Here's our summary of key economic events over our long holiday weekend that affect New Zealand, with news May is a month best forgotten, but it is not clear June will really be any better.
There were a range of May PMI reports out overnight and they almost all reported contractions, but at a lesser pace than for April. That was true for the US and Canada, and for the EU. But Japan's contraction got worse in May (but it wasn't as deep as the others in April). The odd one out is China, where they reported an unexpected return to an expansion, and that is despite weak export orders. Things are not good in India, where they got virtually no bounce in May and remain deep in recession.
In the US, the April data for household income and expenditure reports some outsized gains and losses. The burst of stimulus in the month has had an outsized impact on incomes, and that probably indicates how precarious the average household income level was prior to the widespread lockdowns.
The CARES relief cheques and higher unemployment payments have helped to stem economic hardship with a one-time bounce of +13%, but those programs have not acted to stimulate discretionary spending.
Consumer spending, the American economy’s main engine, fell by a record -14% in April. It may have declined by a lesser amount in May, but it will still have declined and the echos of that pullback are being felt worldwide. And there are signs on deflation appearing.
One loud echo is coming from America's manufacturing heartland in the Chicago area. Their PMI fell harder than expected in May, lower than in April, lower than in the GFC, and its lowest in nearly 40 years.
Also lower than expected is consumer sentiment. That stimulus money is being 'saved' not spent, as the outlook darkens further and consumers hunker down with sharply lowered expectations. Consumers are sensing what the Atlanta Fed is reporting - a humongous collapse in economic activity in Q2-2020, down by more than -50%. That is, missing activity at the annual rate of -US$11 tln. For each of April and May alone, it could be as high as -US$1 tln - that's equivalent to wiping out the economies of Australia and New Zealand in eight weeks.
The world will notice, even if equity markets are still turning a blind eye to events of this magnitude.
Leading up to what will also surely be a disastrous Q2, the Canadian economy contracted at at -8.2% annual rate in Q1-2020. They currently have "a neighbour from hell" and their dependence is hurting them hard at present.
Job losses are mounting everywhere.
All those predictions of a sharp V rebound seem like just hopeful guesses now.
One government is focusing on the future; South Korea. They have announced a NZ$100 bln 'New Deal' plan to reshape their economy. The plan aims to create and extra +550,000 jobs by 2022 focusing on 100,000 specialists in artificial intelligence and software programming. 5G investment is at the center of this plan. But it isn't the Green New Deal that many assumed it would be.
5G is also at the heart of China's focus on the future.
China is moving quickly to replace, even displace US tech in their supply chain. It's a disengagement forced on them and will have very long term consequences. In fact, US tech might is based on Taiwanese companies for execution and China has its eyes more clearly focused on Taiwan.
A key metric on how China's economy is returning can be found in a survey of American companies operating there. Half of respondents’ manufacturing facilities in China are operating at full capacity in May, a 14 percentage points increase on April. It is almost a certainty that local companies and companies owned by other nations will be doing better.
Evidence that the screws are on Hong Kong democracy is shown by a police ban on any recognition of the Tiananmen Square anniversary.
In Australia, their housing market stabilised in May. Housing values edge lower, while transaction activity partially recovered from the sharp drop in April. While the May value retreat was minor, it seems clear they are moving into a cycle where declines will become more normal.
The latest compilation of Covid-19 data is here. The global tally is now 6,222,700 which is rising at a faster pace than recently.
Now, just under 29% of all cases globally are in the US, which is up +77,000 since this time on Saturday to 1,797,500. This is a similar rate of increase. There are more new cases per day in the US than are being reported by any other country, including Brazil and Russia. US deaths are now exceed 105,000. The significant acceleration of outbreaks in both Texas and California will be worrying officials there. Global deaths now exceed 373,000.
In Australia, there have been 7204 cases (+31 since Saturday), 103 deaths (unchanged) and a recovery rate of just under 92% (unchanged). 20 people are in hospital there (-3) with 3 in ICU (-2). There are now 482 active cases in Australia (-6).
There were zero cases again yesterday in New Zealand, so now only one person is left with it in the whole country. We are now at ten days with zero new cases.
The UST 10yr yield is up +1 bp today at 0.66%. Their 2-10 curve is marginally steeper at +51 bps. Their 1-5 curve is unchanged at +14 bps, and their 3m-10yr curve is steeper too +55 bps. The Aussie Govt 10yr yield is up +2 bps at 0.91%. The China Govt 10yr is little-changed at 2.72%. And the NZ Govt 10 yr yield is also unchanged at 0.83%.
The gold price is higher today, up +US$5 at US$1,736/oz.
Oil prices are unchanged today. The US crude price is now just over US$35/bbl. The Brent price is just over US$38/bbl and back with a premium.
The Kiwi dollar has risen solidly over the weekend. We are now just on 62.9 USc which is a full +1c gain and an eleven week high. On the cross rates we have slipped back to 92.6 AUc. Against the euro we are also firmer too at 56.5 euro cents. That means our TWI-5 is up to just on 68.
Bitcoin is slightly firmer today, up +1.7% to US$9,573. 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 ».