Here's our summary of key economic events overnight that affect New Zealand, with news markets are not impressed with some positive economic data, rather seeing rising problems ahead.
US retail sales bounced back in June by a bit more than expected and boosted by car buying. They were up +2.3% compared to the same month a year ago, making back a little of the -7.2% equivalent drop in May. For the first six months of 2020, they are still -3.4% lower on a year-on-year basis and that is the loss of -US$102 bln of retail impulse. But that may be the best it gets with lockdowns and restrictions on the rise in the pandemic fight.
Last week's American new jobless claims were 1.5 mln and at the expected level. There are now 17.4 mln people on this support or 11.9% of the workforce. In the next few weeks this will start tailing off as benefits for early claimants expire.
And the average interest rate on its dominant 30-year fixed mortgage fell to its lowest level in almost 50 years of record keeping at now under 3%. It is the third consecutive week and the seventh time this year that rates on America’s most popular home loan have hit a fresh low.
China's house prices rose +4.9% in June, the same rate as for May, with much of the impetus coming from major second tier cities. It is a trend Beijing's loose money policies fed, but they didn't really want that 'investment' to leak into high-rise property. They are scrambling to undo what could become a dangerous bubble. It is a bubble that has recently been estimated at a massive US$52 tln.
Retail sales fell -1.8% year-on-year in June which was a result worse than the small gain expected. And it is just miles lower than the +9.8% gain China recorded for retail sales growth in June 2019.
Electricity production, an oft-watched metric of China's real economic activity, was up +6.5% in June from the same month a year ago and that is a fast rising trend and the fastest growth in more than a year.
But China's own reporting of industrial production shows it rising +4.8% year on year in June and marginally better than analysts were expecting.
All this rush of data is in support their Q2 GDP result, which claims growth of 3.2% and better than the +2.5% expected. It is certainly a solid recovery from the Q1 decline of -6.8%. It's not quite the V-recovery they are claiming and that will have to wait for Q3. However, it is perhaps going to be just a limited recovery.
Foreign direct investment in China is still retrenching, despite their claims. It fell another -1.3% in June compounding the -3.8% fall in May.
In Australia, there are now almost 1 mln people unemployed and worse by 274,400 in a year. And that is despite its biggest monthly bounce back in jobs since records were kept. However, it wasn't enough to stop the unemployment rate rising to 7.4%. The rise in employment was dominated by +249,000 part-time jobs, while full-time work fell by -38,000. But the true picture is much worse, with joblessness that would be over 13% without Government subsidy programs. And that is why the official figure is set to keep getting worse, even if the reopening of the economy adds back jobs, because those support arrangements are due to be wound back - not to mention the new Victorian lockdowns and the risks of the same in NSW.
Wall Street is currently down -0.6% in early afternoon trade and shrinking the weekly gain to under +1%. Yesterday Shanghai fell very sharply (-4.5%), Hong Kong was also sharply lower (-2.0%) and Tokyo fell as well (-0.8%). Overnight European markets slipped about -0.5%. And yesterday the ASX200 ended down -0.7%%. The NZX50 ended down -0.9%.
The latest compilation of COVID-19 data is here. The global tally is 13,637,900 and that is up +241,000 since this time yesterday. Global deaths reported now exceed 586,000 (+6,000).
A quarter of all reported cases globally are in the US, which is up +71,500 overnight to 3,650,900. US deaths now exceed 140,000. The number of active infections in the US is now up +27,500 in a day to 1,854,200.
In Australia, there have now been 10,810 cases reported, another +315 since this time yesterday, and still concentrated in Victoria and NSW. Their death count is up to 113 (+2) and 30 people are now in ICU (+2). Their recovery rate has slipped back further to 74%. There are now 2661 active cases in Australia (up +205 in a day).
The UST 10yr yield is -2 bps softer at 0.61%. Their 2-10 curve is a little steeper at +47 bps. Their 1-5 curve is also a tad steeper at +13 bps, and their 3m-10yr curve at +50 bps. The Aussie Govt 10yr yield is down -1 bp to 0.88%. The China Govt 10yr is softer too, down -3 bps at 3.04%. And the NZ Govt 10 yr yield is down -2 bps at 0.93%.
The gold price is -US$17 lower today at US$1,795/oz.
Oil prices are a little softer today. They are now just under US$41/bbl in the US and the international price is just under US$43.50/bbl.
And the Kiwi dollar is softer by nearly -½c at just on 65.3 USc. We are little-changed at 93.7 AUc. Against the euro we have slipped slightly to 57.4 euro cents. That means our TWI-5 is down to 69.8 and where it was two weeks ago.
The bitcoin price is softer by -0.9% at US$9,133 and also near a two week low. 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 ».
Daily exchange rates
Select chart tabs
89 Comments
To invest wisely we decifer some complex input, fact v fiction, history, risk v reward and run them through commonsense to find out where it is going.
With China we have fairly clear indicators that they do not tell the truth. The big question is how many pinches of salt do we add to Chinas reporting of figures. A pinch of salt, or two this time?
Almost all Chinese economic data releases are in two parts. First, the raw data, and secondly the 'interpretation'. It is the 'interpretations' that can get a bit hilarious as they twist to spin it to fit the CCP/Beijing line. But the data often includes ugly bits so it seems less likely to have been massaged.
But they do have (or at least, did have) a very real problem at the provincial level with data quality, especially when local governors were incentivised to meet Beijing growth targets. Those incentives have now ended, but the habits of a lifetime may endure.
Chinese govt don't answer to voters so no incentive for them to be honest, ever. Everything they release should be viewed purely as a picture of what they want people to think, with any correspondence to reality being only what is convenient or what is necessary to not totally destroy their audiences belief. They totally blew it with their laughable wuflu data, and few are going to take their word on anything going forward.
the most important thing to keep the peace is to keep your residents busy ... doesnt matter if its for nobody
"China’s ruling party’s primary objective is to prevent urban discontent, which means that providing jobs is the no. 1 aim. If that means building capacity that nobody wants, and using debt to do so, then so be it.
The crackdown in HK may well be related to the mainland, at least in so far as seeing HK citizens ‘getting away with’ protests might set the wrong precedent for the discontented in mainland cities. "
Re COVID risk: Wonder if there is any analysis of who has been leaving and rentering short term NZ? Eg business travel etc, and should they be risking our elimination status?.
Also re entrants: how many are full citizens, how many are PRs, how many are 1 or 2 year Resident holders? Can the NZ border control and the isolation facilities actually cope with the numbers?
If NZ can barely cope with just NZ returnees - how could we cope with a more open border? Students? Tourists? Trantasman bubble etc
Well, there are degrees of ‘opening’ I suppose.
We are currently on Open1 (NZers returning) but even within that setting there seems to be some latitude for some who have been travelling in & out.
Open2 might be tran-Tasman. Open3 might be International students. Etc
Its a very interesting one for NZ (I'm in Australia). You're damned if you do open up the borders, and damned if you don't. I can see a swing in sentiment to relaxing the borders after Xmas, when NZ realises it can't save itself by itself. There seems to be the misconception that everyone is going on holiday this summer, which will save the tourism industry and NZ economy. Two points about that:
- Its a period where most NZers are on holiday already. There will be no surge compared to previous years.
- An NZ holiday is at the beach in a bach, booze and food from the supermarket. Although many will still do this sort of trip, I can see the extravagant aspects of these holidays not occurring. Peak season for hotels and restaurants in tourist destinations will be minimal. I think a lot of people will look at $120 as a weeks food if they lose their job as opposed to an opportunity to ride the Shotover Jet.
The problem I see rapidly gain momentum is complacency. For the vast majority of NZ, we are back to normal while the rest of the world burns. We are largely buffered from the health and economic effects for the short term and living in our own snow globe of sorts. The real heat will come after the wage support and bank deferrals end. Combined with a breach our borders, it'll be catastrophic
Exactly,
So lets go back to the question, what is a surplus property?, in my view, one you shouldn't have bought in the first place. Good property, something with positive attributes, is something they aren't making any more, something you buy and hold, preferably without debt. We are not talking about vanilla suburbia. We are talking shelter, sun, view, access, good geo, one offs.
Week 17 of US labour market collapse
https://wolfstreet.com/2020/07/16/32-million-people-on-state-federal-un…
I found this a seriously interesting clip, starts on problems in US at about 2hr 11min in. Not something you hear talked about often.
(From that link)
"We should expect that every single person who has risen to the top of any organisation to be corrupt"
Cynical, but probably quite true, because - unless you are corrupt you won't be allowed to rise to the top by those already there. Those who try to change that System will be quietly 'promoted' out of harm's way before rising to anything like the level that threatens the status quo.
And here's the sad reality that you are confronted with - "If you don't do it, someone else will and make themselves rich along the way, so it may as well be you". The idiots amongst us don't realise that until it's way too late.....
Can be a challenge between reaching your career and financial goals while at the same time reaming true to your values and principles.
Many people who are perceived as being successful aren’t that happy as they’ve destroyed their character, morals and relationships in obtaining their money and power.
Thanks for this years' inspirational comment. Saving this for sharing around.
Moral of the story is be successful but not at the expense of your values. Question would be do we know what our own personal values really are or do we borrow them off whatever are the prevailing social norms at the time. That's pretty hollow also.
I would back it up a bit and ask what organisations are no longer fit for purpose. Say for instance DHB's. Not fit for purpose but no politician wants to touch them because it would be a world of woe for them, some powerful people in those DHB's. Then what about education, big supporters of Labour are teachers unions, yet every year we watch schools fail pupils that go on to cause problems in society. Regional councils, local councils, immigration, MPI, et al, all fit into a failed model where vested interests look after their own, yet we don't call it corruption, for some reason it's an accepted model.
DoC is a fine example. 1080 is the answer and any budding scientists in Uni that has an alternative view is weeded out. If any manage to get through and report figures which to not conform DoC's narrative they are asked to have a rethink so they will be able to gain funding for their next project.
When they tender studies the scientists must show their methods of data gathering, if in DoC's view it has an element that will expose unwanted facts, the tender is not accepted.
Mike Meads NZ's top insect scientist and one of the best in the world did a study on the death rate of insects after a 1080 drop. His figures came back at a staggering 50% decline. Naturally if those figures were correct 1080 would be banned from that second onwards. DoC asked him to go back and look at his figures again. He did that and they did not change, again he was asked to have a 'rethink'. He refused and the 'peer review' came back as a fail.
DoC then granted a bird scientist to conduct the study again and the figures showed no major loss of insect life.
Mike Meads career was destroyed by DoC due to him sticking to his morals. A true Kiwi hero that stuck to his guns, when he knew that nonconformity would cost him his career.
RIP Mike, you did the right thing.
https://youtu.be/ixvo1DemwE4
https://coranz.org.nz/insects-zapped-by-1080-blitz/
DHBs will not get fixed even under a consolidated model. The politics are just too toxic, and there are some fairly seriously psychopathic characters who fight their way to the top. Besides they seem to think they are a breed above the normal human being, sort of like Hitler's Aryan race. With a history of aircraft engineering on military aircraft including strike aircraft and an IT degree gained in 2 1/2 years, I actually had a nurse tell me that there was no way could understand the complexity of Health. When I pointed out my history, and the fact that very high levels of complexity were significant components of both areas, she got offended. Unfortunately she was a senior manager in the DHB.
As to schools, is it possibly that the politicians have fiddled with school standards too much? Plus the fact that successive socio-economic failures by successive governments for decades resulting in the only job opportunities for the average minimum qualified school leaver is a part time, minimum wage position that equates more to being a slave than anything, being barely less than inspiring at all. Actually Collins was a big promoter of that policy when National brought it in. She called it life style flexibility at the time.
My experience - totally true for the highest echelons. Human nature really. People seeking power and privilege seek only to surround themselves with sycophants. Problem is they will always tell you what you want to hear, rather than what you need to hear, and the majority will usually be less than competent in their jobs. Very common in Government service, and especially Health. Managers don't like or want to have to deal with mavericks who don't sing the company song, so at the end of the day it is career before company, and it is always someone else's fault. Trump is a good example of how not to manage.
Declaration; I am constitutionally incapable of sucking up to those who think they should be sucked up to. Considered professionally to be a fairly serious character flaw really, but I'd rather put integrity first.
I would rather be the idiot in this story. I've lived in poverty through my earlier years, with no wish to return to it. Why betray everything you know to be good though, for what I take to mean some form of excessive wealth. It is often those who already have a wonderful home, a well paying and secure job that affords plenty of lifes comforts, well above what the majority enjoy, and yet they choose corruption as a means of getting even more for themselves.
I try to have a deathbed perspective. What will I regret at the end of my life. Not going down that path won't be on my list. We often don't really learn this till far too late, but it's true - we find more genuine happiness in helping others, than in indulging and accumulating more for ourselves. For the cynical this is just another cliché. But remember a moment in your life, where you have truly helped someone selflessly, or received this yourself. Being the hand helping others up, purposely standing aside so they don't have to go through you, that is worth working towards. Look around at the people truly motivated by greed with no real purpose besides this. They can barely stand their own company.
Take the virus as an example, lots of experts that can point to all sorts of things. Trouble is the specialists are blinded by their own expertise. I'd say the experts are often mediocre, their real expertise is assuring their position in the heirarchy. I'd say for a lot of the problem, virus included, that the answer isn't a specialist but a generalist.
That's why the death numbers are interesting. They cut to the chase.
https://www.cdc.gov/nchs/nvss/vsrr/covid_weekly/index.htm
https://www.hsj.co.uk/commissioning/thousands-of-extra-deaths-outside-h…
I'm thinking we dodged a bullet with Covid, it could have been really nasty but looks to be more like season flu. I not denying that there are not tragedies, and that it hasn't killed. Just got caught in the politicised, corrupt healthcare management.
Just not killing enough people in the third world to convince me otherwise. India should have bodies piled up on streets, this is no Ebola.
https://www.zerohedge.com/geopolitical/nhs-consultant-says-staff-are-be…
https://www.zerohedge.com/political/why-sweden-succeeded-flattening-cur…
This comment; "The few Covid cases that we have had get repeatedly tested, and every single test counted as a new case." is a serious error/failure of data collection that someone should lose their job over, if it is true.
The empty hospitals? I am less concerned as this would be the consequence of preparing for the spread and limiting the opportunities.
That is just willful blindness and so wrong. Sweden's death rate per million is 554, Germany 109, Norway 47, Denmark 105, Finland 59, France 481, Holland 358. Among its neighbours it has the worst death rate. Even higher than the US at 426. True Spain ( 608 ) and Italy ( 579 ) are higher but that was only because they were first and other countries learned lessons from them. And for those two, their curve is now very much lower now they are on to it. Just Sweden refused to learn those lessons.
If you can't learn and respond to evidence, you (Sweden) deserves its mistakes. To deny the evidence is just sociopathic in a Trumpish way.
I just went on line and checked, it looks like the virus has gone through SWeden and now death and infection rates are very low.
https://www.worldometers.info/coronavirus/country/sweden/
Interested in your thoughts
Andrew
Take the virus as an example, lots of experts that can point to all sorts of things. Trouble is the specialists are blinded by their own expertise. I'd say the experts are often mediocre, their real expertise is assuring their position in the heirarchy. I'd say for a lot of the problem, virus included, that the answer isn't a specialist but a generalist.
Yes, this is particularly true in large and burueaucratic organizations. Some of it's it coming to a head though. Had a meeting y'day and discovered that the world's oldest and largest market research company is ready to annouce massive layoffs and restructuring. It will likely close offices in some countries. The company has become more important than the clients themselves. However, it's been obvious for a long time that they're increasingly irrelevant, ponderous, and resistant to change.
A General Sense of Treasury’s General Account
Accounting-wise, every dollar that ended up in the General Account was a dollar that had been taken from some bank. Therefore, draining reserves.
Whatever dollars are added or subtracted from the General Account this changes the level of bank reserves for the banking system (it all takes place as a remainder on the Fed’s liability side of its balance sheet). For each dollar in a tax receipt that comes in, for instance, like the SFP that’s a dollar that gets locked up under the government’s discretion the banking system can no longer access.
Going in the other direction, for each dollar Treasury uses from its General Account to pay for some expenditure, that’s a dollar reserve which gets added to a depository institution’s balance.
When the General Account balance goes up, all else equal, fewer reserves are available to the banking system (draining). And when it goes down, more are freed up for non-government use.With that in mind, over the last several months the federal government has been building a monumental cushion in this part of the Fed’s balance sheet. At last count, for last week, the balance was $1.624 trillion. Truly breathtaking.
Now remember our accounting; as the level was going up, that meant fewer bank reserves were left available for bank use.
With so many, more than a trillion and a half added, to a lot of people this represents potentially an inflationary mess once they are released into the economy (banks first); that will be when the full measure of the Fed’s recent balance sheet expansion (“money printing”) finally is unleashed.
One reason why is because as that cash gets used over the coming months these reserves will be added to the other trillion and a half the Fed created and left on account with the banks already; separate from the General Account. So, if that first trillion and a half wasn’t inflationary already, then the second trillion and a half sitting in the government’s hands today surely will be when it all gets mobilized!
Yeah, no. Read more
So Judith is going to outspend Jacinda to get in! And as for the cost? Who cares! It's all free money...... MMT? Bring it on!
"National's plan comes with a hefty price tag. The money to pay for the $31 billion worth of projects will come from more borrowing, future budgets and the Covid-19 recovery fund."
Maybe check both sides of the ledger.
And the returns for project spend will also have income effects.
Speaking of investments.
Yesterday we found the biomass boilers in UC are more expensive to run after coal with a carbon price. But no comment from where the wood for wood pellet biomass are to come from. (Surely more trialing & development needed).
Politically PM Jacinda is much more Jimmy Carter style, loved by bubble media but hopelessly hamstrung.
Its embarrassing to to everyone.
This morning they have tripped on a covid response element. Jimmy Carter style.
https://www.rnz.co.nz/news/political/421414/trade-me-founder-keen-for-b…
"That's probably the frustrating place we are at, is that every time the Health Minister, Dr Bloomfield, the prime minister hops up and tells people to use a technology that we consider has no chance of success and that really erodes our ability to deploy technology that can work."
Income Effects?!
From drilling through the Brynderwyns AND the Kaimai Range, as well as under the Auckland Harbour, of course!? Sure, there's a rail hole through the rock in the Kaimai from yonks ago, but given how long and how much the Johnstone's Hill Tunnel took, the Income Effect is likely to be heavily negative!
These aren't just your 'cut and cover' projects.
every time we tunnel (the company) leases in a machine and sends it out straight away once finished, , the private company does not care as its priced into the contract so no need to buy
if we had the MOW we could have brought it 5 times over and used it on mutliple projects around the country
every tunnel we have done in NZ has needed a different sized machine. The sewer line in auckland, the three lane water view tunnels, the two lane Johnstone's Hill Tunnel, the single trail CRL rail tunnels, all need different machines. So buying instead of leasing would have been a real money waster
"https://www.stuff.co.nz/national/politics/122153158/national-announces-…
".. building a four-lane expressway linking Whangārei, Auckland, Hamilton and Tauranga – transforming them into an “economic powerhouse”, ... ...abolish the Auckland regional fuel tax within 100 days of being elected, kick-off $300 million worth of "digger ready projects" in the city, such as filling potholes....The Resource Management Act, which is the main piece of legislation for managing the environment, would be repealed if the party got into power, with Collins claiming it is the “New Zealand's biggest barrier to future development...
All dinosaur thinking
Economic power house... read supersize the consumption pit
& more roads to create work so that people can travel to make believe jobs
This is impressive from Collins, but I still think her party is too much of a shambles to win the election:
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12348768
"National would scrap plans for light rail to Auckland airport and instead, build a heavy-rail line from Puhinui to the airport in 2026, which would later be extended to Onehunga."
She should try reading the business case before scrapping projects. Heavy rail solutions do not add any transport capacity in Auckland. Given limits on the southern line and CRL tunnels, every train you send to the airport at Puhinui (or Onehunga) is a train that would otherwise carryon down the southernline.
The light rail options add an entirely new line, with a serious amount of additional capacity, which will solve congestion issues in a way that rerouting existing trains cannot.
Adding a third line along the southern line route is possibly needed, at least as far as southdown.
And the nats plan does add an extra line.. west auckland to southdown then on south. Currently west auckland to south auckland via train is a waste of time, its far quicker to drive due to the need to go into the city then back out.
Planing to buy stock Now.... Be carefull
https://www.forbes.com/sites/investor/2020/07/16/stock-market-crash-202…
Great news for Queenstown
https://www.rnz.co.nz/news/national/421423/covid-19-managed-isolation-f…
Megan Woods Walker apology.
It sure looks that way.
China Q2 GDP result, which claims growth of 3.2%.
NO WAY this economy grew 3.2% y/y last quarter.
By way of rationale, weakness in the consumer realm (retail sales fell by 2.8% and 1.8% in May and June, respectively) businesses were operating at 85% to 90% of capacity throughout April and May. In addition, the Ministry of Transportation’s passenger traffic data showed a roughly 50% contraction from a year ago across those two months.
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.