Here's our summary of key economic events overnight that affect New Zealand with news China is facing some substantial challenges.
China is in a tough spot with its currency. Too much foreign currency has built up domestically in their banks and their official reserves are high too. Previous attempts to use this funding for international investment has failed because the projects they invested in turned out to be largely poor investments. This build-up is putting hard upward pressure on the yuan exchange rate. These private reserves now exceed US$1.1 tln and growing fast (+35% in a year) and the public ones are a similar level (and fairly stable).
China is still in its week-long CCP anniversary celebration. But their PMI reports are not really helping the mood (nor would, if anyone was noticing). The private services PMI is recording a sharpish turn away from expansion to just a steady state and its tamest result for a year, just barely expanding now. That is much more of a pull-back than what the official services PMI recorded. An under-reported pandemic spread there may be the cause.
Japan's services PMI is actually contracting, but noticeably less now as they are getting to live with the latest pandemic outbreak.
There was a services PMI out in Australia too. There, service sector activity expanded at a healthy level in June even if it wasn't as strong as recently. It was affected by the lockdown in Victoria that extended into June. Nonetheless, overall expectations remained positive alongside hiring activities, although some firms highlighted issues related to a shortage of labour. Pricing pressures however accelerating at a record rate in June.
After a record high in April, Australian building permit levels fell sharply back in May, driven by a -10% fall in approvals for private sector houses. But some of this is artificial as there was an extension of the time to build for HomeBuilder projects from 6 to 18 months. Builders are no longer rushing projects through the approvals process alleviating the pressure to meet the deadline.
Aussie job ad data softened in June, but it is still at far higher than the pre-pandemic levels.
Singapore retail sales recorded a disappointing result, even though this was only May data. Sales fell more than expected from April, and their retail sales index is still -13% lower than for May 2019.
And staying with May data, the OECD is reporting that CPI inflation rose to 3.8% pa in their member countries, driven by energy prices, and largely influenced by the +5% rise in the US.
The US is still on holiday, so no economic news from there. However in Canada, their widely watched business outlook survey continued to rise and reached its highest level on record, suggesting that positive business sentiment is broadening. But some of this is probably just a relief rally. A companion consumer sentiment survey is also bullish, with expectations for spending growth near a survey high, likely reflecting pent-up demand. Some respondents say they plan to spend part of the savings they have built up over the past 16 months. Older Canadians are cautious, younger ones relieved. One interesting aspect of this survey is that most people say they would like to work remotely after the pandemic. This will have big implications for housing preferences, demand for office space and public transport.
The New York equity markets are closed today for that major public holiday. But overnight European markets made small gains led by London's +0.6%. Yesterday, the very large Tokyo market had a tough day, closing down -0.6% and they were matched by Hong Kong. Shanghai however closed up +0.4%. The ASX200 ended its session up a minor +0.1% while the NZX50 Capital Index starred with a +0.8% rise.
The UST 10yr yield starts today at 1.43% and unchanged while the US is on holiday. The US 2-10 rate curve is still at +1.19 bps. Their 1-5 curve is also still at +79 bps, while their 3m-10 year curve is unchanged at +138 bps. The Australian Govt ten year benchmark rate starts today at 1.46% and up +3 bps. The China Govt ten year bond is at 3.10% and down -1 bp. And the New Zealand Govt ten year is now lower at 1.71%, down by -4 bps.
The price of gold is now at US$1792/oz which is up +US$5/oz from this time yesterday.
Oil prices higher by +US$1. In the US they are now just under US$76/bbl, while the international Brent price is now just under US$77/bbl. OPEC has so far been unable to agree on raised production quotas.
The Kiwi dollar opens today just on 70.2 USc and marginally lower than this time yesterday. Against the Australian dollar we are soft too at 93.3 AUc. Against the euro we are little-changed at 59.2 euro cents. That means our TWI-5 starts today down slightly at 72.9.
The bitcoin price is now at US$33,397 and down a sharp -6.0% from this time yesterday. Volatility in the past 24 hours has been a very high +/- 4.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
63 Comments
Norway pays Gabon $5/t to offset CO2 and protect rainforest. Meanwhile, cunning New Zealand enters into an elaborate tax scheme to get ute owners to pay Congolese child cobalt miners and Chinese rare earth producers for EV’s,powered by Indonesia coal, for soy latte drinking city slickers to possibly offset CO2 and feel good. The New Zealand scheme doesn’t cost $5/t or protect any rainforest - especially Indonesian rainforest.
https://www.bbc.com/news/world-africa-57567829
https://www.reuters.com/article/indonesia-coal/indonesia-sets-coal-benc…
I understand that the facts are generally not relevant to your diatribes, but if you don't like NZ's new EV policy, you're going to hate Norway's.
The alternative to subsidy, tariff, and rebate is to enable the ETS to do the job directly. That means adding the agricultural sector and making transport users individually liable at the pump.
At current rate of progress, there is no way that NZ can make its Paris Agreement obligations without paying someone else to remove our emissions for us. That cost is increasing over time, $5/t is a bargain which wouldn't be available now.
Be careful for what you wish for.
RE China: No Reflation Here: PBOC Balance Sheet Update May (Same As April)
For the month of May 2021, China’s central bank reported almost exactly the same as it had in April (or March). In the case of foreign assets, as has become standard, nearly identical. Despite reflation dollar flows being described and talked about, they still haven’t reached the official PBOC balance sheet which after so many months of this simply reduces the charade to a mockery.
Something is going on in the shadows, and one thing it can’t be is the usual reflationary dollar inflows. If there are those, they are taking a different route and seemingly ended up in very different places. Whatever your preferred explanation at this point – many people seem to like the idea of China corporates holding their dollars offshore for whatever reasons – perhaps the most important question is, why?
https://www.newshub.co.nz/home/money/2021/07/real-estate-agency-barfoot…
Every month house prices are touching new height and it is not a perception but reality supported by data, still Orr insist that has data to support that house price is cooling.
David, whom to believe data or Orr.
Also how long does Orr will pursue the policy of Wait And Watch, Is four months not enough.
Rest of the world adjusting to life with Wuhan virus even Australia talking about stopping lockdowns.
Jacinda and Co will now need to make a decision open up and accept some deaths or permanent borders closed and become a North Korea of the South Pacific.
So far Labour has shown they will not make tough calls and this may open the door at next election as I predict most people will want to reopen.
National may have a chance if borders stay closed and business starts to suffer.
So because it could be worse, there's no valid criticism of the govt's response? Even though it was largely garbage and half-done until investigative journalists stopped taking their word for things and asked "Are we actually testing people at the border?". Because it turned out we weren't. Hell, we didn't even test people leaving MIQ until May last year.
Interesting latest Roy Morgan poll (admittedly these sometimes a bit maverickish) indicates a wavering in support for the government. Understandably, that fall off has fallen to the Greens. Does seem though that the energy and application in opposition by David Seymour and the ACT party inside and outside of parliament, is starting to noticeably impact and almost paradoxically, National is in the slipstream of that.
Yup, are you surprised though? Green's looking good to being a part of the next government. Wealth tax on the cards? Was always going to happen. The current govt has treated young people with contempt. They have been absolutely screwed en mass by the post covid rise in house prices. The govt should have introduced a CGT mid last year. Instead they let national housing stock raise 300 billion. Not one cent of which will be taxed.
My Mrs. has said that the shipping line they use to and from NZ for explosive/flammable goods is due to be closed down as it's not worthwhile. It seems the rest of the world is getting on with it and leaving NZ behind. Our isolation has pros and cons - the main con being that conducting business in NZ has become a whole lot more expensive.
yip - i dont think people realise the implications of shipping issues and our isolation ....
if it aint worth coming here, they wont ... we are fast becoming a bigger version of the chatham islands (from a viable export perspective)
and that means expensive goods in and far less out
Yes but look at our Fiji neighbours and how our 6pm news hardly mentions it now as they are having to adjust and things seem to be holding up well.
Give Fiji another month and they look to be tracking similar to India who also seem be no longer scare news worthy.
You know they would be bombarding us on news everynight if it was bad in Fiji.
I agree rastus. People think they need to go to the hospital for any minor affliction when in fact they should learn how to manage their own well being. There is so much information available as to how to live a healthy lifestyle that there is no excuse. Obviuosly some have issues unrelated to lifestyle which is no fault of their own.
Not everyone will be vaccinated. Uptake in adults will be about 65% (low due to vaccine hesitancy) and not enough for herd immunity. Jac is currently working out how to explain the failure of the vaccination program and the inability to open the borders and allow covid in because the health system can’t cope. I expect she plans to retire to private life or lose the next election rather than deal with this unsolvable problem.
Now expectation is borders will be closed till March / April 2022 but the way things are going will be again pushed to end of 2022 than mid 2023 just like reserve bank insisting that inflation is temperory but reality is otherwise (most economist going with it as it suits their narrative) unless their defination of temperory is few years.
This circus will continue as no one has any clue about the future except following one mantra and that is to keep asset class inflated by cheap and easy money - only time will tell what the future unfolds.
I think we about a week away from the media being forced to publish the ineffectiveness (not anything like 90%) of the Pfizer (and other current) vaccines against the Delta variant.
https://www.jpost.com/breaking-news/health-officials-rule-covid-booster…
This probably explains why there's a lot of news of either giving up on lock-downs or planning for much longer ones. By the time our vaccine rollout is completed there is a good chance the next variant with another spike protein mutation has turned up making the it almost pointless for the herd immunity goal.
There is two to three week lag on deaths from cases. Only after the cases and deaths peak cases can we determine this.
"However, the rate of unvaccinated patients among those who are currently in serious condition is decreasing drastically. On Sunday, the patients in serious conditions who were not vaccinated stood at 57% ... Among the patients hospitalized, the rate stood at almost 53%."
Israel has a 57% fully vaccinated rate. These are preliminary numbers so I guess mitigating factors can be found.
It's no secret but its not in the headlines here yet. This is the kind of stuff that causes vaccine hesitance. I will not be taking a useless vaccine (not that we are at this point yet) with poor safety statistics.
"I will not be taking a useless vaccine (not that we are at this point yet) with poor safety statistics."
Yip
why would most of the sub 50 age population bother ... all risk and no upside
theres a reason that liability for med co's was removed ... its still "experimental"
I am not sure the vaccine passport argument holds once vaccine effectiveness drops below 50% and no effectiveness percentage is high enough to skip the two week stay on return at the moment.
I think forcing people to take various different vaccines (the interactions and effectiveness will be poorly tested) to stay up to date as availability will depend on location will not be tolerated for long.
We will have better numbers by the time any decisions need to be made.
Yup. I think the prepping for the long multi year lock down has begun. I think the pfizer vaccine will not have an acceptable level of protection against the future variants when we reopen. Our healthcare system is second world & can barely cope without a COVID19 outbreak.
https://www.stuff.co.nz/business/industries/125651153/covid19-businesse…
They won't open heading into our winter as this is when the healthcare system gets stretched by flu etc. My guess is the Spring of 2022 (October/November). However I think there is a good chance we may never reopen. The Pfizer vaccine is only 70% effective against the delta varient. It is likely that there will be new variants round by October 2022 that further reduce Pfizer vaccine efficacy to a point where there will be what the govt considers to be an unacceptable loss of life if we reopen. Further I doubt more than 70% of adults will get the vaccine.
https://www.smh.com.au/world/middle-east/pfizer-vaccine-halts-severe-il…
In regards to the Delta varient the Pfizer-BioNTech vaccine is 96% effective against hospitalisation after 2 doses. These are comparable with vaccine effectiveness against hospitalisation from the Alpha variant.
https://www.gov.uk/government/news/vaccines-highly-effective-against-ho…
70%
It will probably be even less against the "future variants" when we get round to reopening next year. They already have a delta plus variant
https://www.timesofisrael.com/liveblog_entry/pfizer-vaccine-70-effectiv…
Australia moved away from it's elimination strategy. In truth lockdowns and bubbles where always a short term management strategy, vaccinate and learn to live with Coronavirus. New Zealand did well, we deferred many deaths in the elderly and immunocompromised - but there is unlikely to be much benefit extending border measures once the vaccination program has been completed. It would be like keeping your border closed to prevent flu.
The key now is making sure that everyone who wants a vaccine has had one.
https://www.stuff.co.nz/national/politics/125662926/covid19-nz-governme…
Looks like I might be right though squishy
China was first to massively inflate with fiscal response to Cv19
So, like the bobbing cork theory I have posited, (see below) it is first to go down again. This will be a theme for world economy leading to financial collapse between February and Oct 22, with stock market declines starting in Oct 21 and inflation getting out of control in 22.
Instability, Saturn/Uranus Square 2021-22 Covid19 and “stimulus”
Inflation, deflation (and jubilee to come?)
The virus, lockdowns, economic drops in activity followed by massive injections of monetary and fiscal stimulus (to disguise the pain).
The world economic blocks have done the above in a cycle conga across the globe. And so, as each cork bobs up from the depths of “recession” under the influence of “stimulus” sugar rush, each cork will settle to a more stable position, once it has had its initial rocket.
So, in turn, China, UK, EU, Japan, India and rest of the world will do this cycle and revert to 2019 rates of growth - OR most likely, LOWER. Because debt reduces growth over time and we now have a LOT more debt.
The Saturn square to Uranus shows astrologically that two antithetical forces are smashing into each other. So, no return to “normal” and a new definition of what normal might be for most.
As the above song proceeds, expect slowing and then drop in Chinese economy, with defaults and crises showing up at random, especially in first 3m of 2022. Then EU countries will follow with full scale impacts and recessions, stock market implosions. And housing market price and sales reductions in order of 20-30%. Then USA will slow and resume sub 2% pa GDP growth and Japan also will stutter and fall back.
Like with insulin resistant diabetes, the system loses stability before crises arrives. All Nations have been doing (in an exaggerated version of 2008-11) is postpone inevitable need for revision of what we are all wanting and needing. And that is NOT more of the same that was not bringing fulfilment and opportunity for the mass of Western civilisation in 1982 - 2019.
So, expect staggered bouts of high inflation followed by recessions and deflation to follow, in 2021-23. After that, difficult to know! Debt jubilee? Certainly the April conjunction of Jupiter and Neptune in Pisces symbolises “forgiveness” and cleansing.
Planet clashes in synodic cycles indicate change and evolutionary need for it. They do not show a little wobble and a band aid on it and back to normal, despite the MSM and elites wanting it to be so.
Coming deflationary surge to credit markets, from China.
Plus Fed cock up to cause surge in instability
https://www.zerohedge.com/markets/zoltan-sees-reverse-repo-hitting-2-tr…
https://www.nzherald.co.nz/business/covid-19-worker-shortage-auckland-r…
"Sahrawat said she was taking part in lights out because half of her staff were on some type of visa who "deserved some reassurance" about their future in NZ."
This endless demand or potential rort towards a “pathway to residency” for every menial position has got to stop.
However, good luck Adern & Co - the push-back from business on any meaningful immigration reset is already becoming very loud and “desperate”– and it’s only just started.
I think this is what you get with an economy nearing "Full employment"?
I'm all for extending temporary visas a bit longer at a time when the government is disorganized and taking a wait-and-see approach to so much.
Permanent residency is one hell of a carrot and workers in menial positions who net contribution to society is helping to keep restaurant costs down... eep sorry not a fan of that. I picture a "residency credit" system where you must accumulate 10,000 'points' through a combination of paying tax, employing others to pay tax, working in healthcare or other almost-unsustainable NZ industries, volunteer work, community involvement...
Let's not kid ourselves team, currently the seasonally adjusted number of unemployed in NZ people is 135,000 (down 5,000). That's a city the size of Tauranga just sitting around doing whatever people that have nothing to do do.
Desperate shop owners and orchard owners need to pay more, a LOT more to get these people off the couch.
At the moment it suits Labour to have this voter pool in it's pocket so there will not be any sensible policy floated to remove the insane abatement policy "If you’re a single beneficiary without dependent children: the first $90 gross (before tax) per week doesn’t affect your main benefit after this the main benefit abates (reduces) by 70 cents in the dollar". $90 a week LOL so, so, so dumb.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.