Here's our summary of key economic events overnight that affect New Zealand, with news the Chinese economy may be powering the meager economic activity the world has right now, but it is just a debt-fueled 'recovery'.
And their economy is taking on much more debt. New yuan loans rose in August at their fastest pace in nearly three years, adding almost +NZ$800 bln in just one month.
And although car sales in August reached almost 2.2 mln, the world's largest car market is still struggling to move "New Energy Vehicles" (electrics and hybrids). In August they sold 109,000, so only less than 5% of Chinese cars are electric. This is despite crowing that they rose almost 25% in August from a year ago. China sells about 21 mln cars a year to claim the #1 spot as the "world's largest" car market and far more than #2 USA (17 mln per year).
China needs rising car sales, especially for its steel industry. But the country's steel exports have been subject to 15 new anti-dumping investigations in the first nine months of this year, more than all of last year. Other countries bristle at their growing dominance. Thailand is the latest to take action against the Chinese onslaught.
And while China is emphasising exports, foreign firms are raising their investment in the country, with FDI up almost +19% in August 2020 compared to the same period a year ago.
But outbound investment from China isn't as enthusiastic these days. And one place in particular the Chinese are pulling back from is Australia. Four years ago it exceeded NZ$20 bln. Last year under NZ$3 bln. The prospects this year are for lower again.
In Indonesia, their capital Jakarta is locked down with 11 mln people restricted to their homes for at least two weeks, as the pandemic bites fiercely there. Hospitals are swamped. Seaborne escapes to Australia will worry Canberra.
In the US, the monthly budget statement from the US Treasury revealed another huge -US$200 bln deficit in August, taking the twelve month total to a new record high of just on -$3 tln. Given that the annual rate of GDP is now just under nominal $19.5 tln, that is a Federal deficit of -15.4% of GDP, a staggering level. And that takes the total of US debt held by the public (ie: excluding interagency debt) to over US$20.8 tln. So the annual new deficit added almost 17% to that load in one year. And the US Administration not only did nothing to deal with this load, it actually made it worse. Even at tiny interest rates, the interest cost load amounts to $537 bln per year in 2020. If rates ever rise, this cost will be toxic, and a rise to an average interest rate of 3% will consume more of their tax revenues than their Defense Department, and nearly half of their enormous DHHS (welfare) budget.
American core inflation rose a bit more than expected in August, now up +1.7% in a year. Not included in that core inflation reading is food that was up +4.1% and petrol that was down almost -17%. But included are two items in demand in a pandemic and recession; medical care is up +5.3% and used cars are up +4.0%. So it is more expensive to buy a car to look fo a job, but cheaper to drive around in the search. Don't get sick, however.
The US Department of Agriculture report for September (WASDE) notes that China's demand for grains, especially wheat, if on track for record imports, especially from Australia and Canada. That would be China's highest level of imports since the 1995/96 season. The USDA also raised it forecast for beef prices on Chinese demand. And they have slightly lowered their milk price forecast.
In Canada, household debt burdens are falling and fast. Households are paying down debt as uncertainty over employment rises. But that is not fast enough for some; their regulator sees delinquencies and foreclosures rising later this year and into next.
The latest global compilation of COVID-19 data is here. The global tally is 28,831,000 and up +558,000 in two days. Global deaths now exceed 921,000 (+10,000).
Just under a quarter of all reported cases globally are in the US, which is up +86,000 to 6,695,000 and a never-ending large rise. Their death total is now 198,300 and rising at about +1000 a day (598/mln and could pass the UK rate in the next few days - but the UK is in its own renewed surge yet again).
In Australia, there have now been 26,651 COVID-19 cases reported, and that is only +86 more cases from Saturday and only from Victoria and NSW. Deaths however have now topped 810 (+13). Their recovery rate is up over 88% now.
The UST 10yr yield is holding at 0.67% but that is down -5 bps in a week. Their 2-10 rate curve is unchanged at +54 bps, their 1-5 curve is at +12 bps, while their 3m-10 year curve is now just over +57 bps. The Australian Govt 10 year yield is unchanged at 0.90%. The China Govt 10 year yield is holding at 3.15%. The New Zealand Govt 10 year yield is also holding at 0.61% and little-changed in a week.
The price of gold will start today at US$1940/oz which is virtually unchanged in a week. Silver has also recorded little change from this time last week.
Oil prices will start the week lower at just under US$37.50/bbl in the US while the international price is down to just under US$40/bbl. These levels are -US$2 lower than this time last week.
The Kiwi dollar will start the week at 66.7 USc and a very slight firming. Against the Australian dollar we are unchanged at 91.5 AUc. Against the euro we are also marginally firmer at 56.3 euro cents. That means our TWI-5 is still at 69.7.
The bitcoin price is little-changed today, at US$10,289 and also about where we were at this time last week. 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 ».