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US deficits rise sharply; China's births collapse; China's debt rises again; Japanese machine tool orders swell; Aussie business confidence up; UST 10yr at 1.15%; oil up and gold unchanged; NZ$1 = 72.3 USc; TWI-5 = 73.8

US deficits rise sharply; China's births collapse; China's debt rises again; Japanese machine tool orders swell; Aussie business confidence up; UST 10yr at 1.15%; oil up and gold unchanged; NZ$1 = 72.3 USc; TWI-5 = 73.8

Here's our summary of key economic events overnight that affect New Zealand, with news China's population may now be shrinking.

But first, the US federal budget deficit widened sharply in January as the latest pandemic-relief package sent direct stimulus payments to millions of Americans. The monthly deficit widened to -US$165 bln in January, and for the first four months of the 2021 fiscal year the federal budget deficit rose 90% to -US$738 bln. On top of that, US$54 bln will be the cost of raising the minimum wage to US$9.50/hr (NZ$13.10) starting in June this year.

Last week, retail sales sagged somewhat with same-week year-on-year gains falling away.

December job opening data however came in on the positive side, even if the gains were minor.

The USDA WASDE report confirms that strong Chinese demand for grains, especially wheat and rice, is keeping prices high. American beef and dairy production is rising and prices for both are expected to slip.

China is reporting a sharp drop in births down from 14.6 mln in 2019 to 10.4 mln in 2020. That means China is aging at a very fast pace indeed when you get a more than -30% fall in births in just one year. Given that 2019 deaths were 10.0 mln, China's population growth likely stalled in 2020. Other official police data put the birth decline at -15%, still very major.

China is also reporting strong loan demand in January, with debt levels rising +12.7% year-on-year.

And that comes after a very positive report on car sales in the country in January, up +30% year-on-year.

And China is reinforcing its extra-territorial claims, saying anyone born in the country is a Chinese national, no matter what their passport says. You can't escape Beijing's grip if you are Chinese.

Japanese machine tool orders rose +9.7% in January from a year ago, and the December data was revised higher.

In Europe, carmaker BMW has contracted to buy "green aluminium" from the UAE (that is, aluminium made via renewable electricity) in a signal about how fast climate criteria is changing global supply chains. Tiwai Point may have a much longer life than even recently expected - and the conversation with Rio Tinto may be quite different at the next renewal.

In Australia, business conditions pulled back in January from unusually high levels in December. But business sentiment rose and to well above its long run average. Especially notable was the return of boardrooms to invest in capital expenditure.

And we should note that James Packer and his Crown casino company was deemed as unfit to run the new facility in Sydney. This decision will have knock-on impacts in other Packer/Crown casinos in Australia and maybe elsewhere.

On Wall Street the S&P500 is little-changed in early afternoon trade. Overnight European markets were mixed. Yesterday Shanghai rose a very strong +2.0% and matching the prior day's Tokyo gain, Hong Kong was up only +0.5%, and the very large Tokyo market was up +0.4%. The ASX200 fell -0.9% and the NZX50 Capital Index fell -1.0% with a late fall-away.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now at 106,617,000 and up +339,000 in one day. The pandemic seems to be easing in many places now. Global deaths reported now exceed 2,330,000 and +10,000 since yesterday.

More countries (83) have started their vaccination programs. And although 134.7 mln doses have been given so far (+3.9 mln more overnight). There is clear evidence the vaccines are working to reduce or even eliminate deaths for those who have taken it.

The largest number of reported cases globally are still in the US, which rose +87,000 overnight for their tally to reach 27,704,000. The US remains the global epicentre of the virus although there is some easing. The number of active cases fell overnight and is now just on 9,696,000 and -91,000 less in one day, so more recoveries than new infections. Their death total is up however as 477,000 as the vaccination program kicks in. We now wait to see if there is any Superbowl party super spreading data. The US now has a COVID death rate of 1435/mln, and that compares to the disastrous UK level (1672) where deaths are also still rising (114,000, +1000 overnight).

In Australia, their community control is impressive. Their all-time cases reported is now 28,860 and only +3 more cases overnight, all from new arrivals and all in managed isolation. 44 of these cases are 'active' (-7). Reported deaths are unchanged at 909.

The UST 10yr yield is down another -1 bp from yesterday at just under 1.15%. Their 2-10 rate curve is marginally flatter at 103 bps, their 1-5 curve is unchanged at +40 bps, while their 3m-10 year curve is also flatter at +111 bps. The Australian Govt 10 year yield is down -2 bps at 1.22%. The China Govt 10 year yield is also down, by -1 bp at 3.25%, while the New Zealand Govt 10 year yield is firmer, up by +6 bps at 1.44%.

The price of gold will start today unchanged at US$1837/oz.

Oil prices are slightly higher at just over US$58/bbl in the US, while the international price is now just under US$61/bbl.

And the Kiwi dollar will open today firm at 72.3 USc. But against the Australian dollar we are a little softer at 93.6 AUc. Against the euro we are softer too at 59.7 euro cents. That means our TWI-5 is little-changed at 73.8.

The bitcoin price has risen sharply again overnight and is now at US$46,744 and up by +8% in a day. It reached a record high of US$48,226 in between. Volatility remains very high at +/- 6.6%. 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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73 Comments

Is any reason given for the dropping birth rate in China? The link is all in Chinese....

13
up

With the one child policy everyone had a son. Sausage fest over there now.

All cheerios no doubt.

What percentage of their young people are migrating? Large numbers to the US, Australia, Canada and NZ.

Globally the peak rate of population growth was 1961, we've been on a remarkably steady downhill trend since then. Birth rate is one half of that statistic.

It is called limits to growth.

Covid-19 needs to be viewed in this context.

How has going from about 3 billion in 1961 to getting close to 8 billion now a "downhill" trend, we have almost trebled the population from then to now

Really easy, just read what I said properly. But your answer highlights why there is no hope, so little understanding. You've been around a while, you should know that which I speak of.

A change in the rate of change is just as important as a change in the actual numbers - it just takes time for the dropping growth rates to be reflected in the actual population numbers.

This BBC news article on fertility rates and projected population levels is quite remarkable - https://www.bbc.com/news/health-53409521.

Or to answer your question with a simple analogy, the car (population) been slowly and steadily accelerating for a while and is going faster than it was 60 yeas ago. However the rate of acceleration (additional force from engine / fertility rate) has been slowing over that time and is almost negligible now. If the trend continues the car will soon start to slow down.

"The merciless birth limits formally launched in 1980 turned procreation into politics, pitted neighbor against neighbor, and resulted in countless forced abortions and sterilizations. Baby girls were aborted by couples desperate for male heirs; others were given away to childless relatives or put up for adoption. Couples who defiantly kept their “illegal” children were financially crippled by fines, lost their jobs, and in some cases had their property taken away.
...The experience of other Asian neighbors also suggests that economic development would have continued to lower China’s fertility. In other words, the policy wasn’t necessary.

And yet once it was set, it became intractable. Even when data showed that Chinese cities that had been allowed to experiment with two-child policy pilot programs had low fertility and a more balanced sex ratio, the government didn’t budge."
https://foreignpolicy.com/2015/11/03/a-brutality-born-of-helplessness-ch...

Mindless obsequiousness to the utterings of Mao.

They meant well, that's the main thing. Just like the West today.

Fair comment Zach. I think Mao was seeing problems with not only feeding the people, but controlling them too. But ultimately these were consequences of other things he was doing. And just like the west, very short sighted.

Plummeting birth rates aligned with development is a very strong East Asian theme.

Fertility rate here in NZ has dropped to a record low of 1.63 per woman .
Our birth rate has been falling for decades, in line with much of the West. However, demographers have noted the rate of decline picking up over the last 10 years.
Demographers are suggesting the rising cost of housing, increasing job insecurity and a strained economic environment were contributing to a reluctance to have children.

This housing and migration-driven GDP growth was going to cost us one way or the other.

I would add to the strained economic environment the strained environment itself. Anecdotally, I know plenty of people having fewer or no children due to fears for the climate and/or not wanting to make things worse through adding more people.

20
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All those awful income, cost and social stats in New Zealand would be changed with the stable population. Could have been good.
Instead we shot ourselves in the foot by pumping up immigration to disasterous levels.

I would actually add increasing levels of health care, but mainly increasing levels of education. Both in regards to sexual health/contraception but higher levels of education mean woman are more interested in pursing their career rather than having more than 1 or 2 kids.
If you look at the birth rate trends it tends to be lower socio economic groups that still have more kids, even though they are the ones less able to provide for them.

Everyone just gets a cat in my peer group instead (assuming our property overlords let us). There's too much cost and uncertainty, which is why we gave up on the dream of having a family, or a home. I'm sure this is very common amongst the young.

David Chaston. A better headline would have been "China's birthrate becomes economically sustainable"

10
up

No.

Has become less unsustainable than it was.

:)

My immediate thought was...I wonder if that's where they are hiding the Covid-19 death statistics?

There is reasonable suspicion they are...not being forthright:
https://www.medrxiv.org/content/10.1101/2020.05.28.20116012v2

The link is to the heavily censored, Communist Party propaganda service - tencent qq.

Have said it before- China has a demographic timebomb that will be a significant barrier to them moving beyond middle income status.
I think the CCP well knows these headwinds hence is increasingly throwing toys out of cot

18
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And now NZ seafood exports to China are barred...NZ and the west needs to pivot strongly away from China ASAP. It's becoming increasingly volatile, unpredictable, and nasty.

11
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Easier said than done. Now we have the Greens wading in on Air NZ and Saudi Arabia. Don't recall their stance on China but likely to far less vociferous. After all Saudi Arabia doesn't feature at all on NZ exports compared with China.
Knee jerk re-action from the CEO of AirNZ. Could have quite easily claimed contractual issues prevented AirNZ from stopping work on this batch of engines. Perhaps he can lay off an engineering technician or two now that they've evidently stopped repairing the last engine

12
up

The West can bandy together and support each other with trade. Yes our economy will suffer, but what's most important in the scheme of things? Morality and values or money?

Missing the point, the Government's stance is to not support the Saudi military. But the hypocrisy here is that the military are following the instructions of the government, thus it is the Saudi Government who are responsible for what is occurring in Yemen. Besides the Saudi Navy, like most does good as well; it rescues people in strife on the Gulf, it carries out anti-piracy patrols and so on. When one wields a club, do we blame the club for the harm, or the person wielding it? But we continue to trade with Saudi. And just as with China and their atrocities against their own people, we turn a diplomatic blind eye while still continuing to trade.

Just a point, while this is a Labour government, National did the same. But I am disappointed, I thought we stood for higher values.

11
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Problem is Murray that if we adopted “higher values” we would not trade with any of the major economies ie USA,UK,EU,China as they all make weapons that are used to suppress people around the world. So we adopt values that are politically expedient hence we cancel a Saudi contract but still sell to China. Cancelling the contract because it “didn’t pass the sniff test” is a dumb reason. Surely China can’t pass this test. So it is all about virtue signalling and Money. We should have honoured our contract with the Saudi Navy but declined further work. It was our “mistake” but no, lets be all woke and cause a stir with Saudi Arabia who we also trade with.

Totally agree Phil. I think we can hold the higher ground and your comment re the more appropriate response is right on the nail, and would demonstrate a requirement for business integrity too.

and you could add in teh response to Mayamer -- lots of moral high ground statements -- but not stopping our trade with them!

Ardern jumped in where others feared to tread.

Simply put, India chose to bandwagon with the US, Japan and Australia while ASEAN and China took a differentiated stance. Geopolitics crept in. But the US has since realized that folly and national security adviser Jake Sullivan scrambled to contact the ASEAN ambassadors in Washington.

14
up

I thought we stood for higher values.

Indeed - pricing shelter beyond the resources of the majority imposed by decade failing technocratic monetary ideology.

An exclusive West? Surely not! So tone deaf.
NZ and Australia aren't even part of the West, they're in Asia...apparently.

The total lack of moral leadership in the USA didnt stop anyone trading with them the last 4 years....

10
up

Coincidentally in mid/late 2020 China threatened Zespri with restricted/no access of kiwifruit to the Chinese market next season, supposedly due to scale (pest bug) on export fruit, a bug which already exists in China. This resulted in Zespri reviewing pest spray programs despite the industry already having sufficient spray programs, testing and monitoring protocols. Being cynical, I would suggest this is China/CCP firing shots at key NZ export industries as a warning to the NZ government to toe the CCP line.

Ha ha..you mean the fruit called the Chinese Gooseberry that NZ renamed...now that's funny

How about selling some of that seafood to the local NZ population at prices we can afford ? Oh thats right the almighty dollar trumps any nasties.

On current estimates, China's popuation will halve by the end of this century. Similar trajectories will also be seen in Japan and some countries in Europe like Italy and Spain. Nigeria however, could see its population rise to some 700m.

15
up

It's good for China. Africa is a looming disaster.

10
up

With a one child policy, China's population will have been dropping since the introduction of it in real terms. Now it is time for the rest of the world to follow suit, if there is to be a planet healthy enough to live on.

Problem there is, the retirement/pension scheme in developed countries (excluding Norway) is a giant ponzi scheme that needs a young working class population to full the coffers to pay the old, retired pensioners. With an aging population and less people paying taxes to prop up the system every one had better look out below....

Southern Hemisphere and satellite temperature anomaly has dropped in to negative territory.

"Southern Hemisphere: -0.09 C"

https://www.nsstc.uah.edu/climate/

...thanks to La Nina and the new temperature baseline changing to the average of 1991 -> 2020, which will be significantly hotter than the previous baseline of 1981 -> 2010. Not sure what your point is, other than we should be enjoying our brief respite from the relentless warming of the planet which is extremely evidence from the graph in your link.

As a planet, we're still above average thanks to the Northern Hemisphere running at +0.34 C.

The relentless warming that is not different to the 1st half of the 20th century - when industry was a fraction of what it is now. Given the rabid runaway global warming headlines and hand wringing committees, one would have expected CO2 to be drowning out La Nina by now and, you know, be a bit more global and runaway.

"The Antarctic continent has not warmed in the last seven decades, despite a monotonic increase in the atmospheric concentration of greenhouse gases."
https://www.nature.com/articles/s41612-020-00143-w#ref-CR12

Well aren't we lucky that things haven't accelerated from a catastrophic trend. I found this article very interesting for putting things in perspective - quite a long read I'm afraid but very approachable.

https://www.theatlantic.com/magazine/archive/2021/03/extreme-climate-cha...

WHO investigations find that SARS2 may not have originated from the Wuhan lab, and the virus may (not) have been circulating in Dec 19 in China & Italy and that the wet market was not the originator.
https://i.stuff.co.nz/national/health/coronavirus/300225983/coronavirus-...

12
up

I don't trust the independence of this review at all.

Why? Confirmation bias?

These are a whole bunch of international experts in the subject, on the ground in Wuhan. "... the decision to downplay the lab theory was a unanimous judgment among the WHO team's 17 members." - i.e. they all think it's a bull dust theory.

In absence of me training myself in a subject and performing the test myself, I defer to experts. As we should in this case.

Google Tedros Adhanom and it'll answer all your questions. He chose Robert Mugabe as a WHO Goodwill ambassador ffs

The inspectors should have been let in immediately, not barred from entry for over a year. If something dodgy did happen the CCP gave themselves plenty of time to tidy up.

But which experts do we believe these days. Even the experts seem to be at odds with each other. And then there is consensus but as we know science is not a popularity game.

So you obviously don't think China has undue influence over WHO.
Lots of telltale signs of interference such as the delays in letting the investigators in to China.

With Ebola they could trace the epidemic back to a child in Africa but I doubt they'll have access to do the same in China. We may never truely know it's origins, man made or otherwise.

11
up

Someone else thinks it might be a mistake to cover Auckland's prime growing land with houses... https://www.nzherald.co.nz/nz/stupid-and-inconsistent-urban-sprawl-set-t...

12
up

'Stupid' is not 'mistake'.

Stupid is stupid.

There's been a lot of it about.

So... what's the solution, if not growing out? Is it just less houses, or intensification (but definitely not in the areas with the villas and Link buses, heavens no!)? People need to understand sprawl is a safety valve - you only need it if your urban planning regime is not fit for purpose or beholden to vested (read: older, wealthier) interests.

Agree. This article is on-point https://www.stuff.co.nz/life-style/homed/residential/124180027/residents....
Singapore seems to have managed to grow its population without having the option of unending sprawl. I'm not saying that endless population growth is ideal (quite the contrary). But to growth the population and remove productive land at the same time via urban sprawl is not just stupid - it's madness, bordering on a crime against future generations.

Kauri - agreed.

Just remember that Singapore off-shores it's consumption and - until recently via China -it's wastes. They're a long way ahead of us though:
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=3296&context=...

"Second, Singapore’s heavy reliance on import of fossil fuels will need to be addressed." Yep, away ahead of us.......

The thing that makes me laugh is that there are still people arguing that councils should be calling the shots on development. New Zealand cities are a blight on this countries spectacular landscape, they are sprawling suburbs with people driving to 'local' supermarkets and houses are expensive. By no metric are councils doing a good job. There should be no argiment to persist with this arrangement.

Here are latest stats on CV19 in UK
Notice, cases, deaths and hospitalisation been falling for a while.
Same in USA
When vaccinations in USA especially have been so few, it is surprising (and draws no questions form journalists) as to WHY CV19 is in retreat? It started retreating in USA and UK in mid January, when b-all vaccinations had been done. USA has not had much of a lockdown and also its winter.
https://www.bbc.com/news/uk-51768274

Finally recognition of green aluminium, it should be a big marketing point for Tiwai and should allow it to remain open for quite some time as it should come at a price premium.

We should call their Bluff.
Get them to name a sale price.

Sale price. ? They tell us business is bad at Tiwai. So they would donate it - sure thing.

"China's population growth stalls suddenly" - the dropping of birth rate has been happening for some time. The subject line should be "the National Bureau of Statistics suddenly reports the reality".

US minimum wages rising to NZD 13,10/hour compared to NZ minimum wages rising to NZD 20,00/hour

Median US house prices rising to NZD 479,000 compared to median NZ house prices rising to NZD 839,000.

The US federal minimum wage means very little. Most states set their own (higher) rates.

Yvil... minimum wage depends on the state. For example I think the minimum wage in California and NY is $15 USD or $20+ NZD. And do not forget a number of people on min wage in the USA get a lot more in tips.

And China is reinforcing its extra-territorial claims, saying anyone born in the country is a Chinese national, no matter what their passport says. You can't escape Beijing's grip if you are Chinese.

I'm calling "fake news". This applies to the territory of Hong Kong which has been returned to China therefore claiming it is "extra-territorial" is not valid. It applies to residents of Hong Kong. It was agreed to back in 1997. If you were born in Hong Kong and wish to stay in Hong Kong you come under Chinese law and cannot flee to a foreign embassy after committing crimes and hope to get away with it. This seems fairly sensible as Western operatives will seek to recruit such folk to cause chaos. We can't deny it, it's what they do all the time. It may be for a good cause although I think they (imperialist running dogs!) just do it for money as always.

Those born in China and get citizenship in another country revoke their Chinese citizenship and will escape Beijing's lawful grip if they live outside of Chinese territory.

Article 9 Any Chinese national who has settled abroad and who has been naturalized as a foreign national or has acquired foreign nationality of his own free will shall automatically lose Chinese nationality.

Link to the rules

A few weeks ago, I think on the BBC, I heard a report on the end of the one child policy 4 years ago. They said there was a small bounce back in year 1, then dropped again in year 2 and was staying down.
So govt went out to talk to young couples and discovered business as usual these days: With the rising cost of living, women wanting a career (and one income not really cutting it these days), and all fighting each other for a place in the most expensive school they could afford, kids are a bit hard.

Population growth stalls? - ngg, is it because some drastic correction on numbers in 2020? - which, magically made the overall number as ..stalls? - remember this is the country that not long ago have a one child policy for a reason, then change it.. also for a reason...or are all of them migrated due to C19 in 2020? hmn..