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American inflation up wiping out wage gains; US Federal debt up; China revises Covid-19 cases sharply higher; China car sales tank; UST 10yr yield at 1.61%; oil up and gold up; NZ$1 = 64.4 USc; TWI-5 = 70.2

American inflation up wiping out wage gains; US Federal debt up; China revises Covid-19 cases sharply higher; China car sales tank; UST 10yr yield at 1.61%; oil up and gold up; NZ$1 = 64.4 USc; TWI-5 = 70.2

Here's our summary of key economic events overnight that affect New Zealand, with news the unexpected revision upward to the China virus data has markets stepping back and reassessing their views.

But first, inflation is rising in the US, now up to 2.5% in the year to January with core inflation up 2.3%. Today's CPI rise was driven by petrol (+12.8%), rent (+3.3%) and medical care (+5.1%). And these price rises are wiping out all the rising wage gains the Americans are fond of talking about.

And the American budget deficit is inflating fast too. For the year to January the Federal budget deficit rose tp -US$1.06 tln and borrowing rose even faster to US$1.1 tln in the past year. Both were worse that the December result by some margin, and both exceeded the deficits the previous Administration left by an +80% larger deficit and +60% higher borrowing. And that is quite remarkable because the prior Administration had to deal with the GFC and this one was gifted a rising economy.

Across the Atlantic, the UK is also about to go on a major deficit spending spree without matching tax income.

In China, there was a huge 'revision' of the number of COVID-19 virus infections, up from 45,200 previously to now 60,400. And the death toll has also been revised higher, from 1115 to now 1370.

The risks to their economy are magnifying. Even before the emergency, trade was going off the boil. Preliminary data shows that car sales tumbled -18% in January from a year earlier and are expected to drop more than -30% in February. Meanwhile sales of electric cars plunged more than -50% in January and, down for a seventh consecutive month.

The virus emergency is pushing Chinese commerce even more firmly online, and that will have a lasting impact. Housing sales are taking a back-seat, and developer stress will become extreme soon with large financial consequences. One will be for the New Zealand log trade.

Equity markets are in the red everywhere today. The S&P500 is the latest to slip lower after some sizable falls in Europe, first triggered by the China data revision, and then by UK government ructions. The FTSE fell more than -1% and by far the largest decline by global markets. Shanghai was down -0.7% yesterday, Hong Kong by -0.3% and Tokyo by -0.1%. The ASX200 was a rare gainer (+0.2%).

The UST 10yr yield is now just on 1.61% and similar to this time yesterday. Their 2-10 curve is still positive at +18 bps. And their 1-5 curve is still negative at -4 bps. But their 3m-10yr curve is positive, at +5 bps. The Aussie Govt 10yr is down -3 bps at 1.08% even. The China Govt 10yr now at 2.88% and firmer by another +1 bp. The NZ Govt 10 yr is also up by +1 bp to 1.41%.

Gold has risen again today, up another +US$7 to US$1,577/oz.

US oil prices have made another small gain today and are now just over US$51.50/bbl. The Brent benchmark has also firmed to just under US$56.50/bbl. Demand for oil is now expected to shrink for the first time in more than ten years as the economic impact of the Chinese virus spread.

The Kiwi dollar will start today softer at just on 64.4 USc. On the cross rates we have also dipped to 95.7 AUc. Against the euro we unchanged at 59.4 euro cents. That has weighed on our TWI-5 to 70.2.

Bitcoin is still over US$10,000 and is now at US$10,196 which is a -2% fall in a day. 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.

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60 Comments

22
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Revised virus data? For the CCP there is no such thing as objective truth, no such thing as impartial fact. There is only party assertion. Reporting what you see and know is ‘spreading rumours’, and will be punished. Others – as has happened - simply disappear. The risks of honesty are enormous. Nothing the CCP says about the virus – or anything else - is to be trusted. The new virus metrics, like the old ones, are manufactured by party stooges for their own purposes. Trust them at your peril. And pity the Chinese population.

And pity the Chinese population

Pity the US population - subterfuge is endemic world wide.
The Belief That Everything Will Be Fine Once Trump’s Gone Is More Dangerous Than Trump

And so one day Mr Wolf arrived at the first Mr Pig’s bank of straw and name plated “World Bank of Debt” and he called it in and huffed and puffed and blew the place down. Didn’t then need to bother with the next two, leaving it simply to the domino effect. But Mr Wolf was still hungry.

Trumps going to leave them with a massive debt.
Here's a question - who is most trustworthy?
Trump or the Chinese govt?

14
up

Big difference. I can criticise Trump in fact say whatever I like. Not so in China. Hands down no comparison. Also, do you think the democrats in the US are going to do any different?

HSL, not much at all, regret to say. It has been said that the only difference between that of a Republican & Democratic administration is that, during the latter, the poor too are allowed to be corrupt.

What election promise(s) has he reneged on?

1. Repeal and replace, day one! (healthcare...still waiting...everything's gone quiet)
2. Balance the budget (his business smarts..."fiscally responsible" republicans)
3. Eliminate the federal debt in 8 years ("fiscally responsible" republicans)
4. Make Mexico pay for the wall
5. Releasing his taxes
6. Separating himself from his business interests (USA's standard anti-corruption measure for presidents)

Just a few off the top of one's head... There are plenty of actual trackers out there where you can review the 20+

He is the President (i.e. the executive branch of Government) not a Dictator.

1, 2, and 3 are all reliant on Congress (Legislative Branch)
The checks and balances in US politics is both a blessing and a curse. They are put there to explicitly stop the President from acting unilaterally.

4. Partially reliant on Congress, but also more of a election "PR Statement" (At least that is what Labour would say) it wasn't meant to be taken seriously.

5. His personal business - no law requiring him to make them public.

6. This is a failure on his part, and something I am surprised is not being pursued further.

They're promises he made, point being. With 1, they had the house and the senate too. He and his party had all the power necessary and broke that promise.

Speaking of president acting unilaterally, it's been quite the dandy of a week for that eh? Crazy stuff.

Nancy takes another loss.

Trump speaks.

https://youtu.be/ZEfOGTH9txE

Build a WALL
Draining the Swamp
Cut taxes for everyone
Bring back Manufacturing
"We’ve got to get rid of the $19 trillion in debt. ... Federal debt is up, not down, under Trump's watch

I'm getting tired now...the list could go on and on

16
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Trump ultimately has to answer to the electorate. Xi just disappears or murders anyone who rubs him or the party up the wrong way. eg In 2011 there were 115 billionaires in China. Since then, 72 have died, with 15 murders, 17 suicides, 7 accidental deaths, and 19 from illness. Another 14 were executed.

And as soon as a Democratic is in power again the Republicans will reverse direction and start harping on about fiscal responsibility again.

The debt has to a large degree been counterbalanced by growth, so that US govt debt to GDP has increased little, it's only up 1.5% since 2016. Not great, but not terrible either.

I don’t think Mr Trump is going anywhere. He’ll be re-elected in November.

Even the Yanks arent that stupid to see that the Dem's are a shambles that couldn't accept defeat and created a hell of a lot of issues that were proven to be false. Not leaders what so ever! But then again, look what we have 'running' the ship thanks to Winston and NZF.

13
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The experts, of course. And they've been saying the numbers were many multiples under reported for ages.

The ccp head of wuhan was removed on the same day when the "revision" was out. And the first thing his replacement announced was they didn't really know how many people were infected in wuhan even the whole hubei province.

International trade with china needs to be stopped until they come clean on what is really going on internally. Without hyperbole a hundred million lives hang on our preventing the spread internationally.

No need. The US will have thermal imaginary of the crematoriums that they could release. They will also have spys on the ground reporting back as well as monitoring insecure communications. Several countries with developed spy and satellite capabilities will have this info at their finger tips and will be just as much responsible if numbers are much higher. None of them will want the real data coming to light as it will have major consequences for the global economy.
Understandable really because a global financial crunch would severely hamper the ability to control the virus.
Five Eyes.. even Jacinda should have a fair idea.
Stuck between a rock and a hard place....
Do something out of the norm and people will click on and panic occurs.
It's fairly clear that this will not be contained and we're waiting in official figures to show this but official figures aren't going to be released as it would cause panic and hamper containment. Buy time, calm the masses and hope like hell an antivirus is found soon.

I feel America knows whether this coronavirus is really from bats or a lab artifact leak as suspected by some people. They won't say tho, as they don't need China to go down right now.

Lab, bat or whatever isn't an issue now. It's out there and it needs to be delt with.
Another fact that we should take into account is that the official infection rates are at least two weeks in lag if not more. Time from infection to symptoms, one to two weeks and then a few days to a week to get tested and get results then compiled and presented.
As of this moment in time we could safely say infection rates are a minimum of 4 x's higher than the reported stats. 60,416 x 4 = 241,664.
Half a million next week and a million a week after. 2m, 4m 8m 12m 24m 48m 100m 200m 400m 800m 1.2 billion...

Some Chinese researchers suggested the actual number of infected is 70% higher than reported for Wuhan, at least. Some nearby cities are now officially under the "military style administration", as announced by the authority while they start building the 3rd field hospital in Wuhan.

If what the Chinese authority told us regarding the development of other provinces is true, then the situation is getting controlled elsewhere except Wuhan and Hubei province. The question is how much creditability has left after yesterday's "revision".

The situation is not going to come under control. We know the Chinese govt lies. Many many epidemiologists are estimating 10x the official figures are infected - its obvious when you look at graphs because first case was early December, but official data extrapolates to early jan - there is a missing month of spread. Probably 0.5 million infected all over china, reports from hospitals in areas that officials claim are not badly affected that they are being overwhelmed. The only question is when will China admit how bad things really are and how world reacts.

If only that were workable - without cut and dry data it will be generally written off as propeganda - and PRC have a lot of power over western media.
What would work is a video record of all the bodies being taken to each crematorium in Wuhan over the course of a day, but with pervasive curfews in force it would be really really hard to do.

I doubt they will be unloading in the open air.
It'll be a drive in deal so bo video of drop offs.
Thermal would show the heat outputs and caluation from there would be easy.
The Western Governments will not want the real facts to come out, Chinise control or not.

You want to watch those videos? Taking doomer porn to the next level.

Good chance they are burning 10s of thousands of dead using coal - without sulphur controlling equipment found in power stations.

I'm guessing that the crematoriums couldn't handle 10's of thousands. So they would need something where a massive amount of bodies could be inserted with ease and fired up and emptied then the same again. That's not your run of the mill equipment, there wouldn't be many inclosed furnaces that this could be done in effectively. Putting them in pits not burnt is not possible due to it being transmitted by water.
Concrete pits, petrol / diesel / coal and cleaned out by diggers would be viable.

This is horrible, it's starting to sound like holocaust.

It's not going to be flash mate. 5 infected in India, they have little to no chance of containment or adequate health care.
Africia, not good either.
Either a vaccine is found and is able to be mass produced or we all catch it and build up our own immunities or die. The world will be a different place for a while.

Well.. yeah... That's just what we can see. The tec that the States has is way beyond this.

"thermal imaginary"

exactly

The States (at least) has thermal in satellites and you can bet your bottom dollar they'll be pointing at China and every scrap of it will analysed. Thermal signature from a similar size crematorium in a city the same size 'v' what the ones in China are pumping out. Unsecure communications.. Over worked staff asking their boss to get more staff as they have processed 'X' amount of bodies today and they are over worked.
Over 10 years ago they had stas that could read a number plate. We can't even python what they have that is top secret 10 years ago let alone at present.
NZ has a fairly good spook network and they have friends, word will be getting back even if it is unofficial. Jacinda has more than a fair idea what is going and what the future holds.
Any deviation from the norm would alert the masses then we have a massive issue of panic..

Here we go.
https://www.arcgis.com/home/webmap/viewer.html?useExisting=1&layers=b8f4...
No idea how to read it but give it a crack.
What I do see is that China is not producing much. Not many hot spots in comparison to other countries.
Here are answers to question posed by someone about sat thermal and replys, someone who has a head to grasp this stuff can give it a crack... I'm not that guy.
https://www.arcgis.com/home/webmap/viewer.html?useExisting=1&layers=b8f4...

Peak oil price. "IMF report says neither it nor its neighbours have gone anywhere near far enough.
It says that the six main Gulf states — Saudi Arabia, Kuwait, Qatar, Bahrain, the United Arab Emirates and Oman — have already spent $300 billion of the $2.3 trillion reserves they had before the oil price crisis. Even with the current retrenchment they are all attempting — the UAE has introduced VAT — the money will run out in 2034."
https://www.thetimes.co.uk/edition/world/when-will-the-gulf-go-bust-wtjj...

Don't worry - it's only digitally-held forward bets.

And there are already too many of those.

Happy Valentines Day....

Buy her a Tesla...Musk will be so happy....On paper he is the richest person in the World, never to have made a significant profit....

Go figure. Stock up on a dream date.....years in the Futures....Together.....OOOps.

https://www.marketwatch.com/story/tesla-stock-falls-after-company-unveil...

"Buy Ze a Tesla"...... and I have, and Ze is pleased. I had it custom built with all the extras and flown over here especially for the special day, if I'm lucky I might get lucky =)

Just think you can switch on auto pilot and see if she really likes her present...?

Chinese govt getting special order of millions of body bags:
https://www.ntdtv.com/b5/2020/02/12/a102775027.html
Is it starting to sink in how serious this is?

They are double bagging them to contain the expelled air, so half a million dead expected if they continue with the double bagging.
That's not counting the factories that they have repurposed to make their own...
A sack and a cable tie isn't exactly rocket science.

Where's all the ones that were saying this is a massive overreaction to a benign flu virus? BAU anyone?

Mate it's not easy for anyone to get their head arround and mixed messages to boot.

Get back to me when we get to a tally of 100 people infected in the west (actually caught it in the west, not those that have returned from Asia with it).

Yeah, the cruise ship has 175 and only 500 tested, so yep getting back to on that now. Now that India has 5 confirmed, she's all on.

garbage

Ring-a-ring-a-rosies
A pocket full of posies
A tissue, a tissue
We all fall down

Get back to me when the number of Western infections created externally not Chinise travelers. Yep exceeded.

Once it gets a foot hold in India there will be no stopping it. No brainer.
Those 5 people would have been infectious for at least 5 days before showing systems and another few days till they caught medical help and were tested and the results returned. No contest.
There will be at least twice that number infected at present not showing symptoms. Well yeah that's logic.
No garbage only heads in the sand.

If 100 westerners catch it, will you change your username to ostrich?

175 in the cruise ship that were not on China.
Exceeded before he even said it.
Correction 218 so double the limit and they haven't tested 2/3rds if the passangers.
A total of over 700 outside China. Just getting back to you that it's over 100 outside of China and not Chinise or vosited China.
Still all good Pragmatist?

Yeah Mate, I keep an eye on these posts and others.

Its settled. From now on you will be known as ostrich - for having your head stuck in the sand

China could just be the catalyst for the next economic crisis

Substitute 'could' for 'is'.

It's about time we had a proper reset!

Sad but true mate.

Days to the General Election: 27
See Party Policies here. Party Lists here.