothers about low intensity conflict. It no longer sees any point in being reticent or even devious. It puts its cards on the table without fear or favour. It quite simply doesn’t give a damn about the United Nations, international law or critical dissent, which it regards as impotent and irrelevant. It also has its own bleating little lamb tagging behind it on a lead, the pathetic and supine Great Britain. Link

HT: Edward Curtin

Appears highly infectious this virus and able to survive outside a host for quite some time. We must be due our first cases this week, then we have to backtrack to find other possibly infected people. Good thing its not flu season or our testing regime would already be overwhelmed. I cant see this disappearing anytime soon.

We would be rooted if it were flu season.
Our healthcare system is a mess.

It's in far better shape than other countries - what do you base this comment on?

Ah, all the stories about awful waiting lists, staff shortages and subpar facilities....

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I currently know a cancer patient who is receiving far greater care in public than private. The reason being her case is reviewed by at least 5 physicians who collectively have far greater experience than dealing with 1 physician (private). For a free system, I think we should count our blessings - and I am happy for my tax dollar to fund it all.

I'd be happy if we spent more to fund more health professionals and armed security to defend them against those that think its ok to assault hospital staff. I'd also suggest anyone who assaults any staff member forfeit their privilege to free healthcare for life

.

Ah yes, better to have all those things and a thriving medical bankruptcy industry on top of it.

Yes, in one month's time it will show here if we have it and by then you won't want to be taking the bus to work.

And we couldnt build a hospital in 10 years let alone 10 days like the Chinese have just done

Although we are probably adding beds/population at the same rate. Adding 1000 beds in China is the equivalent of adding 0.28 beds here.

hot dry weather that rapidly evaporates and destroys air borne virus carrying micro-droplets with UV works in our favor for next few months.

Calling it again.
A month ago we were all looking at quite a fee issues arround the world that could have put an end to a market that was due a down fall. This is much bigger than all of them put together and it's only going to increase the issues with a lot of them and others will be void because of the virus.
We were looking at a possible recession, now it going to be and maybe even worse than that... hang onto your steak and cheese.

Nah Gummy said it was only the Wu Flu - stop being hysterical.

Some people lol...
It's certinally a hard one to get your head arround.

Everybody was Kung Flu fighting
They spread it as fast as lightning.

Hello friend ! ... the Gummster has been on a 4 day trip in Central Otago ... visiting the microbreweries ... what a blast ... great beers , awesome food , terrific wait service folks , polite drivers on the roads

... but , I haven't forgotten interest.co.nz .... I've been peeing my Gummy nappies , larfing at the OTT hysterical overload happening here ... the tin foil hatters have been having a field day over the Wu Flu ... so funny ... so freaking funny ...

Ummm .... you guys do realise that regular flu kills 650 000 around the world annually .... little Wu Flu has just tipped 900 fatalities ... mostly older men , with pre-existing medical conditions ....

... hey , cheers guys ... you're keeping me in stitches , all that running around shrieking that the end is nigh : brilliantly funny !

Ok, GBH how may weeks at a doubling rate of deaths per week (quoted in David's article) will it take for it to be a problem to you? To help you with the maths - it will have surpassed the number of deaths from common flu sometime in the week after Easter if it continues at the current rate - in fact at the end of that week it will have surpassed 1 million deaths if the current death rate continues. The vaccine is at best 6 months off - to me anyway, this would represent a problem if they can't contain it, and given the official numbers out of China are sketchy at best.

Glad to be of service Gummy and hope those beers were tasty.
Less tourists and cheaper accomodation must have been the icing on the cake (froth on your beer).

Oh Gummy..I hope you ticked the insurance box when you booked those Asian flights - ou're keeping me in stitches , all that running around shrieking that the end is nigh : brilliantly funny !

In the US, non-farm payrolls grew by +225,000 jobs in January (of which +34,000 were for part time positions) and far better than the modest +147,000 rise in December.

Trump - "Since my election, we have created seven million new jobs — five million more than government experts projected during the previous administration…If we hadn’t reversed the failed economic policies of the previous administration, the world would not now be witnessing this great economic success".

The unemployment rate is at a fifty-year low and beside that over the first three years since he took office seven million jobs were added. Actually, the President can be forgiven for rounding up – the actual total from the BLS was 6.688 million payrolls (Establishment Survey).

Or, that was the total on Tuesday. The annual benchmark revisions have been made and released to the public today. According to the new estimates, the economy managed to gain just 6.334 million 2017 through 2019. It may sound like a lot but it really isn’t. Not even close. Link

Stuff sold in kmart will become more expensive. Actually, the price on all MIC will go up.

And demand in NZ going down.
It's more than just the Kmart products, certain car makers are also getting hit already. Everything has some component that is made in China or the machines that produce it.

Indeed. Honda, Nissan and GM all have their global components factory in Wuhan, I don't think they will reopen any time soon. apparently, this outbreak will even delay the launch of the next Xbox and Playstation 5.

It is a bit of a lesson about having all your eggs in one basket...

If MC is mindless clutter or mindless crap, then is MIC mindless imported clutter?
I heard Wuhan is China's automotive industry hub.. if they go down then, Europe and America could have a problem, which would certainly end up affecting us down the line economically.
We need truth, we need transparency! Have a great week!

I think whether the mic is crap or not depends on the price tag and who designs the product. It's impossible to escape mic nowadays. But I think people will realise the consumption of some consumer goods is just unnecessary after this outbreak. The demand for many mic or non-mic products should not be there in the first place. My family has been upcycling for nearly two years, it saves money and the environment.

Nice, agreed. It is sad what's happening in China right now and if we don't really need a lot of MIC stuff, then I really hope there is a way out of the current situation, on a human level, environmentally and economically. Maybe it will help us all to evolve to be better human beings.

Boy people love to speculate about a potential bad story, especially one that could be associated with words such as "pandemic" "epidemic" "catastrophic" etc… Many people have died in NZ in this short year but not one from that new virus. Sure it could get bad or it could not, the truth is we just don't know, talking and worrying about it everyday won't make us any safer though

But ignoring it will???

Yes, focusing on better things and on things we actually have control over, certainly will

61,000 people died during the 2018-2019 flu season in the USA alone. The previous season was 79,400 deaths.

yes without any economic impact too!

But of course that is still a small % of people that get the flu each year.

This has a death rate of over 2% and thats assuming the other 35000 that are infected recover.....

There is no doubt that this will have an economic impact and that all depends on the containment, and at the moment its a toss of the coin as to whether this will be contained in the near future or escalates.

Thats true. From CDC stats - 42.9 million people got sick during the 2018-2019 flu season, 647,000 people were hospitalised and 61,200 died.

So that puts the common flu into perspective.

... delboy ... stop that ... what are you doing , bringing facts and commonsense to interest.co.nz ...

These DGM'rs are having a field day with Wu Flu ...

.. sit back , enjoy the show ... freaking funny as ...

Funny as...?

Look out when everyone runs for the exits shouting 'why didnt they tell us before now'.
I think we are being told. But many wont listen.

Hi Yvil, check this article out, you will find out it's actually not a speculate. The numbers from Chinese official media are indeed inaccurate.
https://www.stuff.co.nz/world/asia/119384645/he-ducked-chinese-authoriti...

ANZ cut H1 New Zealand GDP from 1.3 percent to stall speed 0.8 percent.

And population growth still well over 1%? Sounds like recession.

I would proffer that a significant number of Chinese owned NZ properties are unencumbered by pesky NZ Mortgages , and are more likely to have been purchased with cash or syndicated money , or debt raised in Asia at very low interest rates , like between 1 and 3%

Wishing that they will be forced to sell in very large numbers is just that .............. wishing .

And there is very good reason for them not to sell .

Basically we are seen as a safe haven for savings , our property sector has no CGT , no transfer taxes , no gift taxes and no estate duties , we are not as racist or xenophobic as Aussies .

We are a very attractive investment destination

However - if push comes to shove and your work has been shuttered for a few months how are you going to survive - go on the dole? My prediction is a few homes come on the market - and then a flood particularly in Auckland as investors need to cash up (unless they can get out and immigrate here).

So the country you live in has a major problem and you are lucky enough to own property in a land far away without said problem. So you decide 'I'll keep my assets in the country with the big problem and sell my properties in the safe country" Doesn't make sense at all.

Ah the common sense fallacy. While it is unlikely they will sell, what pressure can or will be put on citizens to return money from overseas is the unknown.

Oh, I now see my mistake, using common sense instead of hype and speculation

We'll doh, markets always act rationally, it's proven fact.

It appears you don't understand the common sense fallacy - it has nothing to do with "hype and speculation" and everything to do with evidence and reasoning (and in this instance the evidence is lacking)

https://rationalwiki.org/wiki/Common_sense

Cash is king Yvil..you should know that?

Sorry I disagree, OPM is king (and OPT)

Sorry if you tried to buy a box of noodles I would say no to OPM.however ..cash, bitcoin, gold accepted!

It pains me to say that Bitcoin is looking good. Hard to get stuff from overseas with a silver coin.

Frazz, do you know what OPM is?

...operating profit margin...or off post menstrual - take your pick - now off to count my bitcoin (which you poo pooed I recall?) But you are such a clever chap with all your acronyms.
or OTHER PEOPLES MONEY
or Original Pilipino Music (OPM)
or Office of Personnel Management

It will make sense if they dont have any income from that safe country and the economy is getting a big hit in the country with the big problem, which is the reality for most of those foreigners at the moment. People will live in a place where the local can provide them jobs and income.

Exactly

Maybe, but...kill business cash flow for a few months and things could easily change

https://i.stuff.co.nz/world/asia/119384645/he-ducked-chinese-authorities...

Anyone who tells it like it is has an unfortunate smelting accident.

And speaking of Lord Copper, not the book.

http://www.lord-copper.com/grandstanding-and-hostages-to-fortune

Just charming up there ey

It is patently obvious from many different sorts of evidence that the Chinese are hugely under-reporting the pandemic. The easiest demonstration is in the extrapolation back to patient 'zero' in the confirmed cases graph - Official Chinese data extrapolates to start of January. But it's known patient zero was start of December - they are hiding a month of exponential growth! See log graph on this page: https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594...

A data analyst/fraud researcher goes into the unbelievability of the clearly manicured data China is publishing: https://twitter.com/evdefender/status/1226679345881780226

Very impossible (as per Tui ads..), remember it's around four months ago, the statement '... No Force can stop China..' - it reminds me the history of Titanic, claimed to be UN-sinkable the day before it's maiden voyage. Will the world start to learn now? that putting all their eggs in one basket apparently it's not a good idea, cheaper cost will always entice the Neo-liberal principle (shielding the full force of capitalism greed) to go for certain country options - Does anyone remember the story of body parts? which all claimed to be/wanted to be the boss.. in the end.. which body part got the position?