Inflation vanishes in Canada; Japanese exports fall; Japanese machine orders tank; China tax receipts rise; China dominates Aussie exports; UST 10yr yield at 0.68%; oil unchanged and gold drops; NZ$1 = 66.1 USc; TWI-5 = 69

Inflation vanishes in Canada; Japanese exports fall; Japanese machine orders tank; China tax receipts rise; China dominates Aussie exports; UST 10yr yield at 0.68%; oil unchanged and gold drops; NZ$1 = 66.1 USc; TWI-5 = 69

Here's our summary of key economic events overnight that affect New Zealand, with news that business pullbacks on investment spending is causing havoc among Japan's machinery manufacturers.

But first in the US we should note that mortgage applications fell last week.

In Canada, consumer inflation vanished in July. In fact they recorded deflation from the prior month.

Japanese exports have continued to drop sharply in July even though the rate of fall is slowing. There was a recovery in shipments to China that helped cushion declines of exports to Europe and the US. The value of their exports fell -19% from a year earlier amid continued steep falls especially for vehicles. The drop was about as expected.

And Japanese machinery orders are still falling sharply. They were down -23% year-on-year in June and are expected to be down -21% in the July to September quarter. Export orders are down more, down about a third on this basis. It is very grim for capital goods manufacturers, especially as analysts had expected July data to show some gains.

But in China, they are reporting growing tax revenues. They were up +4.3% in July over the same month a year ago, a quickening pace. This is clear evidence their upturn is underway.

And staying in China, the massive Three Gorges Dam has reached record high water levels as torrential rains caused heavy flooding upstream on the Yangtze River. No reports of damaged dam integrity yet, but any failure will threaten commerce along the country's longest river. The mighty Yellow River is also in massive flood.

For all its troubles of late, the Hong Kong jobless rate has stayed at 6.1%. However they have a very low participation rate of 59.6%.

Australia's trade troubles with China will be an intractable problem for them. China is the destination of almost half of their export trade, a dominance that is strategically unnerving for them. China has fierce leverage. In contract, China takes 28% of our exports.

Overnight, European equity markets rose an average of +0.8%. Today, Wall Street is unchanged in early afternoon trade and holding a new record high. Update: Some disappointing key earnings reports have Wall Street falling in late trade. Yesterday, Shanghai fell hard, down -1.2%. Hong Kong did manage some afternoon trade, reopening after the storm, but it too fell and by -0.7%. But Tokyo managed a +0.3% gain. The ASX200 ended yesterday up +0.7% and the NZX50 Capital Index had a profit-taking day after some key results, down -0.8% at the close.

The latest global compilation of COVID-19 data is here. The global tally is 22,218,000 and that is up +262,000 since when we last checked this time yesterday. Global deaths reported now exceed 783,000.

A quarter of all reported cases globally are in the US, which is up +45,000 since yesterday to 5,673,000. US deaths are now just over 175,600 and a death rate of 530/mln (+4/mln). Only seven countries have a higher death rate. The net number of people actively infected in the US fell overnight to 2,466,200, so marginally more recoveries than new infections.

In Australia, there have now been 23,993 COVID-19 cases reported, another 220 since yesterday, and still very much concentrated in Victoria. Australia's death count is up to 450 (+12). Their recovery rate is now up to over 63%. There are 8302 active cases in Australia (-109) indicating a turned tide and more recoveries than new infections.

The UST 10yr yield is up +1 bps at 0.68%. Their 2-10 curve is still at +53 bps. And their 1-5 curve is also unchanged at +15 bps, while their 3m-10yr curve is marginally steeper at +60 bps. The Aussie Govt 10yr yield is up +1 bp at 0.88%. The China Govt 10yr is up +2 bps at 3.01%. And the NZ Govt 10 yr yield will start today at 0.67% and unchanged.

The price of gold was very volatile overnight. After yesterday's +US$23 rise, it has fallen -US$38 today to US$1,968/oz. Silver which didn't rise much yesterday, fell in sympathy, down -1.1% overnight.

Oil prices are little-changed again today. They are still just under US$43/bbl in the US and the international price is still just over US$45/bbl.

And the Kiwi dollar rose overnight and then fell back to the same level as this time yesterday, just on 66.1 USc. Update: It has subsequently fallen sharply to 65.7 USc. Against the Australian dollar we are firmer at 91.4 AUc. Against the euro we are up marginally at 55.6 euro cents. That means our TWI-5 has firmed to 69.

The bitcoin price has slipped -2.0% from this time yesterday to now be at US$11,791. The bitcoin rate is charted in the exchange rate set below.

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78 Comments

15
up

Where's the 'money' going? Into Tim Cook's bank account, by the look of it! Bond issues at 0% and stock buy-backs can work wonders for a mans' net worth; if he's one of the anointed few of course. The rest of us? We get to pay our dues into a Kiwisaver account that we can drawdown on when we hit 65, whilst Tim gets to spend our money today.
(NB: Apple is just using the rules of the game they've been given, and doing it well. It's The Rules and those that make them that are the problem.)

15
up

It is hard to make sense of the scale of the management rort that has taken place in the USA over the last 40 years. By loading their companies up with cheap debt and using the money to buy back stock, the top level management's stock options rise in value. It looks like they are doing a good job as the share price goes up, but all the while they are making the business more vulnerable to any downturn. At the same time they have been able to move production overseas and use cheap well qualified immigrants to keep wages down, as well as buy up their competition while they are still small. The benefits of the system flow to the 0.1%, who, of course, assume they have god like powers to change the world.

No wonder the US is on the brink of civil war. If Trump wins, will California secede? If Biden wins, will Texas?

Stock buy backs used to be banned - its a rigged game with only one outcome unfortunately.

Well put.
A good read and an explanation of why it might be California; Texas or both!

Most of my relatives and old neighbourhood friends hate people like me. And I don’t blame them. Most are lifelong Democrats, yet they voted for Donald Trump, and will again....My career is the product of an economic revival engineered by the centre-right New Democrats of the Clinton era and subsequent administrations. I’ve observed the tech industry for two decades; it’s a job, but it's hardly work.

https://blog.usejournal.com/why-trump-is-likely-to-win-again-23e56ccff95b

That's an excellent read, thanks. It really is exactly the case there. I've got a whole bunch of rellies who fit the description of those swing voters at the last election. Scarily, many of them aren't even swinging anymore - quite the opposite, they're MAGA hat wearers. Unbelievable.

Lets not kid ourselves it's any different here, Labour is lucky to have a charismatic leader , people vote for her in spite of her party, without her Labour would most likely not be in power. I find National full of bores, rather not vote for any of them.
We need a new party, 100's of thousands of kiwis want a better way, not the high immigration, low wage, high cost of housing, indebted, over regulated, high taxed, expensive country we have been turned into.

We need a new party, 100's of thousands of kiwis want a better way, not the high immigration, low wage, high cost of housing, indebted, over regulated, high taxed, expensive country we have been turned into.

Absolutely agree.

I've argued before that National needs a rejuvenation along these lines https://www.prospectmagazine.co.uk/magazine/tim-montgomerie-future-conse...

New Zealand's politicians on the whole need to learn to represent the needs of more New Zealanders, including those who are only just born or are yet to come.

Couldn’t agree more Rick! Trouble is the National party obviously couldn’t disagree more. Why else would they pick a relic, a “blow the man down” barging old hat, as deputy.

Yes, absolutely - in reverting to the Punch & Judy Show they've signaled to younger generations that they have nothing much to offer them. And certainly not a viable, self-sufficient future.

There's actually a fair chance that Biden will win Texas (around 30-40% chance, but that was unthinkable under Obama).

Biden's Barlarky Baggage just keeps on coming. He said he met his second wife on a blind date but she was actually married too someone else at the time. She used to look after his kids then things happened.Obviously a divorce took place and she married him.
I thought his fake education qualifications was bad enough, now this blind date bullshit.
He hasn't opened his mouth at the convention yet but when he does he will stuff up again, his history is not good even Obama says he does F*** Up on occasions. He obviously underestimates these occasions.
How can anybody trust him going forward.

Interesting listening to some of the more genuine conservatives in the USA who are planning to vote for Biden. Basically because they don't think the country can afford to have Trump in for longer, and that almost anyone is better and safer than Trump. Perhaps not many find Biden particularly desirable, but Trump far less so.

Will the rest of the country go to level 3?

It would appear the cluster is under control, so probably not.

New case numbers keep declining but there's talk of revising alert level 1 limitations.

I hope so, but either messaging or enforcement needs to improve too. I spent an hour walking through Wellington CBD yesterday and probably saw max 20 people wearing masks, and no effort by anyone to maintain two metres separation.

24
up

Hopefully the cluster is now contained and under control. Lot of finger pointing continuing though. But this incident is hardly a new problem. It is indicative of a problem longstanding and increasing. That is the unaccountability of national and local body public service. For instance in Christchurch recent events, alongside of a confirmatory report by the Ombudsman, has highlighted many council staff do not see themselves as having to report to let alone answer to the elected councillors. Even Mr Brownlee & Ms Williams local MPs have agreed publicly on that. So here we have it again. The government tells the MOH of the policy required. The MOH acknowledges and confirms it as being done. The MOH, knowing better, then just saunters off and does its own thing. All of NZ is long suffering from this malaise and now it has manifested in form and substance that has seriously threatened the livelihood and wellbeing of each and everyone of us, something must be done. The dead hand of bureaucracy is not only ruining NZ’s way of life, but it is menacing NZrs.

24
up

But why should they care? Decent wages, paid regardless of actual output... why buy in when you have no skin in the game? Clearly the answer to how to improve things is even more money, regardless of actual output. After all, the measure of success is how much you spend, not what you get done, which is ideally not measured at all.

13
up

The dead hand of bureaucracy is not only ruining NZ but it is threatening NZrs.

Christchurch Council has been out of control for a long time. The general incompetence and self importance of NZ bureaucracy is stark but they have little self awareness of the extent of the problem. Being offshore, I do not have to deal with them often but I do remember a time going to an event when various trade and diplomatic types flew from around the region in Asia for a speech given by a NZ dignatary. There was little reason for them to be there except and all they seemed to do was graze on the lamb and wine available. They would have flown back to their respective countries the next morning. For them, this is normal, despite not really doing anything.

Mate of mine came from UK to work at christurch council, used to similar councils in uk with 3-400 people, he didn't know how many people worked at ch council but thought around 3k. Took him an hour to get a park in the morning . He left in disgust.

"The MOH, knowing better, then just saunters off and does its own thing." Insightful comment. The Auckland DHBs are even more culpable

We set this flawed system up in the neolib era.

The idea was to have the elites/cronies thereof in the boardrooms, having turned everything - LG, health, schools) into monetised institutions. Then you have one CEO, channeling the Board (and conveniently, the flow of up/down info) and that meant the CEO's had to be of neolib persuasion too. We had a raft of them.

But it didn't work, couldn't work. Firstly, growth options were reducing, and commandeering the commons wasn't going to stave off that trend. Secondly, the aims of the institutions were for social good (libraries, hospitals etc) not for profits to be made. Brownlee and Co are relics of that 'we are going to screw the public out of what it owns' era.

Time we moved on

Gold price taking a bit of a mauling now and is down 3.7%. Just another day in our surreal economic and finanical world.

Doubtful if Auckland be free of Lev3.

https://www.newstalkzb.co.nz/on-air/kerre-mcivor-mornings/opinion/kerre-...

The laptop stolen from within, not news worthy?.

Kerry Mcivor? Next you will be quoting the Hosk?

What part, point of her discussion do you find disagreeable.
You know the drill, jot down your top three 3, if you can.

Ha the drill...you lost me at Kerry.
I read educated fact based authors ...not shock jocks who publish books on how they "got fit by running".
I suppose you listen to Leighton Smith Podcasts as well?

Baseless slag off McIvor all you want - if we actually had some journalists of integrity in this country then the omnishambles of border control would have been highlighted much sooner and Hipkins, Digby, Woods, H2... could have been doing their day jobs rather than assigned to shore up the image. The $50 million sycophant fund is one of the most expensive mistakes to date.

"Baseless slag off McIvor all you want" thanks I will then

Ever thought of doing your own blog, own ideas, take her on, head on.
Do you have a link?

Why would I waste my time taking on Kerry McGivor? Who would care?
No..too busy with small to medium business trying to survive under current conditions. You seem to have plenty of time Henry - how about you launch some You Tube channel with all your links and recommendations?

"Any country that has been able to report a good result is an island. So saying look at what is happening in America and the UK is pointless." - One of these is also an island, 10% smaller than New Zealand in fact. There may be a lot more traffic, but that doesn't change the fact it could be locked down like us if the desire was there.

Good point UK is an island. Though Scotland has been doing its own thing, x sea border with Nth Ireland is always open.
It also sounds like the channel boat refugees have been accepted throughout, and resettled in heartland hotels.
Airports seem open throughout
Do you know if the x channel trains have continued?
USA is not an island.

China and Vietnam's deaths per million are better than NZ. I didn't know these countries were Islands. McIvor shows great journalistic insight and research.

If you believe China's official stats.

I'm fairly sure their border security and policing of mask wearing and social distancing is a bit more effective then ours. I have friends who have returned to China and they were compulsorily tested as soon as they landed, they then had to self isolate with random checks several times a day. If you are not in your house when they check then you go directly to jail for the foreseeable future.

Efficient and low cost. Of course you have to be a lot harder than NZ is to achieve this.

Do you come out of Jail less 1 Kidney?

Probably, but at least your ears should start working from then on.

The stringency of their response is not the same thing as the reliability of their statistics.

What proof do you have that they are lying about the numbers?

https://www.bbc.com/news/world-asia-china-53816511

Specific to covid? Not a lot. But there's ample evidence on other fronts, e.g. gdp, that the CCP regards official statistics as an arm of the propaganda machine.

NZ Covid deaths confirmed .......... 22

Deaths per million is comparing apples with apples:
Vietnam: 0.3
China: 3
NZ: 4

https://www.worldometers.info/coronavirus/

Can you put up some comparisons from none Communist states? Or are you suggesting we head down that road...apples with apples

I am pointing out that McIvor's claim that you have to be an Island to have a successful covid 19 response is incorrect and lazy journalism. If you are now claiming you need to be an Island or a Communist State to be successful against Covid 19 then you would need to explain Thailand (deaths per million 0.8) or risk being lumped with McIvor as incorrect and lazy.

New Zealand is regularly a winner of per capita competitions because of our small population. In this case, it works against us.

McIvor and others surely took that into account?

Nonsensical.

Indeed, not being aware of mathematics, percentages and ratios would be nonsensical.

NYSE: Apple becomes first $2 trillion company. It has doubled in price since the CV-19 event on 23 March.
That's 6 months work.
For comparison
Value of entire NZ stock of Houses = $1 trillion
NZ GDP = $300 billion

Those numbers don't actually mean anything anymore when the $$ are being printed like there's no tomorrow. If the value of entire NZ stock of houses = $1000 trillion, would it matter anymore? If Apple became the first $100t company, would it matter? I don't think so, not if you value something in a monopoly money.

It's important
IBM is the forerunner of everything in the digital world
By 1980 the size and power of IBM was larger than the economies of many small to mid-size countries.
It was the largest company at that time
It was so powerful the Department of Justice set out to split it up
They failed
Today IBM is valued at a mere $112 billion
There is disquiet in the US about the power of the FAANGS
Department of Justice is dusting off the Anti-Trust legislation

Who cares anything about what we are dumping on the grandchildren?
https://www.stuff.co.nz/national/politics/opinion/122488274/election-202...

The truth is that nobody knows what we are dumping on our grandchildren. It might be nothing at all.

One thing I am sure of now though. There is no future in printing money to burn it paying subsidies for people to sit at home. Having experienced this for myself after being always employed I find it incredibly demotivating.

If we are determined to print money it needs to be spent in a way that lifts the country not suppresses it. Think Big was smarter than what we are currently doing.

RTD- bollocks. You are dumping the most depleted planet, resource-wise, that there has ever been.
You are dumping the most toxins, the most pollution, that there has ever been.
And a legacy of 5-6 billion to many in planetary-footprint/overshoot terms.

I understand the need to avoid, but as Michelle Obama said; It is what it is.

So your first move as the PM would be what exactly?

11
up

The next generation are getting around the problem by not having children

So true - 50% - 60% of my friends have just said no or wanted too but lost out to time/money constraints

Evolution in action. Excessive hedonism/selfishness (in women at least) being bred out of the species. Though not amongst baby farmers sadly.

I think this reflects more on the young's financial instability. When you require two worker just to service an average mortgage, of course it's going to affect the desire for kids (losing an income stream).

Nonsense, it's the most educated and responsible who aren't having children.

14
up

"Boomers have had it tough"

Probably the biggest misconception in history.
Boomers have lived like kings with a standard of living never to be repeated.
They lived in times of plenty .... abundant easy resources, lower environment & population pressures... then kept the party going when the easy wins were done by piling into a mountain of credit & leverage....

Yes - I had to chuckle about that quote as well Ham.

Yes, I noticed he didn't cover off the massive inflation of house prices to pull forward money from the future into now. We've been asking younger generations to run up massive debts to fund boomers lifestyles for over a decade now.

Nor how much he paid for university.

Perhaps those are sitting in front of his other, unopened eyelid.

*grumble grumble* "But what about 1980's mortgage rates!" (neglect mentioning concurrent wage inflation) *grumble grumble*

Yep. Typical boomer buying a house in the early 80's spent a total (including interest) of 3-4x median salary to get a free hold house. Payments dropping precipitously as portion of income so that within 3-4 years they had lots of disposable income, could afford kids and hobbies etc.

Nowadays in Auckland and Wellington 20 somethings are looking at needing to spend 20 years median salary with payments that will continue to be a major portion of their income for decades. Kids verging on affordable.

Aaah those Americans. They know the cost of everything and the value of nothing.

Interesting that the economists have all agreed Negative rates are coming....
yet I dont see any commenting on how we will then ever get out of negative rates
Doesnt that imply capitalism is dead?

I don't think we can ever get out of negative rates if we continue to pump most of the loan into housing market. I hope someone has been monitoring whenever there is an OCR cut, how much loan has gone into housing market...

Capitalism died the day central banking became a thing.

"The establishment of a central bank is 90% of communizing a nation" - Vladimir Lenin

No, the people started getting screwed to moment fractional reserve banking became a thing.

Rothschild was onto that 150 years ago. It's a rort; key-stroke-issued digits, but the keystroke-issuers get to buy Beamers and condo's as a result. Total parasitism. And in a degrowth world, has to be outlawed. Flat-fee yes, percentage interest no. Too simple (if you're interested)

More MoH handiwork.
7 out of 11 gone.

https://i.stuff.co.nz/national/health/122506399/two-more-toplevel-resign...

Note to Govt appointee Levy.
Depreciation is a non cash cost.
Capital charges are calculated & imposed by, MoH, call them a levy.

Part time Minister of Health may well be doing this again.
https://i.stuff.co.nz/national/health/coronavirus/122506262/i-own-that-h...

Can Kelvin Davis lend a hand, spin a bit of his magic maybe.

I have no time for Hansen, for reasons from another field.

But here the problem is unacknowledged by either philosophy; the Limits to Growth. We successfully fended off mortality, using medicine/health knowledge. That added to a problem nobody is brave enough to face; overpopulation. That overpopulation grew itself by trading in remote proxy (money) for real stuff (processed parts of the planet). All is interconnected; doctors expect to cash-in their proxy for processed parts, even as folk expect to be fixed by them, as a car is (which has led to folk being less self-healthing, a negative spin-off).

Systemically, health is now expected too much of, is suffering from entropy, and the noelibs hit it by trying to apply their flawed doctrine. Simply put, as a 'business', almost nothing works in a de-growth environment and health is no exception - unless we agree to triage of other infrastructural effort.

Senior doctors in Christchurch are protesting. ? But it's their one eyed self interest that is the actual problem.

No, I think it's systemic. They are indeed used to being upper-deck passengers, but the ship is sinking.

i think that is probably on the nail PDK. It's dentists that bug me, privileged to ridiculous, time to bust that union.

The banking and finance industry is what you should be targeting.

but i might not make old age.

Reading the a very brief biography of one of China's top avantgarde authors the other day, I was struck by the fact he had previously practiced as a dentist after a one year course in dentistry.

I'm not advocating for Black & Decker Dentistry for myself, but it did make me wonder whether we have the balance quite right.