Retail sales up in the US, trade balance worsens; confidence improves in many large countries; Canada faces large deficit; RCEP close to finalising; UST 10y at 0.65%; oil down and gold up; NZ$1 = 65.9 USc; TWI-5 = 69.3

Retail sales up in the US, trade balance worsens; confidence improves in many large countries; Canada faces large deficit; RCEP close to finalising; UST 10y at 0.65%; oil down and gold up; NZ$1 = 65.9 USc; TWI-5 = 69.3

Here's our summary of key economic events overnight that affect New Zealand, with news of improving sentiment in many large countries, even if levels aren't back to pre-pandemic standards.

Last week's American retail sales were lower than the previous week but they were +2.2% higher than the same week a year ago, and this is considered a positive trend.

But that masks major changes in the retail industry as retail bankruptcies, liquidations and store closings reached records in the first half of 2020 as the pandemic accelerated the shift to online shopping.

And their August merchandise trade balance rose to just on -US$85 bln for the month, a new record high, made worse because the July result was revised worse too. Their trade balance with China is now at its worst-ever level. Those tariffs just make American pay more, they are having no impact on the Chinese (as any year one economics student could have told you). American exports fell almost -15%, while their imports fell -5.9%.

But a widely-watched measure of consumer confidence increased sharply in September, after back-to-back monthly declines, but remains nearly -20% lower than year-ago levels. The rise from August is based on the belief the economic impacts of the pandemic may be fading.

In Canada, they say they are heading for a government budget deficit of -15% of Canadian GDP in 2020.

In China, sentiment amongst Chinese firms and households improved in Q3-2020, as their economy returned to a full recovery.

There was some data out of South Korea late yesterday that is instructive. (South Korea is our fifth largest export market and our sixth largest import source.) Their industrial production was -3.0% lower in August than a year ago, and that was slightly worse than expected. Investment intentions declined too. But their retail sales were up +3.0% from year-ago levels and that was an unexpected positive result. Perhaps that is why their business confidence inched up in September and isn't far below year-ago levels now.

And we should report that the RCEP trade deal is in its final stages before agreement. Started in 2012 by China to counterbalance an American-dominated TPP, it now doesn't include India. (And the TPP no longer includes the USA. They are developing a security alliance with Japan, India and Australia, known as the Quad.) And both Japan and Australia are having last-minute second thoughts. But New Zealand is still committed to being in.

In Europe, economic sentiment improved again and for the fifth consecutive month, even if at a slower pace. But it is still -30% below pre-pandemic levels. And remember those were barely positive at the time after a long decline from late 2017.

Wall Street has started today down -0.2% in midday trade, following Europe markets which were down an average of -0.3% overnight. Shanghai closed yesterday up +0.2%, Hong Kong closed down -0.9%, and Tokyo ended its session down -0.1%. The ASX200 closed flat while the NZX50 Capital Index shed -0.6%.

The latest global compilation of COVID-19 data is here. The global tally is 33,444,000 and up +271,000 in one day. The European resurgence isn't abating, nor the one in the US Midwest. Global deaths reported now exceed 1,003,000 but clearly many are going unreported.

The largest number of reported cases globally are still in the US, which is up +45,000 overnight to 7,374,000 back up after their weekend. The number of active cases are stable at 2,535,000 so as many new cases as recoveries and making no real progress. Their death total is now just over 210,000 and rising at +1000 per day. At 634/million population, it is the worst western death rate bar Belgium and Spain.

In Australia, there have now been 27,063 COVID-19 cases reported, and that is only +19 more cases than yesterday. Deaths are up however at 882 (+7). Their recovery rate is now almost 91%.

The UST 10yr yield has retreated today, down at 0.645%. Their 2-10 rate curve is unchanged at +53 bps, their 1-5 curve is also unchanged at +15 bps, while their 3m-10 year curve is still at +58 bps. The Australian Govt 10 year yield is up +1 bp unchanged 0.84%. The China Govt 10 year yield is down -1 bp at 3.14%. And the New Zealand Govt 10 year yield is unchanged at 0.46%.

The price of gold is back up at US$1895/oz and a +US$21 jump, and on top of yesterday's +US$14 gain. And silver has made another outsized daily gain, up more than +2% for a second day.

Oil prices are sharply lower today, down by more than -US$2 to just under US$38.50/bbl in the US, while the international price is equally lower at just over US$40.50/bbl.

The Kiwi dollar starts today at 65.9 USc and nearly a +½c rise from this time yesterday. But against the Australian dollar we have lost some more ground and are now at 92.5 AUc. Against the euro we are soft at 56.1 euro cents. But that means our TWI-5 has risen to 69.3.

The bitcoin price is much lower this morning, and now at US$10,686 and a +1.9% decline. 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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45 Comments

23
up

We should hang our heads in shame. And acknowledge stupidity, both in our Customs/border personnel, and in our legal system.

When you’ve sailed to New Zealand, you’ve spent more than quarantine-time …….. quarantined! This recently happened to a NZ scientific-expedition boat which took 43 days from Panama, no stops and GPS tracked. They were told they’d have to quarantine. They pointed out the 43 days, and were told ‘just the foreigners onboard’. Who had also, oddly enough, been in isolation for – wait for it – 43 days. Who’d have thought?

I tell you who didn’t thought – the personnel at the border, the bosses of same, the bosses of the bosses of same, and the legal system which threw three innocent, non-threat people in jail. This is kangaroo-court territory – are we really that ignorant?

Shame on us

They wanted to go back to Germany anyway, according to their lawyer, and now it looks like they get that free on us as taxpayers

this is all about sending a message to anyone else that tries the same trick, should have confiscated their boat, to be sold to cover expenses

13
up

It's no trick. Whether they wanted to return to Germany (presumably selling their boat here, or to return later) or not, is irrelevant. And yachties (usually on E-W circumnavigations, spend money in NZ refitting their boats. Whangarei does very well from this. There is also a humanitarian/safety issue; most do the down-hill run (and will have planned their route years out https://cornellsailing.com/publications/world-cruising-routes/ ) to avoid the cyclone season in the SP. It is a well-trodden route, and there's no PlanB if you're halfway round in Tahiti. This is a classic example of rule-makers not familiar with reality - just like the screen-swiper brigade wouldn't know one end of a splitting-axe from the other. Tells us we are in societal trouble; ignorance and omnipotence hand in hand.

And there's only expenses because our ignorance induced a cost.

15
up

and this ignorance is all around us, in councils, health boards, MPI, MOD, it's invasive in our bureaucracy, people who don't know what they are doing running the show. Just go ask a Southland farmer how it's working out for them.

I'd be more inclined to ask a Southland Galaxiid.

Reminds me of the Walrus and the Carpenter: 'But answer there was none....'

"Threats
Their main threats are habitat loss from land development and water abstraction, and predation by introduced fish species such as trout (although some larger river habitats have enough space for galaxiids and trout to co-exist).
Other threats include stock access to streams, reduction of native vegetation, and forest harvesting. These changes in land use impact on the streams in which galaxiids live, increasing sedimentation, changing natural flows through water abstraction, and reducing habitat available for spawning".

Quite, CO :)

11
up

The problem is Murray is that it was always going to be so, it is predictable. Read Bob Jones "On Management", one of the best books on psychology you can read. Box tickers.

But it takes you back to the wisdom of trashing civil rights for the lockdown in the first place. Those rights were always going to get trashed further by bureaucratic idiots. Linear thinkers, they are in those positions for that reason. The Police are a corporate and behave the same way, more power should not be vested in them.

So really you either fundamentally oppose the lockdown as deeply flawed in many ways, or you suck it up and accept a few bad decisions on the path to whatever dubious outcome is intended.

11
up

These guys were on a vacation , holiday, whatever you want to call it, and they could have flown home from Tahiti, so I don't buy your humanitarian argument. The world has changed, and I see it no different to someone travelling overland by bicycle or whatever from London to NZ, as has been done hundreds of time by Kiwis, at this time, you have to change YOUR plans, NZ doesn't have change the country's plans for YOU.

So if they'd come to make a million-dollar film, you'd have let them in? Is that what you mean by not being on holiday? Seems that's what we make exemptions for.

I'd rather go with humanitarian.

they look at it in black and white no greys, if they allow one boat without approval in then they can all come , is it sensible no, we have container ships arriving daily whom sailors have spent less time isolating, coming from ports ie melbourne where covid was rife and not being tested when they went ashore.
i have no problem with any of them coming as long as they have spent 14 days at sea, come from the islands (covid free) and do testing and stay onboard until two negative tests. i suspect the reason they are not allowing it is the resource they would need, northland DHB, police, armed forces, to enforce .
then they are free to wander the coasts and spend up all over NZ during the summer

If they had all been tested twice during the voyage, that would be a valid comparison. Sailor A comes on board with a new infection, no symptoms, and passes it on to sailor B on day 12; who in turn passes it on to sailor C on day 24, who on arrival on day 30 is just getting infectious. Boom, Covid bomb. Only a solo sailor has really been quarantined.

A short quarantine could be done, by testing on arrival and anchoring offshore and retesting 9 days later, or something like that, but it would require a designated port for this to happen, security around the boats, a tester to go on board ... it all takes technical and limited resources more efficiently used in the quarantine hotels. When our quarantine facilities are a bottleneck for employers wanting to bring in staff, and families wanting to be reunited, why should yachties be able to jump the queue by sailing in?

I have round the world sailors in my family and I am certain they would never risk losing possession of their boat. The ability to sail on is everything.

First Presidential debate today at Tuesday 9 p.m. ET – my understanding is it Wednesday 2pm NZDT (NZ is ahead 17 hours). Live streaming readily available such as CNN.com
Background about the debates:
https://edition.cnn.com/2020/09/28/politics/us-presidential-debates-expl...

Yes they'll be some burning questions. Not sure how Trump is going to avoid discussing his lack of paying tax; Mr Trump paid only $750 (£580) in federal income tax in both 2016 and 2017. And that he owes over $400m in debt!!!!! "To whom? Different countries? What is the leverage they have?"

Nancy Pelosi, Speaker of the House of Representatives, asked whether Mr Trump owed money to foreign interests, following an article on his financial records by the New York Times. The fact that you could have a sitting president who owes hundreds of millions of dollars that he's personally guaranteed to lenders, and we don't know who these lenders are," she said, and suggested that Mr Trump may be indebted to Russian President Vladimir Putin. BBC https://www.bbc.com/news/business-54332956

The story starts with this:

Donald J. Trump paid $750 in federal income taxes the year he won the presidency. In his first year in the White House, he paid another $750.

He had paid no income taxes at all in 10 of the previous 15 years — largely because he reported losing much more money than he made.

However, down in paragraph 78(!) it reports:

Mr. Trump was periodically required to pay a parallel income tax called the alternative minimum tax, created as a tripwire to prevent wealthy people from using huge deductions, including business losses, to entirely wipe out their tax liabilities.

Mr. Trump paid alternative minimum tax in seven years between 2000 and 2017 — a total of $24.3 million, excluding refunds he received after filing. Link

Audaxes, What Trump supporters don't realize is that Trump still owes millions in tax, he also defrauded the IRS by giving false accounts to the value of his assets etc. And he still owes over $400 million most likely to foreign powers.

Michael Cohen: Trump Tax Returns Show He Could Be 'Facing A Potential Bankruptcy' | Katy Tur | MSNBC https://www.youtube.com/watch?v=WnGuKNwYCBY

Michael Cohen - really?

And the investigation by the New York Times! Oh and remember Michael Cohen was Trumps righthand man for many years until Trump politically threw him under the bus along with Trumps other cronies that ended up with criminal convictions.

He paid no taxes because he was making losses, real losses, no clever accounting required ie he is a shifty business man who convinced his supporters he was the opposite. The guy is a con man selling bs.

But this is how to be 'smart' and 'successful'. Gamble with leverage and allow other people to pay taxes (via VAT/GST, wage tax/PAYE). Is it not?

Nope. He is in deep doo doo with millions of debt repayments due. The only success he had was the apprentice and the money form this has been gobbled up in failed golf courses and failed casinos. He sold himself as a successful business man who would do the same for the US economy. He is not..he is a fraud.

Exactly He is the biggest con for years. Can not call him a loser because others took his BS and allowed him to thrive making him appear a winner. That makes the system in US the losers.

11
up

The tariffs imposed by the Trump administration seemed pretty ad-hock without an overall support package designed to re-localize manufacturing in the US so it is no wonder they haven't worked to bring down their trade deficit.

As the world inevitably moves towards re-localisation and away from trade with mercantilist countries like China, NZ should be thinking about this too.

I spent many years in the late 90's and early 2000's in the US watching their manufacturing industries get hollowed out by moving to Mexico and Asia. Many people lost their jobs and average incomes stagnated there to be replaced by debt and shite service jobs. Globally, pollution rose and labour standards declined with laxer standards in China etc.

This discontent and relative decline explains why many elected a bozo like Trump. Unfortunately I don't think he genuinely cares about much except himself, let alone has the ability and skill to turn around the greatest own-goal the West has made in allowing manufacturing know-how to slip away to a corrupt dictatorship like China.

A good comment. And yes, "Trump. Unfortunately I don't think he genuinely cares about much except himself" but that just tells us the state of desperation many Americans (and others) have reached in their search for an alternative to more-of-the-same - which is what a Biden Admisitraion wants to return to; keeping the unwashed masses in the debt soaked place.

Actually it's the Republican's that want to suppress the unwashed masses so they can pay tax, so the wealthy want to avoid paying their fair share of tax. Go and watch the film 'VICE' if you want to see what the Republican party is all about. Guess they thought that Trump would be another puppet president for them but what they didn't realize is how massively in debt Trump is and is only looking out for himself.
Film trailer for VICE (Also available on Netflix) https://www.youtube.com/watch?v=lbUAVTc7NTo

"Available on Netflix". The same network that broadcasts the cuties "doco"?

Apple began making the $3,000 computer in Austin, Tex., it struggled to find enough screws
Tests of new versions of the computer were hamstrung because a 20-employee machine shop that Apple’s manufacturing contractor was relying on could produce at most 1,000 screws a day

Seems insignificant in the larger scheme of things but highlights the fundamental problem with manufacturing in the US.

https://www.nytimes.com/2019/01/28/technology/iphones-apple-china-made.html

Sounds Air has signed a letter of intent to purchase electric planes with the Swedish company Heart Aerospace, endeavouring to become the first regional airline to offer zero-emission flights

https://www.rnz.co.nz/news/business/427098/sounds-air-aims-to-offer-firs...

"Environmentally sustainable". That phrase is misused more than most. Those eco-planes still require extraction of resources, most likely from poor African countries by large conglomerates that will further degrade its fragile ecosystems.

this sounds unnerving for a normal traveler, the sounds of the engines gives some comfort that all is well, no sound apart from humming and whistling would make me nervous

Normal?

What you mean is 'post WW2'.

Not normal in any evolutionary or inter-generational time-scale. Electric planes, like electric cars, are the right answer to the wrong question.

"Those tariffs just make American pay more..."
But isn't that the name of the game? Inflation Targetting.....
Prices up = Good. Business Costs (ie: Wages and Job Security) down = Good. The Artificial Cost of Money (Risk) down = Good.
What kind of lunatic planet have we created for our descendants?

this is a world game changer, that and many airports are starting to use dogs to sniff passengers and they are accurate
Tests for Covid-19 that show on-the-spot results in 15 to 30 minutes are about to be rolled out across the world, we could see tourism slowly return early next year
https://www.theguardian.com/world/2020/sep/28/covid-19-tests-that-give-r...
https://www.biorxiv.org/content/10.1101/2020.06.03.132134v1

This is a bigger world game changer...

Dr Scott Atlas
https://youtu.be/biC4nHPYtbA

Call for critical thinking.

dr atlas is a radiologist not an infectious disease specialist, that would be like me taking my car to the panel beater for and asking him to replace the big end bearing,
Radiologists are medical doctors that specialize in diagnosing and treating injuries and diseases using medical imaging (radiology) procedures (exams/tests) such as X-rays, computed tomography (CT), magnetic resonance imaging (MRI), nuclear medicine, positron emission tomography (PET) and ultrasound.
in saying that i think we should never go past level two in the future, we now know a lot and have tools arriving weekly to deal with it,
the next covid app update should be enabling bluetooth
https://www.stuff.co.nz/national/health/122801285/coronavirus-bluetooth-...

Of Dr Atlas' discussion, what are the points you take issue with?

For mine one is a health policy point. In that Grant R should have done a cost benefit of the PMs eliminate at all costs policy.

Developed countries following the Japan Path. Everyday morning reserve bank governor running to office to print more and more money to buy bonds and stock.

"All key indicators of the El Niño–Southern Oscillation have now reached or exceed La Niña thresholds. Central and eastern tropical Pacific Ocean sea surface temperatures meet La Niña thresholds, with the latest NINO3.4 and NINO3 values for the week ending 27 September being −0.80 °C and −0.85 °C. Atmospheric indicators including the Southern Oscillation Index (SOI), trade wind strength, and equatorial cloudiness are also at La Niña values. The latest 90-day SOI ending 27 September was +8.1.

All climate models surveyed by the Bureau indicate further cooling is likely, and that La Niña thresholds will likely be sustained at least into January 2021."
http://www.bom.gov.au/climate/enso/outlook/

Daily obfuscation complete. My oil-co lords and masters will be well pleased.

The interesting thing to watch, is just how Australia looks during a 'cooler' oscillation. My betting is that they will be in record-high territory for that scenario too.

And all oscillations - um - oscillate.

In was in reference to NZ weather - but don't let that get in the way of batshit crazy conspiracy theories. Andrewj will get to fill up the dam. "Northeasterly winds tend to become more common during La Niña events, bringing moist, rainy conditions to northeastern areas of the North Island and reduced rainfall to the lower and western South Island. Warmer than average air and sea temperatures can occur around New Zealand during La Niña."

We are sneaking by with just enough but my sister in Gisborne said they are very dry mostly due to lots of wind. Must have been horrific stock losses down south in the past few days.
Should head back to easterly rain hopefully.

Michael Reddell has another crack at the RBNZ's unaccountable lack of monetary-policy movement. His heading - Bleak Passivity.

There is, again rightly, an emphasis on the susbstantial uncertainty firms and households face, again here and abroad, as the future course of the virus is really little more than anyone’s guess. We are told – in, I think, materially stronger words than they’ve used before – that “monetary policy will need to provide significant economic support for a long time to come to meet the inflation and employment remit”. And yet what did they actually do? Nothing.

https://www.tvnz.co.nz/one-news/new-zealand/act-promises-cut-wasteful-sp...

Is this the same cost saving concept used by Rodney Hide about the Auckland Council amalgamation?