Here's our summary of key economic events overnight that affect New Zealand, with more and more news detailing the intensity of the global slowdown.
American claims for unemployment insurance filed last week came in at 1,480,000 and far higher than was expected (1.3 mln). More than 20 mln people are on these State programs which typically last about six months (it varies by State) - then you are on your own.
US durable goods orders bounced back better than expected in May from April after two terrible declines - but April was an awful benchmark. But they are still -21% lower in May 2020 than May 2019, a decline of -US$51 bln for the month. That will hurt. New orders for non-defence capital goods are down only -9% year on year in May. Otherwise this would be seen as a disaster too, but in the context of the times it is better than expected.
The US merchandise trade deficit in May came in at -$72.4 bln, much worse than for March and April and almost as bad as for May 2019. Not helping was that exports fell -36% year-on-year while imports fell 'only' -26%.
Coming up, the US Fed is about to release its updated assessment of stress testing their systemically important banks.
In Mexico, their central bank chopped -50 bps from their policy rate, taking it down to 5% even. That comes after the usual terrible retail and trade data for April and May were released.
India is moving to impose restrictions on imports from China.
In China, even though there are some very mixed signals and export order levels are weak, their economy does seem to be staging a minor recovery. Importantly for them however is that it won't be trade-based any longer, it will be based on internal demand.
And the Chinese are no longer out buying up the world. Chinese outbound M&A activity in the first five months of 2020 “collapsed” compared to previous years, to barely 30 deals per month. New outbound deals by Chinese firms for January – May 2020 have fallen -71% in volume and -88% in value compared to the same period in 2019.
In Germany, giant payments platform Wirecard has collapsed after a monumental fraud. It is the first ever DAX30 company to file for insolvency and winding up. That will have echos in this part of the world with challenger banks in Australia tied into their currency exchange.
Australian job vacancies recorded their largest ever fall in the last three months and workers were laid off in record numbers.
Compounding the income loss from job losses, average Australian household wealth fell -$9,982 or -2.3% to AU$428,585 in the three months to March 31 due to falling superannuation balances and share market losses. It was the largest wealth decrease since September 2011.
And a note about an Auckland-based software company that is proving an international winner during the pandemic - Pushpay. It provides software for churches so they can collect their donations from parishioners, and American evangelical churches has adopted the platform in droves. 10,800 churches in the US now use the system and find it helps keep them in touch with members as well. It has turned into a huge business.
The latest compilation of COVID-19 data is here. The global tally is now 9,494,600 which is up +199,000 since yesterday and a rising pace. Global deaths reported now exceed 484,000. We may be focused on the growing disaster in the US, but the infection is out of control in Russia, India, South America and the Middle East too. Europe seems to be getting on top of it though.
A quarter of all reported cases globally are in the US, which is up a very sharp +49,000 since this time yesterday to 2,389,500. US deaths now exceed 122,000. The number of active cases in the US is now up to 1,620,100, up +40,000 in a day. That is near a daily record again - only one day in late April was higher.
In Australia, there have been 7558 cases, +37 more since yesterday. Their death count is up another +1 to 104 and their recovery rate has slipped to just under 92%. There are now 512 active cases in Australia (+18).
The UST 10yr yield is unchanged at 0.68%. Their 2-10 curve is a touch flatter at just under +49 bps. Their 1-5 curve is marginally firmer at +15 bps, while their 3m-10yr curve is also also flatter at +56 bps. The Aussie Govt 10yr yield is also soft by -1 bp at 0.89%. The China Govt 10yr is firmer by +1 bp at 2.92%. But the NZ Govt 10 yr yield is unchanged at 0.96%.
The gold price is marginally lower, down -US$4 to US$1,762/oz.
Oil prices have firmed marginally. It is now just under US$39/bbl in the US and the Brent price is just over US$41/bbl.
The Kiwi dollar is firmer in a minor move up, now at 64.3 USc. On the cross rates we are up slightly too, now at 93.5 AUc and against the euro we have gained to 55.3 euro cents. That means our TWI-5 has firmed slightly to 69.2.
The bitcoin price has stayed down, unchanged today at US$9,277. 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 currency charts are here.
74 Comments
Major floods there:
https://asiatimes.com/2020/06/widespread-flooding-aggravates-chinas-woe…
https://www.asiatimesfinancial.com/flood-alert-at-three-gorges-dam
Historically, China's internal issues have kept them too busy to take over the world. Plagues (COVID), famines (locusts), revolts (Xinjiang), earthquakes and floods (Yangste).
" other words, the unemployment rate based on those on those receiving state or federal UI would be 19.6%.
This is far higher than the nonsense the Bureau of Labor Statistics reported for May (13.3% without error). The BLS has simply fallen off the deep end with its unemployment reporting."
Laying off managers always delivers higher returns than laying off workers. But any business must generate cash flows, AND limit it's cost structures. Two prongs in the current situation that may be unsustainable. Innovation, and adaptability. Changing the shape of how one does business to adapt to a changing world is not always easy or simple.
Likely to be a lot more US layoffs if they can't ever get on top of the coronavirus. BBC Coronavirus: US cases ‘may have topped 20 million’. "At least 20 million people in the US may already have been infected with Covid-19, according to the latest estimate by health officials.
The Centers for Disease Control (CDC) says the true number of cases is likely to be 10 times higher than the reported figure. It comes as the state of Texas halted its reopening as infections and hospitalisations surged. The US has recorded 2.4m confirmed infections and 122,370 deaths.
Some southern and western states have been reporting record numbers of cases in recent days."
https://www.bbc.com/news/world-us-canada-53186075
'And the Chinese are no longer out buying up the world. Chinese outbound M&A activity in the first five months of 2020 “collapsed” compared to previous years, to barely 30 deals per month. New outbound deals by Chinese firms for January – May 2020 have fallen -71% in volume and -88% in value compared to the same period'
This could be also because World has realized and not alowing China to buy rather than Chinesse not buying.
The USA and much of the world has an Diabetes epidemic that is being swept under the carpet.
Hers a new doco out of the States. 'Blood sugar rising'
https://www.youtube.com/watch?v=2pBVbAHkC7M&feature=youtu.be
Yet the fix is very simple. Sensible diet and regular exercise can completely eliminate diabetes. Medical science has multiple research results on this. When will people take charge of their own lives and help themselves? In NZ we are spending boat loads of health cash on people who will not help themselves. Extremely frustrating.
Yeah - but people aren't doing it. When people aren't doing what they should, you need the government to step in and protect them from themselves. Akin to tobacco and alcohol harm - we have clear rules and taxes to discourage their use, or limit their use to appropriate environments.
The time for refined sugar and fat taxes was a decade ago. They are an absolute no-brainer now, with the tax take being recycled into making healthy food cheaper and subsidising/encouraging healthy exercise habits.
It's literally one of the main jobs of government to tax undesireables and subsidise desireables. And that lack of action from continuous caretaker governments means we have massive healthcare costs and huge social issues as a result. All those who whinge about "personal responsibility" I hope dutifully pay their tax bills to ensure they are paying the healthcare costs that such a dumb narrative brings about. YES personal responsibility works for YOU, but it doesn't scale up to a population of any size. We have direct evidence of this, so to continue that narrative is like shouting for the wind to stop.
Yes i see your point, but there is no mainstream health remedy that can cure you of diabetes UNLESS you get off your arse and help yourself! Diabetic individuals who do not take measures to help themselves, generally struggle to have even simple sores heal. Their circulation becomes compromised and they become progressively sicker. Our health system is fundamentally crippled because our health professionals are seldom permitted to tell them the blunt truth, when they should. So we spend more and more on them, trying to keep them alive when perhaps there is a better way?
That they need to help themselves! DHB staff are afraid of patient complaints, and being too direct with a patient is a very good way to generate complaints. DHBs are not good at and don't have a good record for supporting staff who are bluntly honest with their patients. I know, i have seen it in action. Being blunt is often interpreted as being rude and disrespectful. This is often a no win situation for DHB staff.
Why do Maori get disproportionately represented in the diabetes stats? Because we cannot tell them to fix themselves! Instead it is used as a political platform to get more money, but because they are not told what they need to hear, bluntly and often misinterpreted as rudely, that they need to fix themselves!
My interaction with the health system for my diabetes has been with my GP, and the practice nurses - they definitely give advice about lifestyle, and 3 monthly hba1c tests keep track of compliance with the advice. I don't know where you are getting your information from.
Oldbloke,try just eating meat, fat meat, Gary Taubes has a great book on why we get fat. I eat mostly meat with a few greens and some dairy fats- cheese and cream.
I suspect a Keto diet is the best way to control diabetes.
https://www.amazon.com/Why-We-Get-Fat-About/dp/0307474259/ref=sr_1_2?cr…
Not sure about that actually Aj. The meat industry dumped tonnes on tonnes of lamb & mutton breast and flaps into Melanesian, Polynesian and Micronesian markets in the 70/80’s and on. OK it was cheap & protein of sorts, but its nature was not a good diet for the metabolism of the indigenous consumers, far from it
As people say at end of the day it is up to personal effort to 1) excessive more 2) eat less to maintain a reasonable weight and physical ability. The focus must move away from what is beautiful etc to what is good, as you can be reasonably healthy without being to be as thin as Maria Sharapova. Annual funded and standard tests of your general health indicators from very young must be mandatory in our health system. Doctors can provide diet and exercise plans for children that may require help them getting on top of their physical issues and to prevent these becoming chronic, life-time matters.
That type of thinking is futile - if only people would show some willpower and personal responsibility the problem would be solved!
In reality the environment is to blame - lack of exercise and easy access to cheap unhealthy food is built in, the default position. Add to that humans have evolved over millions of years to conserve energy as much as possible and seek out fatty and sweet foods. Thus the situation we are in.
That's easier said than done, usually highly caloric and low quality foods are cheap compared to fresh produce, this makes no sense if we want to keep a healthy population with balanced diets. Furthermore, sugar is commonly used as a preservative which makes things even worse. There should be regulations where there are lower or no taxes on quality foods while those with negative health effects should have taxes such as tobacco or alcohol.
Merits of lockdown compared with science.
https://youtu.be/kZqGSnVt8c8
Hoover Insto
Big day today
https://www.rnz.co.nz/news/national/419872/covid-19-queenstown-business…
Minister of Tourism, can show his thinking and approach for tourism sector.
It's a tuff one. Qantas expect their international travel to be 50% back in a year, 100% back in three years.
Even locals are scratching heads over bungee bail out, taking the low number, $5m yr, for 20 jobs, that's $250k per job kept.
Thousands of people have sought welfare after the district's main earner - tourism - ground to a halt.
"There's been a surprising absence I guess in terms of feet on the ground, and so in terms of building trust and relationships with the industry I think it's really important that he's here and that he fronts and that he talks to people and understands what's going on."
Bungee guys have a lot of infrastructure to maintain. I think that's pretty sensible to enable the industry to bounce back (hur hur), but should be done as a loan against the equity of the business (at interest rates available to govt). Same for a lot of other tourist businesses like Air NZ.
Disagree...get the current employees to do the maintenance (what exactly does a platform and bungey ropes involve to maintain) and the wealthy owners to inject capital into the business. Just like you or me when times get hard. Comparing Aj Hacket to Air NZ is a long stretch (haha)
Travel and Tourism Industry is being thrown under the bus by the government as have no concrete plan for future.
Like health minister even tourism minister is just a post. Tourism is a big industry which is worst affected by travel restriction and is worst as will be hit for longer than any other business and need support just like other industries that may have direct impact for no fault of their.
Many minister only knows how to extract money for their constituency from government fund and not looking for overall development and support.
Bit of a silly comment Stuart. Somehow you are implying this downturn must be the fault of the governments making. The government did not create the GLOBAL pandemic. Nor can they forever afford to handout money. The reality is that these businesses who were making a lot of money during the long good times did nothing to prepare for a rainy day.
They will need to re-configure their businesses and cost points for the local market for some time to come I'm afraid. Otherwise they probably rightly deserve to go out of business.
"he fears opening of the bubble may be months away"
Try years.
Every time I see a piece about or from tourism in Queenstown I wonder if someone is deliberately taking the piss or trying to wind me up (works every time). These people have been riding the crest of a very lucrative wave and these articles seem to infer the rest of us are responsible for maintaining their lifestyles via taxes from now on. I do not get it. I hope the minister does tell it like it actually is.
And beyond Queenstown.
Sir John Key says he ‘runs out of adjectives’ when trying to describe the size of the economic crisis caused by Covid-19.
https://www.odt.co.nz/news/national/ive-run-out-adjectives-economic-cri…
"To me in my mind, the big challenge ultimately will be how quickly can we get to a position where we can return to some sort of normality.
Will that take a vaccine and will we deliver one?
And ultimately when will confidence return to the consumer?"
Zachary,
I know that you are a fan of the British Empire. I have been doing a course from Exeter University on the Controversies of Empire and I think you would find it both interesting an illuminating. It's run through Futurelearn and is free. I commend it to you.
And the Chinese are no longer out buying up the world. Chinese outbound M&A activity in the first five months of 2020 “collapsed” compared to previous years, to barely 30 deals per month. New outbound deals by Chinese firms for January – May 2020 have fallen -71% in volume and -88% in value compared to the same period in 2019.
@Audaxes............ The Chinese are being sensible !
I would not do any M&A deals right now at all .
Rather wait until you can buy good stressed assets for a song .
There is no urgency at all .............wait and you could get it cheaper , and if you miss out there is always another deal to be done later .
Japan scraps deployment of Japan's Aegis Ashore missile defense system
In other words $multi billion outdated US tech offers no defence against Russian and Chinese hypersonic missiles?
No, their hypersonic weapons would be targeting assets such as ships and aircraft. This is public resistance, which with it's history is curious for Japan. Most military systems exist within a layered structure So the Aegis system using advanced Patriot 3 missiles is part of a last line of defence against attack. Defence against hypersonic missiles will be much harder, but you can guarantee that defence agencies are put a lot of effort into working on it. As it happens such missiles are so new that they may not even be reliable yet.
Agreed - my point. I would not be surprised if there were kinetic weapons included somewhere in the mix. A ballistic missile hitting sub-orbital altitudes doesn't necessarily need a carry an explosive weapon, when a precision guided kinetic weapon can do all the damage required. The terminal velocity of these, depending on the material will approach hypersonic velocities along with their size, making them virtually impossible to intercept.
Interesting comment from the US this morning:
We're getting close!!! My 40-something housekeeper from the Dominican Republic just asked me if I had heard about "something called Robinhood?". Her brother-in-law told her she had to get "into it'. She had no idea what it was. I think she thought it was some kind of a bank.
To be fair I was thinking the same about real estate back in 2015 when my barber, a 20ish year old girl, was talking about how amazing John Key was because her two rental properties have gone up so much in value and I should get in too...
It took 2 more years from then to get to the peak.
Another economist who doesnt understand debt ...
https://www.stuff.co.nz/environment/climate-news/121496645/curbing-cons…
"I'm also a member of the sustainability steering committee at Westpac. That's the executive team plus me. So everybody else on it has real power."
LOL
Idiots
Growth (ie INTEREST) & sustainability cant coexist
Id like to see them run a bank without interest
Oh, running finance without interest is easy-peasy. One just enslaves the debtor's extended family and children, as in the Good Ol' Daze. For a few generations: hence the core reason for the Biblical Jubilee - to Set 'em Free (ish). Or if one encounters a Recalcitrant, enslave Them too. Worked for millenia until we got Woke, or sumpfink.....
The MoH 'deep dives' into three sample PHU performance and procedures make chilling reading. It's clear that: :
- Major disconnects exist between individual PHU's and between them and the National service
- No agreed universal data definitions exist in order to capture, let alone share, information electronically
- Heavy reliance is made on individual knowledge about cases and potential clusters (where's AI when ya needs it?)
- Capture is primarily paper which is then transcribed (with significant error potential)
- There's heavy reliance on Excel Hell (spreadsheets) as primary or secondary data management and reporting - a fraught and error-riddled approach at the best of times
- There's little, patchy or no capture of significant data such as time/date stamps recording time of notification, of subsequent judgements, or of eventual actions. This makes it impossible to judge timelines or performance criteria.
In short: not Gold Standard.....send munny....
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