Dairy prices rise; US retail sales flat; US job openings fall; US trade deficit rises; Australia get big spending Budget; airlines bleed; UST 10y at 0.77%; oil up and gold down; NZ$1 = 66.4 USc; TWI-5 = 69.6

Dairy prices rise; US retail sales flat; US job openings fall; US trade deficit rises; Australia get big spending Budget; airlines bleed; UST 10y at 0.77%; oil up and gold down; NZ$1 = 66.4 USc; TWI-5 = 69.6

Here's our summary of key economic events overnight that affect New Zealand, with news of more evidence the global economy is closer to a serious long-term downturn.

But first up today, there has been another satisfactory dairy auction overnight. On average prices were up +2.2% in US dollar terms and up +3.4% in New Zealand dollar terms. Volumes sold were about the highest offered in 2020 and the most bidders of the year showed up for this one. The result was driven less by WMP (up +1.7%) than by some ingredients, especially butter which was up +8.4%. It is the second good auction in a row, and aided by a Kiwi dollar that isn't as high as it was. Over these two latest auctions prices are up +5.8% in US dollar terms and +7.7% in New Zealand dollar terms. While today's event alone won't change farm gate milk prices, it does seem to end the 2020 downward trend and start the new season positively.

In the US retail sales last week were unchanged and held on to the modest year-on-year gains posted recently.

American job openings slid again and although they decreased by more than expected, it wasn't a big miss. However private sector levels were nearly -10% lower compared to the same month in 2019. New hires were only boosted by the +246,000 the Federal Government made, principally due to taking on temporary census workers.

The American trade deficit got worse again, this data being for August, and now at worst-ever levels. Their monthly goods deficit was -US$84 bln, a record, and their monthly services surplus was +US$16.8 bln, and that too is lowest in a very long time. Their deficit with China was just under -US$30 bln and lower than recently. But clearly American competitiveness isn't improving overall. No Administration has presided over such a quick, sharp deterioration, ever. It is an Economics 101 lesson about how not to apply tariffs.

And still no progress on fiscal relief from Congress or the Administration for their ailing economy. In fact, the Fed boss warned of potentially "tragic" economic consequences that could result if they aren't forthcoming soon. The IMF boss issued a similar warning, although on a more global basis. And in Europe, the ECB did the same.

In Australia, they have responded with a huge NZ$107 bln new spending Budget with large tax breaks and cash for everyone.

And yesterday the RBA kept its settings unchanged but hinted strongly it need that fiscal action to steady the Australian economy. And they also hinted they would have new measures ready next month.

And new trade data suggested things are turning down quite quickly. Australia’s trade surplus surprised to the downside in August. Exports were down -4.2% vs an expected -2.7% and imports rose not fell, +2% vs an expected -4.4%. That resulted in a trade surplus that fell to $2.6 bln, down from an average of +$7.5 bln in the past five months.

The international airline industry is in big trouble. They will burn through NZ$115 bln in cash during the second half of 2020, despite the restart of operations. And that is not expected to stop. The slow recovery in air travel will see a continuing to burn of cash at an average rate of NZ$8 bln per month in 2021. Their international lobby group is calling on governments to support the industry during the coming northern winter season with additional relief measures when the pressures will be most intense. Few will survive without taxpayer cash injections. Boeing warned it will be hit long-term too.

Wall Street is holding today, up just +0.2% on the S&P500. European markets closed about +0.5% higher last night. Yesterday Hong Kong rose +0.9% and Tokyo was up +0.5%. Shanghai is back trading later today. Yesterday the ASX200 ended up +0.4% and the NZX50 Capital Index was up +0.7%.

The latest global compilation of COVID-19 data is here. The global tally is 35,600,000 and up +326,000 in one day. Global deaths reported now exceed 1,046,000 but clearly many are going unreported. 

The largest number of reported cases globally are still in the US, which is up +42,000 in one day to 7,692,000. The number of active cases is at 2,567,000 so as many new cases as recoveries and no progress on that front. Their death total is over 215,000 and still rising at about +1000 per day.

In Australia, there have now been 27,174 COVID-19 cases reported, and that is +25 more cases than yesterday. Deaths are little-changed, up to 895 (+1).

The UST 10yr yield is firmer again today, up +2 bps at 0.77% in a move that in anticipation of new US stimulus. Their 2-10 rate curve is steeper at +63 bps, their 1-5 curve is also steeper at +20 bps, while their 3m-10 year curve is up at just over +69 bps. The Australian Govt 10 year yield is up +5 bps at 0.96%. The China Govt 10 year yield is unchanged at 3.16%. The New Zealand Govt 10 year yield is up +1 bp to 0.53%.

The price of gold is down -US$12 this morning at US$1915/oz. Silver has fallen -1.9% in an outsized drop.

Oil prices start today firmer by +US$1, now just under US$40.50/bbl in the US, while the international price is up to just under US$42.50/bbl.

The Kiwi dollar starts today unchanged at 66.4 USc. Against the Australian dollar we are firmer at 92.7 AUc. Against the euro we unchanged at 56.3 euro cents. And that means our TWI-5 is still at 69.6.

The bitcoin price is little-changed today, now at US$10,730. 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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69 Comments

10
up

Why don't you differentiate, as the CDC has done recently, between those people who died 'with' Covid and those who died 'of' Covid. You see most people succumb to their co-morbidities, very few die purely from Covid. You should do that. It's more accurate. Not as shocking, and not as fear instilling, but more honest and honourable.

Most people die from pneumonia, not from diabetes, liver disease, obesity, etc.

28
up

Exactly! It's a bit like when the media reports gun crime. If someone was shot and died the government shouldn't document that the death was from a gunshot as it isn't the bullet that causes death. It is usually blood loss or brain damage right? So why is it even relevant to mention the gun when reporting the story when it's completely unrelated to how they died? It's just scaremongering!

If you think about it like this, a lot of people who reportedly died of crime have actually just died naturally of haemorrhage. Wake up sheeple!

That kind of logic can take us down the rabbit hole.

Why don't you jump in and join Rosenstein and me?

I promise to tell you the secret of who is controling the clouds, or why traffic lights have 3 colours, or why night seems to always follow day, or why.... It goes deep and they don't want us to know!!1!

One team of medical and scientific experts in India estimates that their country is underreporting mortality numbers by a factor of at least 6-to-1.

Only a small fraction of the population is being tested, one-in-four deaths are being certified for a cause by trained medical professionals and mortality cases among patients who tested positive are being heavily attributed to their underlying conditions or co-morbidities.

Studies conducted at the University of Toronto show that even in high-income countries with good medical certification, analyses "suggest undercounts by 30-60% of the daily death count".

And what of the under-reporting of cases? WHO thinks almost a billion people have had it. Heck we all might have had it a year ago when everyone had a bad cough. Bring on the antibody tests

Have you had a look at the excess mortality graphs? Easily available for Europe and the USA, and they show a huge spike will above background right when the first covid peak hit. There is just no way we 'all had it' last year without the world knowing - that kind of spike in mortality is extremely obvious.

I agree that cases were hugely underreported, especially back in the first wave when testing was inadequate, and reported case fatality rates should be treated with a handful of salt accordingly.

I thought you were going to say we should document whether the gun was licensed or not.

Then that allows some obfuscation to occur. Did COVID actually kill them, or did it just open the door to something else that did? When talking about co-morbitities it is often the cumulative effect and not the dominance of one illness. COVID is likely the one thing pushing these people over the cliff because it is so damaging to their bodies.

We are all but flesh and blood.

10
up

With that logic we could have a zero road toll. Thanks Rosenstein, that’s far more honest and honourable.

You're right, David should do a daily update of the road toll. To remind us why we should lockdown drivers if it starts to get too high. A global tally of road deaths would be informative and guide a global response to driving behaviour and government spending to combat it.

Agreed, car crashes are highly contagious, and easily transmissible through communities if hygiene is poor. It's only logical to put as much emphasis on counting them. We could even monitor the number in some kind of 'road toll' count? Smart thinking again.

Is there another agenda? - Western Lockdown to Shut Down China

World car crash economy is a good way to encapsulate it. Explains why some irresponsible bad leaders are trying to force their populations back in to opening up their economies, without resolving the Covid risk first.
Trump is one such leader trying to risk the US nations health over the Stock Market. To quote him: “Don’t let it dominate you. Don’t be afraid of it,” Trump said in a recorded video message. “We’re going back, we’re going back to work. We’re going to be out front.
This latest stunt is severely backfiring on him as he yet again tries to downplay the pandemic. Reuters article: https://www.reuters.com/article/idUSKBN26Q0CU

There must be a consensus forming amongst the great airlines, whenever volume air travel returns internationally, that fares won’t be what they used to be. Depends too on such as Emirates who willingly & consistently flew well less than half full flights to all points of the compass, under the umbrella of state sponsorship.

I was wondering about this. Where do airlines biggest cost lie? Their fuel? Yet the fuel costs remain stubbornly high. So the fuel companies are still screwing them. Air travel has to change. Load factors drop to enable separation, a lot, possibly more freight sharing the main cabin. and possibly even a re-design of the air circulation systems. For air travel to be affordable again a lot has to change, and someone, somewhere need to map that out.

Air travel relies on economies to scale
Just like everything else
affordable isnt coming back

Very probable. Air travel will become the preserve of just the wealthy. Watch the corruption ramp up.

I thought the planes are a fairly big cost? Second hand planes will be going cheap right now I imagine!
I'm sure if they all go under some new companies will start once Covid is gone. No need for subsidies or bailouts...
Pity the NZ govt owns a big chunk of an airline, you have to wonder why, they should have sold it ages ago! They could pick it up for a song right now they needed. And Auckland Council owns a fair chunk of Auckland Airport, again why? I guess they assumed it was the investment that just keeps giving; I'm not sure those exist (except maybe NZ residential property!)

13
up

There is a runaway train barreling down the railway tracks. Ahead, on the tracks, there are five potential FHB's tied up and unable to move. The train is headed straight for them. Orr is standing some distance off in the train yard, next to a lever. If he pulls this lever, the train will switch to a different set of tracks. However, he notices that there is one Specuvestor on the side track. He has two options:

1. Do nothing and allow the train to kill the five potential FHB's on the main track.
2. Pull the lever, diverting the train onto the side track where it will kill one Specuvestor.

Which is the more ethical option? Or, more simply: What would Adrian Orr (and Jacinda) do?

16
up

The train is full of boomers on gold card sight seeing trip. They shout at him..."dont you dare pull that lever" or we will vote winnie back in

I'm curious Frazz, would you prefer a return to FPP as opposed to MMP?

Grown under the long Muldoon years..what do you think?

Yet you persist in blaming boomers and not the politicians? You argue that the boomers should have voted a different way, but why haven't you and your generation changed things to the way you think they should be?

Sorry Murray - I don't see the difference Boomers - Politicians? What is the average age in Parliament now..
Finally we are getting some change in this election but just look at Judith a classic example of me me generation clinging onto the "best way to run the economy".

The US appears to be worse. Think I read the other day that the average age of the house/senate was in the 60's! No wonder America is falling apart. Not to bash boomers, but they really seem to be struggling with the rate of change in society (technology etc) and quickly appear to be out of touch. Trump is a classic - deny science, deny data and just push anything that works for 'me' (you can also see that on this site - ignoring any information that doesn't fit the paradigm that is beneficial for 'me'). Its like a 12 year old in a 74 year old body. But I must remember that its the millennials that are the 'me' generation (my bad...)

I'm a boomer IO and I have no trouble with the rate of change. I have a big issue with much of the crap our politicians expect us to swallow, and how many actually do (swallow it!). I know plenty of boomers who are part of the gullible masses, but many non-boomers who are too. It's almost like thinking is just too hard for some. Resistance to change is a human condition, not a generational one. The problem is the level of critical analysis and reporting from the media which is for the most part exceedingly poor. GVs article yesterday is a rare light amongst the usual tripe.

Yes all the boomers I meet tell me they have no trouble with the rate of change when I meet them, then ask if I'll help them connect their laptop to the wifi before forgetting what their skype/zoom password is and can't talk to the grandchildren.

That's not an issue with the rate of change that's just keeping up with technology. I was shocked some years back when a young chap was having an issue with his car (an old banger), I suggested he check out the carb and filter (it sounded like it was running too rich - trouble starting), and he asked what they were! Metro male! A lack of technological knowledge is a smoke screen, it is about the amount of exposure to technology.

I think the boomers have been in a minority for some time in Government. Personally I agree about Judith. I can't stand her, or for that matter the Nats at the moment. But this is more about the economic myths the pollies have been selling to the masses for too long. Politics has become too polarised left of right, and serious critical analysis is very lacking in our media. But the pollies are not the only ones guilty of this, Orr shows many of the same traits, and i suspect many of the heads of Government departments are just as guilty, after all they are all political appointees. Just goes to show corruption is insidious at some levels.

Frankly i want to see change to a fairer society as much as you, but i don't blame any one generation. After all they are product of their time, but the politicians who put it all in place - they're the ones who need to be held to account, but what happens to them? they get awards and knighted. Probably not because of what they achieved but because of who they sucked up to and outlived. Disgusting really. We need to find a way to make our pollies more accountable, and our democracy much more functional.

Giving people the 'wealth effect' be it property or sharemarket is a powerful political tool. You can see why politicians change their tune when in office.

There's that Churchill saying along the lines of that the problem with democracy can be found by having a 5 min conversation with the typical voter. I find that to be completely true. I ask people whether they vote with a utilitarian view or not, most don't even know what that means. So I ask if they vote with what would be best for the future and for the majority of people - not just now, but in 10 or 20 years. They will just look at you like you're mentally retarted then realise nearly everyone is just voting for what might be best for me and best right now. As a result, you can see how politicians have no political leverage/power to chase policies that might improve the country long term - they're simply trying to provide a lolly scramble to a bunch of +18 voters with the mental capacity of 8 year olds.

Gotta agree with you there! I've had the same or similar conversations with many people, and these day most are definitely not boomers, with the same kind of responses. Somewhat dismaying.

Just waiting for the boomers to be incoherent and dribbling into their PJs at the summerset village there m86. Then change will come. Until then the boomers have set policy that works for them and for those who are 40+ (so they have the political majority). Those policies have/are screwing those below 40 but that is fine, the number of people in that group is growing by the day and with it the political horsepower required to force change. Whether you can see it, that change is starting - its the movement to the left and away from the neoliberal economic policies that have been dominant the last 30-40 years and have us in this current pickle. A dream for the boomers and hell for those around them (see the depression and suicide stats for younger people).

Spend a week with a boomer and you'll know what hell is like.

"Spend a week with a boomer and you'll know what hell is like" currently doing that (supporting them as well) as we try and find a rental in Wellington that's not cold, have more than 25 steps uphill, and off street parking for less than $700 week. Some one said mate..your dreaming!

Plot twist, the FHBs aren't tied up, they are sitting on the tracks and waving Socialist Aotearoa protest signs and screaming for a UBI and land tax.

upvote for "Specuvestor".

"The international airline industry is in big trouble."
No, it's not! AirNZ shares are trading at $1.55 even though they pay no dividend and are held hostage to the Government Standby Lending Facility.
There can't be any trouble if the shares are trading at that level! It's all about the rosy future that's coming. ( So, forget about "the world has a car crash economy" as well ?!)

Social and economic decay is so glacial that only those few who remember an earlier set-point are equipped to even notice the decline. That's the position we find ourselves in today.
The assumption underlying social order has slid from a shared duty to the nation and fellow citizens, to an obsession with evading civic duties; military service; taxes, and 'following the rules'. All are avoided and this moral/social rot then corrupts the entire social order as citizens lean ever more heavily on the remaining productive class to pay the taxes and provide the military muscle to defend their wealth. That corruption is now everywhere and is obvious to all but those adamantly blinded by denial.
The excuse is always the same: Everybody does it. This is, of course, the collapse not just of the social contract but of morality in general: anything goes and winners take most.

(CH Smith)

This expert is talking about Gold but during most conversation, one thing stands out and that is action of FED.

https://youtu.be/6zhBTUD70PI

Everyone assumes that reserve banks people are experts and knows the consequence of their action and assume that what they are doing is economy but should not forget that too are human and have preconvinced ideas/theory - right or wrong only time will tell.

Just like WHO, everyone trusted and thought are experts but.......

Just like WHO, another agency to be under the scanner will be reserve banks.

The issue also for everyone up the hierarchy, whether it be in the political or central banking, is they are reliant on asset prices not dropping for their own personal prosperity. Their views are at best subjective objectivity.

If property prices in NZ or Australia dropped 30%, how many politicians would that bankrupt, and therefore make them ineligible to be a MP?

Reserve Bank employee resignation reveals all :

https://youtu.be/GGnMvkUt2Y0

Definitely something is not right. Biggest recession / event in over a century and still asset prices going up and UP, touching all time high supported by reserve banks - printing and distributing easy and cheap money as they too know that all this excess liquidity is going only to create hyper bubble and thereby distorting the economy.

No one knowing what is in store in future or how all this will play up.

https://consciousnessofsheep.co.uk/2020/08/14/why-dont-lions-chase-mice/

This explains why Gareth Vaughan was on the wrong track yesterday. He's still on an upper deck...... tilting ever-more.

"For most people – including economists who ought to know better – energy is just another relatively cheap economic input. And since for the best part of three centuries we have enjoyed growing energy return on energy invested, most people take for granted that “clever people somewhere else” will come up with some other form of energy with which to unleash another round of economic growth".

oops

A bit ambiguous, RW. You mean oops we didn't think? Or oops I shouldn't have chided GV?

If the latter, he did well to suggest a re-think about old assumptions, but it was phrased in assumptive language. We do need to do things differently; one of the first is to value things differently. Thus, we don't need to talk of 'debt' or 'investment' but 'applied effort'. That should be the understanding when every budget is assembled; a major mindshift but an interesting one.

When referring to GV, I assume you are talking about his article on debt? I disagree with you here, while I agree with your ultimate aim. GV is trying to stimulate debate on the basis of Government funding. But the environmental impacts of our economic activities, while related are a different matter.

Having said that, the nature of our societies is such that we are all dependent on our Governments to act with integrity in all respects. Unfortunately very few do live up to those expectations, and many with aspirations to do just that get very jaded very quickly as the political system beats them into submission and compliance. Even the very structure of the Westminster Party Political system works against that if the dominant individuals are essentially corrupt. that is why i keep calling for our Governments to be more accountable to the people, and resist lengthened terms.

He was on the right track quoting Carr's call for a 30-year energy plan.

But implicit in that, is the point that finance and money as we've come to know them, aren't capable of traversing the 30 years. Maybe Vaughan (and the MMT crowd) are right in a way; we've just got to get on with establishing a sustainable way of life, all others being dead-ends by default. Maybe you then forget the debt. But that still gives us a society valuing stuff in the debt-issued proxy, which - if it's never to be repaid - I have trouble with. Better we went the Apollo 13 way; we have x amps left, what can we do and what comes first? And what must get dropped off the list. And what are we running now, that we should switch off. It's a much better way than the old millstone connotation of 'will it make a profit' or 'does the business case stack up'.

While we use MMT to ask for a sustainable economy, it is not a prerequisite. But the crap that is being rolled out at the moment won't do it. Shaw is a serious supporter of the ETS, which is just another ponzi to allow the rich and powerful to buy their way out of polluting the planet, and they are the worst. The masses generally have little choice about what they can and can't do because of how little money they have. The whole debate is just too superficial. And to Shaw; just recently I've seen a few comments from him that suggest to me that he would be in favour of dis-inventing the wheel, which concerns me about what he is concealling from the public about his true opinions to preserve his power, influence and privilege.

Actually, I heard him speak for the first time the other day.

I reckon he knows much more of what I and others harp on about, but if he put it in from of the masses, he'd be history. At the end of the day, we weren't Sapient enough to avoid our own-goal demise.

And he's light years ahead of Collins - she's medieval.

Agree about Collins. And you already know I agree with you on the required outcome.

And in Updated news, Stock market takes a sharp dive after Trump calls off stimulus talks.
https://www.ft.com/content/9f130c9c-fb1e-4d05-8864-1c8ac08c54bb

Half the number of houses for sale right across NZ. This is pushing up SOME house prices. After the election when the number houses for sale skyrockets prices will ????? . If you are thinking of maybe selling, now might be a good time....

https://i.stuff.co.nz/life-style/homed/122978621/just-154-houses-for-sal...

.

I always uptick such comments. They are so obviously not wrong....

:)

probably just waiting for the coffee to kick in.

Perhaps the CDC, in collusion with the UN, in collusion with medical professionals worldwide, in collusion with five-eyes, in collusion with the NZ government, in collusion with the NZ police, must have censored my post as it contained too much truth regarding me uncovering the 'gun death conspiracy' as discussed above. It's the only possible explanation that makes sense!

Long black - eleven sugars

Currently supply is low for mortage defferal and another important reason is that investors were not able to remove their tenanent under covid19 or give notice also.

What we are witnessing in NZ is extreme emotion of FOMO, have met many who already have house are now under pressure to buy anither house as many of their friends and family have done or are buying just like peer pressure. Some are borrowing wisely and some who are buying in herd mentality without much planing by using their equity (seems easy and free for now) may be in for a shock id RBNZ and government fails to promote the ponzi and it will be them aling with FHB who are borrowing to hilt now will be worst affected.

Interest rates will be low for ages as the moment reseve bank tries to raise will fail so now what. Following the path taken by Japan but Japan has technology and industry to survive and NZ which use to be dependent on Tourism, International student and immigration as main driver of economy is finished and now surviving by selling houses to each other at premium - interesting.

The UST 10yr yield is firmer again today, up +2 bps at 0.77% in a move that in anticipation of new US stimulus.
Yeah right!!!!

For the third time since March, the BOND ROUT!!!! is back! The 30-year long bond yield nearly closed at 1.60% in today’s trading, which represents the highest dating back to June’s Jay “flood” myth. Yes, we’ve been here before, as I wrote in early June:

Over the last several days, Bloomberg (obviously) has been unusually and sharply focused on the 30-year long bond. The publisher like everyone else mainstream absolutely hated the damn thing for years when it was inconveniently signaling (correctly) that globally synchronized growth was a bumper sticker slogan and never anything more than that.

Within a few days, the 30-year turned around moving downward, flattening the curve while it did in Jay Powell’s flooded face. All of a sudden, the only actual flood, media stories about it, curiously dried up.

Why make so much about what are, in the grand scheme of things, the very smallest of moves? The question answers itself given the background; the Fed’s inflation story has nothing else behind it. In order to manufacture some “evidence”, the smallest little molehill in yields is turned into the massive mountain the Federal Reserve had warned you about.Link

Down on the farm we need some rain. Bulls on the multispecies crops have done exceptionally well over winter, bulls that went on at 180 kgs have come off with tops @ 360 kgs average 340 kgs. Try and beat that for winter weight gain.

Im lighting fires while I can, expecting restrictions soon, going to fire the old bulldozer up now, don't know how it does it but a 50's caterpillar still fires up every time and never misses beat. They new how to make stuff back then, still has lots of power second gear can be a challenge but otherwise it has aged well, I probably owe it a service and tidy up.

Hi Andrew,we will take all your sunshine here in Southland-we had snow last week,the best part of 100mls rain this week,highs around 12degs -but it is a la nina weather pattern forming & it means dryer & warmer conditions ......eventually,which is just as well if we are to follow along with David Parkers recommendations of getting sodden wet paddocks worked to get grass & crops back in by 1 November????? Regards

Wish we could swap, meant to be some rain next week, an inch and we would be away. We just get the wind after you steal all our rain. Hawkes bay is a tough place to farm sometimes, especially around here which in the 'dry belt'.

Isn't it quaint when politicians try to farm via a spreadsheet and calendar in Wellington.

Farming can look easy when you're 1000 miles away and have a pen as your weapon - Dwight Eisenhower

That will be the pony-motor start age of Cat, right? And they rev so low that parts last. Yes, an oil change (but not a full-detergent, which could flush away the fillers and gunge that keep the old motor quiet) would be in order. Wide Firebreaks and Low fuel load is useful Fire Prevention.

And, as always, appreciate the honest review of Real Farm Life.

"The UST 10yr yield is firmer again today, up +2 bps at 0.77% in a move that in anticipation of new US stimulus"

Can someone explain this to me? Investors expect availability of cheap money, so they oversell current bonds, making money expensive? Wouldn't current bonds appreciate when the newer money is cheaper?