US durable goods orders very weak; US oil patch braces for big storm hit; South Korean exports rise; OECD reports sharp shrinkage; UST 10yr yield at 0.69%; oil firm and gold rises; NZ$1 = 66.1 USc; TWI-5 = 69.1

US durable goods orders very weak; US oil patch braces for big storm hit; South Korean exports rise; OECD reports sharp shrinkage; UST 10yr yield at 0.69%; oil firm and gold rises; NZ$1 = 66.1 USc; TWI-5 = 69.1

Here's our summary of key economic events overnight that affect New Zealand, with news there is a warning that a major hurricane about to hit the US could bring an "unsurvivable" storm surge that could reach many kms inland.

But first in the US, their July durable goods orders jumped sharply from the depressed June level but are still -5.0% lower than the same month a year ago. Orders for investment purposes (capital goods) were down -14% on that basis, and the non-defence capital goods orders level were down almost -20%. Despite all this real decline, markets took comfort from the July rise over the depressed June and saw that as a good recovery sign.

They however overlooked the declining mortgage application data for last week.

And that major hurricane is heading for landfall near Texas and the heart of its oil processing industry.

Usually at this time of year we are reporting on the Jackson Hole talk-fest. This year they are still talking, but the event is virtual and doesn't seem to have the same appeal. But it can be a time when some heavy hitters set out their priorities and that can be interesting.

In China, rare earth exports plunged -70% in July from the same month in 2019 according to Chinese customs data. That is the lowest monthly volume since January 2015 with a drop all attributed to depressed pandemic demand.

South Korea's export sector is feeling better with export-oriented order levels a bright spot in their economy.

Singaporean industrial production in July came in way less than analysts were expecting. It is hard making estimates when conditions are volatile, but this is a big miss and far worse than almost everyone assumed.

Indonesian motorbike sales were down almost -50% in July from the equivalent 2019 period continuing a trend that reveals how tough it is in the world's fourth largest country by population, and one we tend to ignore. Economic and social stress in Indonesia is a major strategic threat to Australia.

In Australia, their reserve bank says a -40% fall in house prices is an "extreme but plausible" scenario in a discussion paper on household debt (see page 18). They also say "banks appear resilient to a severe downturn" and that most household debt is held by those who can afford it.

The OECD is reporting that the economies of their members shrank by -11% in Q2-2020 compared to the same period in 2019. The largest decline was in the UK (-22% year-on-year) and the least was in Japan (-8%). They have a grim view of the jobs market ahead.

Back in New York, the S&P500 is up +0.9% today in late trade. They follow Europe where results similar. Yesterday, Shanghai fell -1.3%, while both Hong Kong and Tokyo both were unchanged on the day. The ASX200 also closed down -0.7% while the NZX50 Capital Index rose +0.3% although it suffered through a second embarrassing cyber attack.

The latest global compilation of COVID-19 data is here. The global tally is 23,979,000, up +259,000 since when we last checked this time yesterday. Global deaths reported now exceed 821,000 (+6,000 in a day).

Just under a quarter of all reported cases globally are in the US, which is up +43,000 since yesterday to 5,972,000 and a relentless rise. US deaths are now just over 188,000 and a death rate of 552/mln (+4/mln). The net number of people actively infected in the US rose overnight to 2,530,000, so back to more new infections than recoveries.

In Australia, there have now been 25,205 COVID-19 cases reported, another +152 overnight, and still very much concentrated in Victoria. Australia's death count is up to 549 (+24). Their recovery rate is up to just under 80%. There are 4561 active cases in Australia (-158) indicating a turned tide and more recoveries than new infections.

The UST 10yr yield is unchanged at 0.69% although it has been unusually volatile in the past 24 hours. Their 2-10 curve is stable at +53 bps. Their 1-5 curve is up marginally at +17 bps, while their 3m-10yr curve is unchanged at +61 bps. The Aussie Govt 10yr yield is up +1 bp at 0.93%. The China Govt 10yr is also up +1 bp at 3.07%. And the NZ Govt 10 yr yield is following for a change, up +3 bps to 0.58%.

The price of gold has risen overnight, up +US$26 to US$1,946/oz.

Oil prices are essentially unchanged overnight at just on US$43.50/bbl in the US while the international price is just over US$45.50/bbl. But the US Gulf hurricane could upend markets quickly.

And the Kiwi dollar is much firmer this morning, up +½c to 66.1 USc. Against the Australian dollar we are firm too, at 91.4 AUc. Against the euro we are more than +½c at 55.9 euro cents. That means our TWI-5 is up to 69.1 and a two week high.

The bitcoin price is up +1.7% from this time yesterday at US$11,466. 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 ».

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46 Comments

23
up

"...most household debt is held by those who can afford it." - at the moment, and with the cost of debt at historical lows. What consolation!
Employment and Wage Rates are deteriorating before eyes. 'Those who can afford it' might be in for the biggest shocks of all.

“How did you go bankrupt?" Two ways. Gradually (ie: I could afford it), then suddenly.”

(Hemmingway)

12
up

The strangest discussion I saw on twitter was that incomes are only down 8%. I don't think people understand how serious that is. We're already at 5% defaults in dollar terms for mortgages for Q2.

Really, it's no problem. You just have to be a bit more patient and wait for the next Briscoes sale instead of buying today.
If only insurance, food, rates etc had (insert long weekend holiday) sales too..

Have you ever been to a Briscoes when there's not a 'sale' on? Dead.

Until Briscoes folds. How long can the chain stores take the pressure? I know Mitre10 came perilously close after GFC.

the lockdown has been extremely kind to mitre 10 in terms of DIY sales

I have never seen a spend up like we are experiencing in the pool/spa/diving markets. I assume anyone leisure related is experiencing the same

A few people we know were stocking up on decking timber, paint, tools, screws etc like it was going out of fashion. Used there lockdown time as a chance to finish all the weekend jobs that always get put off

Maybe people have decided to take that money they were going to spend on international travel and use it instead for home improvement???

I'd say there would be a fair bit of that happening

M10 up 40% sales compared to last year since covid

Actually most kiwis had a rise in income, according to statsNZ: "Median weekly earnings from just wages and salaries actually increased 4.3 per cent in the June 2020 quarter"

The fall mentioned above (-8%) is essentially the impact of the self employed being unable to work during the Q2 lockdown, so reporting greatly reduced or zero income. Those self-employed people quickly returned to normal income level following the end of lockdown. It is important to dig into the data rather than relying on headline numbers.

The fall mentioned above (-8%) is essentially the impact of the self employed being unable to work during the Q2 lockdown, so reporting greatly reduced or zero income. Those self-employed people quickly returned to normal income level following the end of lockdown. It is important to dig into the data rather than relying on headline numbers.

Not correct. The impact comprises largely 1. Those told not to come to work and not paid accordingly; and 2. Self-employed including those in the higher earning quintile.

Having a 'rise in income' in yoy is deceptive and does definitely not mean Kiwis are earning 4.3% more than last year.

.

Keep reading the report. From yesterdays interest admin report:
"The increase in median wages and salaries is shadowed by a sharp rise in paid employees who reported no hours worked and no wage and salary income."
"The rise in people away from work led to a lower number of wage and salary earners, especially among lower-income groups. The resulting compositional change meant that those remaining were more likely to be in higher income brackets, increasing the median income measure."

There will be significant rental stress our there at the moment

11
up

My accounts are only just being filed with Inland Revenue as are many others that are self-employed or run small companies. This only gives income up to 31 March 2020. The hit that businesses have taken due to covid won't be fully known for another year.

GST returns filed to July will give a good indication ..cloud technology means we dont wait a year for company results anymore. There are some stuffy old accounting firms holding on to paper filing but rapidly disappearing along with there inflated fees.

Absolutely. Not looking forward to paying all the provisional tax going forward though. I had a good year last year, so this financial year I'm paying tax on a good year +5%. That said I'm in a better position than AirNZ.

You don't have to do this if your profit is down. Talk to your accountant

I'll carry out a revenue analysis in October. If it is going to turn into a cash flow issue I'll deal with it then. At this time it isn't

Depends on return period. Current GST return periods are 1, 2 (odd month), 2 (even month) and 6-monthly. Could be some time yet for GST returns to tell us anything, particularly for the Small end of SME's....

My accounts are only just being filed with Inland Revenue as are many others that are self-employed or run small companies. This only gives income up to 31 March 2020. The hit that businesses have taken due to covid won't be fully known for another year.

Well noted. Thanks for pointing that out. Incomes will be hit, more so than anyone will see in their lives.

To Remember that only economy in NZ is housing economy so not only government and reserve bank but all with vested interest will go all out to present a narrative for housing market as no one can afford it to burst.

As they want a positive spin are highlighting low interest rate and forgetting what affect lose of job and business can and will on economy and is Housing not a part of economy.

Till now have been successful in manipulating the delay of inevitable by printing of money and various policy like Mortage free holiday for a year to start off but all this will come to roost. Wait and Watch.

This uncertain times are time to be cautious and not adverureous unless have deep pockets and can take high risk.

To Remember that only economy in NZ is housing economy so not only government and reserve bank but all with vested interest will go all out to present a narrative for housing market as no one can afford it to burst.

China got the jobs, we are left with the debt.to capitalise the huge increase in the discounted present value of cash flows associated with assets as interest rates are regularly cut in half to reflect economic deflation.

One nation's surplus has to be another's deficit.

All good for me. I have always done well in recessions since 1990. Always had a job. One difference though, no mortgage now, same salary. The misses has a job at Jet Park as a nurse so wages are up.

Congratulations, if only all of us looked out for numero uno then all our worries would melt away.

Alby20, looking after #1 first allows you to look after others when you have yourself covered. I look after lots of people paying over $50K in tax per year.
BTW, I reported you, that was a mistake, pushed wrong button.

looking after no 1 doesnt work (system wide) in a credit fuelled economy
we all need to spend up / leverage hard ... thats how we pay each others wages
hoarding the pie has the opposite effect

Covid is so ageist and sexist. “For those without a comorbidity, the cIFR is effectively zero and flat up to the age of 50, and then increases roughly twenty-fold between 50-59 and 70-79 (from 0.01%to 0.17% for women and from 0.02% to 0.48% for men.”
https://www.cgdev.org/sites/default/files/predicted-covid-19-fatality-ra...

Here is a spanner.

Disease control measures should be adjusted to account probable substantial presymptomatic transmission.
Estimated that 44% of secondary cases were infected during index cases' presymptomatic stage.

Dr Campbell
https://youtu.be/bUfuF3Il4ik

# PM painting us into a corner.

"Dr Campbell" is not a clinician - he is a nurse educator, with a PhD.

16
up

Doesn't make him/her wrong. If you can prove him wrong do so, otherwise do not hang on qualifications. there have been plenty with qualifications who are still wrong.

Exactly...anyone who can do a search on the internet is now "qualified"..who needs years of study and qualifications? Trump is proof..absolute genuis

Nurses are clinicians as well.

Yes, that's why we have lockdowns.

If this is news to you, you haven't been paying attention.

As if the shuttered border were not enough.

Lockdowns are about getting organized.

Rather than compensation for poor administration.

Kiwibank is helping borrowers anyway with their 3.4% Floating rate.
When will the big 4 drop from their 4.6% Floating?

Are they though? Why be on 3.4% floating when you can fix for 1 year at 2.5% or lower?

Also the big banks often give people discounts on their floating rate anyway. I have discounts of 1% and 0.75% off floating on two of my loans with BNZ, so my rate is very close to what Kiwibank is offering anyway.

The meek shall inherit the debt.

Can they afford it?

Let them eat credit card statements.

I need to print them off first now, no postage anymore.

The extra paper will cut down the cost of heating that million dollar draughty cardboard box.

From our Hidaway Health Minister and his part-time performance.

Director general of health Ashley Bloomfield was met by a large group protesting the Canterbury DHB's planned service and staffing cuts this morning.

The health minister has sent Bloomfield to Christchurch to meet with the embattled health board and staff outraged by the proposed budget cuts.

https://www.odt.co.nz/star-news/star-christchurch/cdhb-crisis-bloomfield...