Here's our summary of key economic events over the weekend that affect New Zealand, with news the economic implications of the fear of China's virus continue to grow, even if the virus spread itself is peaking.
In China, the COVID-19 numbers are still rising, up to 69,300 and a +2000 rise from Saturday. The death toll is up to 1670 from 1525 this time Saturday. This time a week ago, the Chinese were reporting 40,500 and 910 deaths so the doubling has stopped. The lockdown of Hubei province is getting even more strict. The toll on front-line workers dealing with the emergency is frightening.
And China doesn't only have the coronavirus to worry about. Air pollution, especially in Beijing, is really bad again and that is despite much reduced economic activity due to the virus cutbacks.
And more research is suggesting that the impact on China and many other Asian economies is going to be tougher than earlier assumed. Further, a raft or new disputes is sure to flood international courts and arbitration as increasing numbers of Chinese companies claim force majeure on existing supply contracts.
China also released its Q4-2019 current account data which showed a surplus of +NZ$14 bln in the period and +NZ$61 bln for the whole year. That is a surplus of only +0.2% of GDP, tiny in world scale. For goods alone, the surplus was NZ$160 bln in 2019 and still only +0.7% of GDP. They ran large countervailing deficits in services.
In Europe, they reported a good trade surplus in 2019 of NZ$380 bln or 6% of EU GDP. That is a completely different scale to China's. And they released their Q4 GDP outcome and it revealed only tiny growth.
In Hong Kong, they are facing their "largest deficit ever" as the government there continues spending following the widespread protest movement' disruptions and now the flu epidemic. In Singapore they too are planning on a major increase in deficit spending, boosted by election-year sweeteners.
In the US retail sales rose only marginally in January, up +0.3% from the prior month, but on a year-on-year basis they are up +4.4% from January 2019.
American industrial production fell however, down -0.8% in January from a year ago. Clearly, the rise in retail sales isn't based on locally manufactured goods. The drop is the first time a January has shrunk since 2016 and continues a string of seven monthly year-on-year declines. This time the reasons given were "unseasonably warm weather" which held down the output of utilities and Boeing's cutbacks.
But consumers aren't worried, with one measure of sentiment rising a little in February.
In Canada, existing home sales rose +12% in January from the same month in 2019 with prices up +11% on the same basis. The property market is especially 'hot' in Toronto. Local mortgage rates there are falling.
In Australia, their largest home loan lender has trimmed fixed mortgage interest rates, promoting an eye-catching 2.99% one, two and three year rate, down from 3.29% and largest cuts to this level for investors. But as regular readers will know, these are 'package rates' that involve a range of fees and other cost obligations, so their "comparative rate" is a better way to match them with New Zealand rates. On that basis, the new CBA comparative rate is between 4.37% and 4.59%. Aussies still pay far more for fixed rate loans than we do.
The UST 10yr yield is now just on 1.59% and lower by -2 bps from where we left it Saturday - and little-changed over the past week. Their 2-10 curve is less positive at +16 bps. And their 1-5 curve is still negative at -7 bps. But their 3m-10yr curve has slipped from positive to a negative -1 bp. The Aussie Govt 10yr is down -2 bps at 1.06%. The China Govt 10yr now at 2.89% and little-changed. The NZ Govt 10 yr will start today at 1.38%.
Gold rose on Saturday (NZT) to US$1,584/oz. However, for all the uncertainty, gold is only had a +1% gain last week.
US oil prices are firm at just over US$52/bbl. The Brent benchmark is also up slightly to just on US$57/bbl. But in an interesting sign, the price of gas in China has hit a record low as demand collapses. Other energy prices won't be far behind.
The Kiwi dollar will start today softer at just under 64.4 USc. On the cross rates we have held 95.8 AUc. Against the euro we also unchanged at 59.4 euro cents. That means our TWI-5 is now at 70.2 and +0.6% higher than this time last week.
Bitcoin has fallen hard over the weekend, now at US$9,734 US$9,434 which is a -8.3% dive and taking the weekly change negative for the week by -4%. 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 ».
42 Comments
To bring us up to the current day, just a few days ago the G-20 was briefed on a terrifying-sounding vulnerability. A new-ish development for the world’s monetary stewards, so called, to chew on. (Read here).
“Central banks have lost control of global liquidity. The dollarised international financial system has become treacherously unstable and vulnerable to a sudden reversal in capital flows.
“Yet the International Monetary Fund is a diminished force and no longer has the firepower to act as the world’s lender of last resort in an emergency. That is the stark conclusion of a G20 task-force of leading currency experts.”
The report was prepared by the Robert Triffin International Forum but wasn’t at all what you might be thinking. It begins by noticing all the footnote dollars whizzing around the world at the speed of light. Once again, not dollars as in physical notes but virtual currency made by banks. Financial products.
However, these genuinely good folks who are only now starting to peer behind the global currency curtain have intentionally or not made it sound like this is some new problem. Worse, they pile on with the belief that the Fed is the only potential backstop available when all available historical evidence proves, beyond any honest doubt, that it is not and has not been.
The IMF gets the axe in this one. It won’t be much longer before the Fed does, too. Link
It will be a mistake to blame the financial and economic events that follow {from the central bank madness happening globally) on the coronavirus, but inevitably this is what those who have relied on a failing monetary system will do. As to the course of the coronavirus epidemic, only time will tell. With financial markets already teetering on the edge of a systemic and economic crisis, the timing of its emergence could pull the trigger on a global financial and economic collapse.
I think you missed the point. It's more about the psychological machinations of making the masses believe the cause of a negative outcome is different to what the actual problem really is. There will be plenty who argue that there is absolutely nothing wrong with the monetary backdrop and how central banks are orchestrating the world and national economies. I'm not necessarily arguing against them.
They may well be rounding up anyone that coughs, and anyone they've ever spoken to, and their dog too... however that doesn't mean they're actually testing these people, and unless they're tested or 'clinically diagnosed' then they aren't added to the official 'confirmed cases' figures.
So, these measures are aimed at stopping the spread of the disease yes, but they're also a mechanism whereby the Chinese are attempting to 'save face'.
By reporting fewer 'confirmed' infections, and therefore getting the media and WHO to pounce in and declare the peak over. In reality however, as you alluded to, it's highly unlikely that this is the case - and far more likely that the Chinese are gaming the reporting system.
Nowhere near enough test-kits in China.
“By our calculations 760 million are living under some kind of residential lockdown.” – Mozur (NYT) | Feb 2020
https://www.confirmationbias.io/?p=20198
You test people because you want to hospitalise and cure them, but what if you are able to isolate the infected and leave them there? Even you don't want to, your hospitals have reached the capacity so you have to make a choice. You may end up with sending those old and weak home and lockdown the entire apartment building, even when you can smell the virus on them. Ordinary Chinese especially those who are stranded in Wuhan are experiencing a humanitarian disaster right now. I really hope people who covered up the outbreak will get jail time, tho I know I'm dreaming.
Yes I wished it was a dream too, it's very serious what's happening and I reckon underestimated.
"Viral Alarm: When Fury Overcomes Fear"
http://www.chinafile.com/reporting-opinion/viewpoint/viral-alarm-when-f…
As the Year of the Pig [2019] gave way to the Year of the Rat [February 2020], a virus that started in Wuhan, a city famed as the nation’s major transportation and communication hub, was spreading throughout China. Overnight, the country found itself in the grip of a devastating crisis; fear was stalking the land. The authorities proved themselves to be at a loss and the cost of their behavior was soon visited upon the common people. Before long, the coronavirus was reaching around the globe and the country found itself becoming rapidly isolated from the world. It was as though the China of the Open Door and Reform policies for more than three decades was being destroyed in front of our eyes. It seemed as is, in one fell swoop, the People’s Republic, and in particular its vaunted system of governance, had been cast back to pre-modern times. Then again, as word spread about the blockades thrown up by towns and cities to protect themselves against contagion, and as doors were slammed shut everywhere, it felt as though we were actually being confronted by a kind of barbaric panic more readily associated with the Middle Ages.
The cause of all of this lies with The Axlerod [that is, Xi Jinping] and the cabal that surrounds him. It began with the imposition of stern bans on the reporting of factual information that served to embolden deception at every level of government, although it only struck its true stride when bureaucrats throughout the system shrugged off responsibility for the unfolding situation while continuing to seek the approbation of their superiors. They all blithely stood by as the crucial window of opportunity to deal with the outbreak of the infection snapped shut in their faces.
You can't count people that you can't test and can't even see anymore, because they are all locked up in their apartment blocks quietly cross-infecting each other and brewing masses of infections, and possibly deaths, none of which is reported. How many millions are in that category now.?
I see an earlier post that calculates 760 Million in this precarious position.
It may not be long until they start tossing the bodies out the windows and CCP just sends teams of street cleaners around to collect them and take them directly to the Crematorium.
When the peak in each apartment block recedes and everyone that is going to be affected has either died or recovered (about a 6 to 10 week process i think) then they will unlock the doors on the outside and let the survivors out.
This process only started about 3 weeks ago, so still 7 weeks to go.....
Other countries of course are just at the very start of the Pandemic spread cycle, some only seeing small numbers at this time, but remember this started with small numbers in Wuhan in November 2019, over 2 months ago, so those just starting out have 2 months to run before they see the numbers that China is producing.
Rounding up all your recent contacts when you are tested positive and putting them all in a camp is even more likely to increase the numbers, the parallel being a Petrie dish in a lab, a confined space within which any viral source can replicate with ease and infect every other organism in the dish.
The only secure method of quarantine being individual isolation cells for every person for the duration.
"The virus spread may be peaking but the fear isn't"
Your statement MAY be peaking indicates that one is not sure (If it is peaking) so how can one expect the fear to go awaya specially when the news from China MAY be censored.
"The virus spread may be peaking but the fear isn't" may be this headline is to calm the nerves but reality is otherwise and with internet and social media factual news flows fast (Though comes with fake news also).
Quite right.
Seems to be an outbreak in Wakayama Prefecture in Japan for sure.
https://www.japantimes.co.jp/news/2020/02/15/national/eight-coronavirus…
Taxi driver tested positive, businessman who traveled in his taxi did too, and said businessman rode the Bullet train the same day... also a doctor in the same district seems to have caught it from an in-patient, and passed it onto his wife.
Shouldn't we be banning all travelers from Japan at this point too?
https://www.stuff.co.nz/business/119489474/coronavirus-hundreds-of-tour…
It's a good thing that we paid down our government debt with the economic returns of mass migration, now that the government will have to provide for the tens of thousands of low-skilled permanent migrants and their families who are on the verge of joblessness.
There's nearly 500,000 here on temporary visas who presumably will leave if the jobs dry up. Will do wonders for housing and infrastructure shortages.
However Simon's planning to open the floodgates even wider if National get in and a recession would be the perfect excuse.
The migration wave over the last decade has been successful for low-value businesses in NZ mainly because supply of tourism, agriculture and education exports to China could be ramped up with the help of cheap imported labour. I doubt cheaper supply of labour alone will make up for this falling demand from China.
Lets not kid ourselves about this new virus .
Firstly , the notion that the rate of spread has slowed may be purely due to the extreme measures taken which as any rational human being are unsustainable in the long run .
We simply cannot resort to wholesale isolation and closing all forms of human movement and activity for any prolonged period .
Secondly , we still have not real handle on where the virus actually started ........a hang of a lot of speculation , but little else.
We have no cure
We really dont know the true incubation period , nor do we know exactly why some fold die and others recover .
Like HIV when it first came to light , everyone thought is would be sorted quickly , it has not been sorted at all.
We still dont know how it is spread , for example is it airborne , importantly how long it can survive outside its host , whether its spread through coughing , the eyes , or even sharing a glass tea cup ( even a cleaned one )
)
The Diamond Princess cruise ship gives an indication as to how easily it can spread.
A week ago it was only 10 infected on board now 355
You would imagine that most travelers on a cruise ship would have a reasonable level of hygiene but never the less it has ripped through a large number of them
is this not the equal of economic sabotage so should his status as a NZ resident or citizen not be reviewed,
good luck collecting the money, he will declare bankrupt
and good luck with the court case in china against a Chinese citizen that has about a 1% chance of success
https://www.stuff.co.nz/business/farming/119565995/kiwifruit-smuggler-o…
Leaving aside entirely untrustworthy chinese numbers, outside of china the infections are doubling every week. At 800 now, at this rate of spread a million inside 3 months. Most of the world within 6. Exponential curves are frightening things. Much of 3rd world doesn't have ability to notice or test for specific corona virus strains. It will be far more prevalent than we are aware of as yet.
Further on above mention of the $15,000,000 fine imposed on a Chinese man who with his wife stole Zespri's 'jewel in the crown' top gold kiwifruit varieties and smuggled them out of the country and into China to benefit China's kiwifruit industry at Zespri's expense. I wouldn't let Chinese near any of our cutting edge agricultural products.
In fact I believe we should double our border security for everybody and everything and make our country the most difficult country to enter and depart from; actually, I think NZ would benefit in the long run even though this may seem counter-intuitive right now. I think it would make NZ more special and even appeal more to tourists.
Down that path lies poverty. We are $10billion a year short on exports as it is. We have to sell off chunks of NZ to make up the difference - and remittance of the profits those foreign owned assets earn makes this a downward spiral, and it will get worse in a couple of years as oil and gas industry winds up (thanks Jacinda). You want to shutter tourism as well? We desperately need ways of earning more foreign income, not less
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