US jobless benefit claims rise; US manufacturers destocking; China boosts strategic reserves; Indonesia stumbles; UST 10y at 0.69%; oil down and gold up; NZ$1 = 66.7 USc; TWI-5 = 69.7

US jobless benefit claims rise; US manufacturers destocking; China boosts strategic reserves; Indonesia stumbles; UST 10y at 0.69%; oil down and gold up; NZ$1 = 66.7 USc; TWI-5 = 69.7

Here's our summary of key economic events overnight that affect New Zealand, with news we are moving to an era of chronic economic under-performance.

American jobless benefit claims for last week came in slightly higher than expected and the prior week's totals were also revised higher. These new higher claims offset those at the end of their qualification for benefits and has kept the numbers on benefits little-changed. All this is worse than expected and Wall Street turned from positive to negative territory on the news.

American manufacturers are now de-stocking. What started out looking like tight management of inventory levels is turning into a defensive de-stocking trend with durable goods manufacturers now holding -7.5% lower stocks that a year ago. This is substantial and inhibiting new orders. It is particularly fierce in the car, furniture and office equipment industries where levels are -10% to -15% lower.

US mortgage rates have hit new all-time lows with the standard 30 year now at just 2.86% plus points, and the 15 year at just 2.37% plus points.

In China, their Food and Strategic Reserves Administration, already holding vast supplies, is reportedly planning a new major expansion of their commodities holdings.

There is no evidence yet that the iron ore price is topping out, but there is some evidence that shipping prices are past their recent runup.

Japanese machinery orders rose in July after falling to a very low level in June (up +6.3%). That July rise is encouraging because the export order rise (+13.8%) was bigger than expected. (This data is different and broader than the improving machine tool orders we reported yesterday.)

In Indonesia, two key metrics are stumbling. First, retail sales are not recovering as they hoped, and secondly, consumer confidence is seriously lagging. Both point to severe economic stress on the way there, and that will worry its southern neighbour.

At the overnight European Central Bank meeting, they left all their key settings unchanged but of course that is continuing to add large financial system liquidity each month under their new emergency settings.

Wall Street opened with a carryover of yesterday's enthusiasm, but that has leaked away on the jobless claims data and the S&P500 is down a sharp -1.4% in mid afternoon trade and the decline is accelerating. Overnight, European markets were down about -0.4%. Yesterday, Shanghai and Hong Kong each shed -0.6% but Tokyo gained a creditable +0.9% on the day. The ASX200 ended up +0.5% and the NZX50 Capital Index was up +0.6%.

The latest global compilation of COVID-19 data is here. The global tally is 27,961,000 and up +313,000 higher in a day. Global deaths now exceed 905,000.

Just under a quarter of all reported cases globally are in the US, which is up +33,000 to 6,561,000 and a relentless rise. Their death total is now 195,800 which is up more than +1000 in a day (591/mln and closing in on the Brazilian level).

In Australia, there have now been 26,513 COVID-19 cases reported, and that is only +48 more cases overnight and clearly the Victorian emergency is easing. Deaths however have now topped 788 (+7). Their recovery rate is up to almost 87% now.

The UST 10yr yield is down -2 bps and now just under 0.69%. Their 2-10 rate curve is unchanged at +55 bps, their 1-5 curve is at +13 bps, while their 3m-10 year curve is now just under +60 bps. The Australian Govt 10 year yield is down -1 bp at 0.92%. The China Govt 10 year yield is unchanged at 3.11%. The New Zealand Govt 10 year yield is now at 0.62% and that is +5 bps higher since this time yesterday.

The price of gold is up another +US$10 and now at US$1,956/oz.

Oil prices are lower again today, down to just over US$37.50/bbl in the US while the international price is down to just over US$42/bbl. This is now a new decline that may knock the US domestic fracking industry out altogether.

The Kiwi dollar is unchanged today and still at 66.7 USc. Against the Australian dollar we are marginally softer at 91.6 AUc. Against the euro we are much softer at 56.2 euro cents. That means our TWI-5 has dipped to just under 69.7.

The bitcoin price is a little firmer again today, up by another +1.0% to US$10,378. 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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50 Comments

11
up

Now it is fascinating that two commentators are looking at very similar angles. Well worth a read of both.

What amazes me is that no one really discusses leverage in housing, and think that housing is immune to the rules of leverage. I mean at a 20% deposit you are leverage 4:1. Sure the government has your back, but do they have the capacity to correct the leverage when it goes wrong?

I like this bit, sums up property speculators: The definition of a bubble is when people are making money all out of proportion to their intelligence or work ethic.

I am always surprised that the economy was allowed to go down this speculative hole, in fact it's been encouraged. I have heard of families around here paying 1k a week for a 4 bedroom house and having to live like peasants to pay the bills. The new poor are these people, life is tough for those without family support and dependants.

I do often wonder where this ends , when will the music stop and what will the economy look when it does?
In the States the Democrats turned their backs on the working people, Trump has steered the republicans to pick up these voters and today the republican party is the workers party, the party of middle America. I'm not sure who represents the workers in NZ, our main parties claim to, but it all looks like pretence to me.

Andrew,
This is indeed a very informative article. It is a good reminder that technoogical progress still has potential to change the world, and that this needs to be factored into prognostications as to how the future will unfold.
KeithW

Auckland locked for longer med experts say.

https://i.stuff.co.nz/national/health/coronavirus/122729361/coronavirus-...

Auckland contact tracing?
Seems more like Victoria & Dan, rather than the great State of NSW.
Because as mentioned before, getting the Police in to fix things up, is not a sign of wellness.
No gold standard here, for sure.
https://www.rnz.co.nz/news/national/425768/pacific-health-leaders-unimpr...

Add to that the part time health minister, getting petty - faulting the people rather than system & bureaucracy.

You cannot entirely not fault the people though. Regardless of race and creed NZ has like other nations it’s fair share of idiots, simpletons and miscreants. Think about the early days, the overaged lout in ChCh coughing on supermarket shoppers, the two elitist Highlanders in Dunedin. Rules and regulations can only go so far. Just think about our traffic authorities ceaselessly pointing out if the laws had been obeyed, the accident wouldn’t have happened. So too here. Regulations just can’t control every person and their actions every time in every place.

I'm not sure you can't fault the people Foxy. A TV1 news report where they interviewed an anonymous member of the church group who said "God will protect us". Well clearly he hasn't and the why is he doesn't protect against stupidity. There have been plenty even on this site who have decried the science, the information coming out about how bad COVID is, and just plainly in denial. I have been the brunt of some criticism because I have repeatedly indicated that even if you survive it, the information emerging is that it leaves lasting damage to the body. My view is that that damage may make you even more vulnerable to a second infection, or even other usually non-fatal infections. Anecdotally, i was talking to a chap the other day who is a bit of a snow bunny and he went to one of the central ski fields on Ruapehu when Auckland was in lock down (L3). He said two out of every three people he met there had snuck out of Auckland to go skiing.

So again don't catch it. Don't run the risk. Wear a mask when you go out, no matter where you are. And for Aucklanders, unless there is 110% chance you have not got it, please don't travel?

Wager there is much hubris at large here. It might well be that the congregation has been controlled, or perhaps even made reliant, by the hierarchy. And that hierarchy has been absolutely unwilling to cede any control in any regard to anyone else.

10
up

Their actions have cost NZ billions, pull their tax free status if they aren't play the game.

Why the sudden righteous anger from govt over alleged religious extremists advocating nonsense on C19 when we've had a parade of antisocial spreader culprits from the thelma and louise roadies through people who were symptomatic thinking a bit of tourism might be just what the doctor ordered, to the purportedly unknown number of 'returning NZrs' who point blank refused to be tested ? All showed a similarly cavalier disregard for science, the rule of law and wellbeing of the community but did not attract the same fevered level of public condemnation from on high as the Mt Roskill fundamentalists. Given the failure of the govts elimination strategy and the dawning realisation that a long term attritional battle of containment with real risk of catastrophic failure lies ahead, the timing of Ardern and Hipkins railing against voodoo preaching high priests smells of scapegoating.

It goes beyond that
Years ago I got pinged for speeding. Was standing outside the court afterwards when a "bro" came out having copped a fine and loss of licence. Got in his car with his mate to leave. The mate said hey you cant drive - you just lost your licence. "F***" that he said - that's white-mans law not mine - and drove off. Within the MEF Mt Roskill Church there are 2 distinct ethnic clusters Pasifika and Maori. Yesterday on talkback HDPA interviewed a Pasifika MEF pastor who explained the opposition is coming from the non-Pasifika segment on the basis of the Police breaking up the illegal meeting suggesting it should have and could have been handled in a more "culturally" sensitive manner. That's from a PI community leader.

Discontent with the colonial white-mans law is running deep.

Yep. Look on Twitter, folk are worked up.

The MEF pastor reciting the becoming tiresome 'white colonial' trope smacks of disingenuousness and possibly guilty rationalisation. If he did indeed attempt to divisively finger just a 'non-pasifika' faction of the congregation for leading resistance to C19 compliance that doesn't line up with the govt spin that this is official doctrine of a church in which he is an executive. An overwhelming democratic majority of NZrs of all ethnicities (including this libertarian inclined boomer) supported giving elimination a try. Church leaders must have repeatedly thundered from pulpits Christ's teaching to render under caesar etc and also the multiple new testament injunctions to obey laws.

Listen to the interview with Efeso Collins
https://www.newstalkzb.co.nz/on-demand/week-on-demand/
at 17: 12 (5:12 pm) on Wednesday 9th

Murray I've got a document in my possession that is a rough recipe for longevity. It came about from a PhD thesis and I twice had the pleasure to sit in front of the elderly author giving lectures on the Gold Coast. At the top of the page there are four categories, the rest of the page mainly deals with the first category. Those four categories, Nutrition, Exercise, Spirituality, Meditation.

The work to get to that point was studying the small grouples of long lived peoples all around the world. He wanted to find common factors, and he did. I obtained this document in the early 90's, the work had been done a well before that time as the guy was 72 and still surfing everyday in Byron Bay. To quality for the study subjects had to be over 85, be fully mobile, have full eyesight and hearing, be free of degenerative disease, be sexually active, and a bit more but you get the picture I hope. His oldest couple were 110/111.

I noted your comment the other day about not recovering fully from a flu a couple of years ago. Also comments that you keep fit. There are four legs that hold up the table that is health and vitality that leads to disease free living. It seems to me that because you have done one well, the exercise one, you think your table is on a firm foundation. From where I sit it doesn't look very stable at all, so you are right to be worried.

Healty people don't get Covid, an if they do won't be getting the longer term side effects you talk about. There is abundant evidence of that, however bias blinds people to the data. The answer to health lies within mate, not with someone else. As a bit of a hint the diet side is largely vegan and organic. You'll find it free of wheat also. It is about the choices you make, stop trying to make this about choices other people make. For a start you won't win, people will do what they are going to do.

Scarfie, we are all products of our time, and upbringing. I do get your point about most of it. I watched a documentary on a Doctor in his 90s in the US about 8 or so years ago who fits the profile you described. And yes I agree that there are multiple factors to build up to well being,.

But, being the products of our time and upbringing means that many don't get to make the good choices that the chap you're talking about did until it is too late. From a dietary perspective, I know mine which is not vegan but has very little meat in it is not bad, by comparison. But I also know that there are a lot who believe their diet is not bad as well, but by my standards it is, and by most measures they are pretty healthy. But i don't necessarily accept your premise that if I lived my life to the model that you have laid out, I would not and could not catch COVID. And I do not believe anyone should.

I also do not accept that people who hold your views should be careless about the rest of us. For to do that is to essentially make a life and death choice about others without their consent, and that is unacceptable by any measure.

This lifestyle stuff isn't new for me on here, I used to post a lot of it 8-10 years ago. I watched a video yesterday that said those that exercise have longer telemores. Those caregiving for a child with autism or person with alzheimers have shortened ones. Lifestyle matters. Stress matters.

See I think your premise, your logic, about life choices for others, simply doesn't stack up. Mine isn't a "view", it is logic and principle based. It is about consistency in thinking. Everything about Covid is simply theory, for every view there is an equal opposing view. I'll take principle over theory any day. Freedom of movement is my freedom, the choice is mine to make whether I give that up, not you at your convenience. Find another way to do it that doen't involved impinging on me. You can choose to lock yourself away, and that is exactly what Bob Jones did. Logic says that if you have the view you are at risk then it is up to you to be careful.

I'm not being careless per se, I'm just carrying on as normal. One thing you'll note if you get around the minor centers there isn't a whole lot of regard for the practice of social distancing or wearing a mask. That touches on the other side I mention, there are a lot of people that don't care that are not necessarily healthy or informed, and won't have regard for your risk. See I'll respect your social distancing, plenty won't. Some of that is careless, some of it is compulsive from the likes of those with psychiatric, personality, or behavioural disorders( say schizophrenia vs narcissist vs aspergers). I know a couple that really can't conceive of the Covid rules. There are quite a lot of these types of people about, more than most realise. As a Police Officer it was my job to deal with these people.

Scarfie, jump on to the article up today on the dietary advice and put your views up there and see how they are accepted.

P.S. i did read an article the other day that indicated that the Old Testament Genesis section provides the map to a vegan diet.

The old testament might be the relevant document if the world doesn't change direction soon!

m86, Thankfully not all share your view.
People need not be treated or view themselves as victims.

Henry, I don't think of myself as a victim. And I don't believe others should be treated as victims. I think you are doing what you often do on this forum and that is twist words into a meaning not intended by the writer. i do however think that people need to be more accountable for their choices. But of the Scarfies of this world who cannot recognise that just because people who make or have made bad life choices about their own well being, those who believe they make better ones should not be constrained or treated like all the others is just disrespectful. Scarfie may be right, he might not catch COVID, but he might spread it, either directly or indirectly by someone else believing his perspective and acting irresponsibly because of it, and that puts peoples lives at risk. Being at risk doesn't mean you're a victim.

For all that Scarfie is trying to change the world, he can't. It won't happen, but that doesn't mean he shouldn't try. However he comes across as dismissive and disrespectful of others simply because they don't align with his view, and that is just arrogant.

In NZ will know the real unemployment data, once wage subsidy ends.

I know of few who are now in the process of applying for income relief as wage subsidy has ended and assume that their may be many other who will have to opt for it. Again will have some money in their pocket for 12 weeks so the real impact will be felt in economy by end of the year when even income relief ends and panademic affect for housing market will be felt when mortage defferal ends in March UNLESS virus disappear and everything gets back to normal or government throws more money.

Yes & how many beneficiaries can the system even support? I mean surely there is a tipping point when the ratio of paye earners just can't support the number of those requiring benefits. Sure you can print money in the short term to full this void but this will just destroy the monetary system after a short while.
Don't really see what the masterplan is here. Tourism was a fundamental part economy & I just don't see how we as a nation can survive without it.

Halve the price of everything?
That's what happens elsewhere.
How many time do we read " So-and-so and their family have to survive on $1 per day" and they do.
That's what coming here in a degree - lower prices and lower wages so that whatever it is we produce is cheaper to sell on the World markets. And those things we can no longer afford to import, we start re-making ourselves.
(NB: "I can't halve the price of my goods. That's below my costs!" and so it will be. So the Flexible Costs get changed - and that will be the input cost of labour. "Want your job at 50% of your current wage or no job - at all at 0% wage?" The workers at The Warehouse are about to find that out this morning)

I can't see any sort of building block technology being able to be manufactured here (eg. chips, internals). Many of the things we import are categorically out of reach for local production purely because we lack the skills required to make them. We don't even have the skills locally to drive a combine harvester which looks about as complex as some of the video games my kids play https://youtu.be/KwQKKaZzrK4?t=87. Unfortunately, if you want a picture of what NZ looks like in 20 years time without a drastic deviation from the status quo - look at South America and pick a country.

Exactly: Reasons to not manufacture something in NZ.
1) High Taxes
2) High Land/property prices
3) High Labour costs
4) High energy costs
3) Remoteness from rest of the supply chain
4) Cumbersome regulatory environment specifically local govt & the RMA

Reasons to manufacture something in NZ
1) Well educated & skilled workforce
2)...????

All easier said than done ... for most primary industry labour isnt the big cost... ie
- fixed cost component ... take Milk / cheese... something has to service the baked in debt on the irrigators/tractors , pay the rates, fuel, freight ...
- production is geared to economies to scale ... not local .. thats the only way to pay off all that big machinery

this government has no plan. Look at their achievements 0ver their term. Nothing. A shambles.

They will have a plan, they aren't under enough voteing pressure from National to hand it out.

this government has no plan. Look at their achievements 0ver their term. Nothing. A shambles.

Yes. Jenee's superb article y'day on the size of the housing behemoth illuminates this for me. Now imagine if that problem didn't exist and h'holds were more 'liquid' to deal with the situation. People don't really understand that asset bubbles of this scale are not about prices as some kind of isolated phenomenon. That feeling of unexpected wealth is the motivation for that family holiday to Fiji or reaching for that 'nice to have' product on the supermarket shelf. Think of it as the 'engine' of the economy creating jobs and supporting small businesses. This is one of the problems with credit-driven bubbles. People start to actually believe the bullshit.

The reality is that it would be much better if house prices were 50% lower and people actually had savings to get them through these times. Instead we have the cost of housing maxed out while people are living paycheck to paycheck across all socio-economic classes (not just the welfare classes who everyone seems to want to project their frustrations). For this scenario, bank profits would be much lower and less money would have been 'lent into existence.' People would have actually had to spend more time saving for the boat.

Now I'm no Nostradamus, but I feel that NZ and Australia are still understating the extent to which our economies are extremely fragile in this kind of environment and our ruling elite does not have the character to successfully navigate us through this. Some will be aware, but most are still looking for excuses as to why the status quo up to Covid is robust. It's not. And it's our own fault for creating an 'anti-fragile' mentality (Taleb).

J.C.
All grand big picture stuff.
So at the individual level; what do you suggest a potential FHB do?

It's about how individuals, h'holds, and SMEs are the backbone of the economy and how their actions and behavior have been driven pre-Covid and the situation they find themselves in. The aggregate of 'small stuff' and how that paints the big picture. NZers don't really think about this stuff (that's for other people) but it's all come to a head now. Personally I don't really see how our resources all locked in housing make the situation good for anyone (important to remember that those resources are also some kind of fiction in terms of savings).

Understanding all this may not help a FHB, but that's beside the point. That person's destiny is now being shaped by what has happened in the past 20-30 years. That's completely out of their hands unfortunately.

example for a FHB, I am on outskirts of CHC, great little house has just come up 3 beds 1 bath two living older Kitchen but adequate..410k..Log burner great wee entry level house...the sort house I started off with as a FHB. If you think your job is secure with low interest rates go for it. BUT just 100 meters away, brand new subdivision..new houses..4 Bdr 2 bath, 3 living..average price 700K ..for a FHB..no way, unless you have at least 20% deposit and really secure job. But again individual choice.

Keep their hands in their pockets ! There is no fun, in catching falling knives.

Correct. It's the lack of any plan for recovery that is really starting to worry business leaders. Little policy out on how to increase productivity or try to get some growth in the economy form the productive side. Look at the stats from people who are worried of losing their jobs in next six months, these are very real concerns, yet the only policy i can see is to just keep paying wage subsidy. Just rack up the debt.

It's the lack of any plan for recovery that is really starting to worry business leaders. Little policy out on how to increase productivity or try to get some growth in the economy form the productive side. Look at the stats from people who are worried of losing their jobs in next six months, these are very real concerns, yet the only policy i can see is to just keep paying wage subsidy. Just rack up the debt.

Right. However, do you think business leaders need to look to the govt for answers? As for the govt paying people's wages, isn't that because too many people don't have any savings?

https://www.resilience.org/stories/2020-09-10/nobel-prize-winning-econom...

"Nordhaus’s celebrated work, which, according to the Nobel committee, has “brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth”,

You cannot have sustainable growth within a bounded system. Not that it's a real Nobel prize.............

Re-recession Not Required

If we are going to see negative nominal Treasury rates, what would guide yields toward such a plunge? It seems like a recession is the ticket, the only way would have to be a major economic downturn. Since we’ve already experienced one in 2020, a big one no less, and are already on our way back up to recovery (some say), then have we seen the lows in rates?

In other words, not recession precisely but lack of recovery in between downturns of whatever ultimate size. That’s why yields turned negative in these key sovereign markets when they did (and why they were nearly simultaneous in doing so). Rising liquidity risks combined with little to no prospects for meaningful economic growth to offset them (recession or not) resulted in this situation people struggle to understand

Interesting following farmers in the USA worried about the future of ethanol. They think times are going to get really tough.

---

Electric vehicles will destroy the ethanol market, and if we have less trade....well, there goes the soybean market, too. My entire career up to now has been commodity based, and I personally see a bleak future for commodity farming in the next 20 years.
I mean...I hope I’m wrong. I like driving big equipment and moving big trucks of grain....but I’m also thinking about what has to change (everything) to grow food for local Americans.

You lost me there. I don’t know what the ‘system’ will look like after exports and ethanol dry up. I suspect it will be corporations farming 100,000s of thousands of acres like in Brazil and Ukraine, perhaps. And some people doing ‘niche’ things, like actually growing food

I mean....there will still be commodity farming. It will be a (one) large business with huge tractors farming most of the vacant land in a few counties...everyone else will have gone bankrupt....or done something niche. Like....growing actual food for their actual community.

What Possible Disruption Is Coming That Requires China To Start Massive Stockpiling Of All Possible Commodities

https://www.zerohedge.com/markets/what-possible-disruption-coming-requir...

I think this partly explains the iron ore price (and Fortescue's share price). However, I also read about iron ore being used as collateral on loans in China in the corporate and industrial sectors.

Plague, Panic, and Protests—The Weird Election Year of 2020

https://www.youtube.com/watch?v=k6L5C0uLFjE

To all those expecting NZ covid19 elimination strategy to bring praise, commercial success and international business opportunities.
Where are you now?

https://i.stuff.co.nz/sport/rugby/all-blacks/300104831/rugby-championshi...

Sanzaar is expected to announce at 3pm on Friday that The Rugby Championship will be hosted in Australia.

But it’s understood that the 2020 version of the tournament will go ahead solely in Australia, starting in early November, due to superior commercial modelling and quarantine conditions. NSW has been touted as the venue.

Its coming up to 3pm place your bets.

NZ Prime Minister Jacinda Ardern has distanced herself and the Government from New Zealand potentially losing the Rugby Championship, blaming "SANZAAR politics"

https://www.newshub.co.nz/home/sport/2020/09/rugby-championship-jacinda-...

And, ...... its gone.

The 2020 Rugby Championship featuring the All Blacks will be played in Australia, governing body Sanzaar has confirmed.

In July, Sanzaar gave approval for the tournament to be held in New Zealand from early November to mid-December, pending suitable facilities for teams to quarantine and train.

https://i.stuff.co.nz/sport/rugby/all-blacks/300104831/rugby-championshi...

Commercial benefit of PM elimination plan.
- empirical evidence.

that's it, the economy is ruined. Hospo would be running so much better if we learned to live with covid by staying home and not socialising.