Here's our summary of key economic events overnight that affect New Zealand with news the economic threats to recovery are just not fading as fast as we need.
American unemployment claims jumped last week to 406,000, an unexpected turn higher. That took the total number of people on these benefits to 3.25 mln and a net rise of +100,000, also unexpected. Until this level gets down to 2 mln, the pandemic impact on their labour market won't be behind them.
Housing market sales in the US rose to about the expected level in June but it was a modest gain. A slowly improving rise in supply allowed the gains. But things are more spectacular on the pricing front with the median now US$363,300 (NZ$521,200) which is a startling +23% higher than a year ago - although some of this is because single family homes are in higher demand than condos and apartments, so the mix has shifted.
The Chicago Fed's national activity index suggests that economic activity moderated somewhat in June.
Meanwhile, the Kansas City Fed factory survey for July is positively glowing. Almost 90% of firms reported supply chain issues and a similar proportion reported labour shortages. Many have increased overtime for current workers and are raising starting wages to attract workers.
In Canada, the cost of housing will have a larger influence in how Canada’s main gauge of inflation is constructed. The shelter component of their CPI, which includes both owned and rented housing, along with other expenses, will comprise 29.8%t of the basket, up from 26.9%. Most of that increase is due to a sharp uptick in spending on real estate commissions and legal fees, owing to record transactions across the country. (In New Zealand, the equivalent portion is 28.0%.)
Housing won't be the largest influence on consumer prices soon. It is becoming clearer that northern hemisphere droughts are going to have very large impacts on food prices over the next year or so. China is scrambling to buy as much as it can, and yields are expected to drop sharply in the traditional food producing regions of North America.
In China, the Yellow River flooding emergencies are not fading. And now a typhoon is approaching the Yangtze River delta area and Shanghai which has authorities on high alert.
The Indonesian central bank reviewed its policy rates yesterday and left everything unchanged. But oddly, it raised its growth forecast slightly for 2021/22 because it expects their government to ease pandemic restrictions early despite the country having one of the world's worst coronavirus outbreaks.
The ECB also reviewed its policy positions overnight, and they too left them unchanged. They are sticking with negative rates in their push to re-ignite inflation.
The UK has asked Brussels to renegotiate its Brexit deal because it is finding it too hard to live with, especially in Northern Ireland. It is getting no interest from EU members however.
In Australian their June 2021 exports topped AU$41.3 bln with iron ore and other dug-up minerals making up almost half of that. These surging minerals exports allowed them to post a AU$13.3 bln merchandise trade surplus in the month.
There were 124 new community cases in NSW yesterday, and another 26 in the community in Victoria where their lockdown has been extended for another week. South Australia is also now in lockdown. And Queensland has closed its border with NSW, which is a last-resort action for them. None of this gives confidence the Trans-Tasman travel bubble will re-open anytime soon. In fact it may be formally suspended later today altogether.
Wall Street is meandering today with the S&P500 up a mere +0.1% in early afternoon trade today. Overnight, European markets rose about +0.5% in all markets except London which was down -0.4%. Yesterday, Tokyo was on holiday. Hong Kong made a sharp recovery, up +1.8%. But Shanghai was up only +0.3%. The ASX200 ended yesterday up a strong +1.1% but the NZX50 Capital Index ended up only a minor -0.1%.
The UST 10yr yield starts today at just on 1.26% and a -3 bps turn down. The US 2-10 rate curve is flatter by 3 bps to now be at +106 bps. Their 1-5 curve is now at +64 bps, 2 bps flatter, while their 3m-10 year curve is now at +122 bps and also 3 bps flatter. The Australian Govt ten year benchmark rate starts today at 1.20% and down -3 bps. The China Govt ten year bond is at 2.95% and unchanged. The New Zealand Govt ten year is now at 1.53% and down -3 bps from this time yesterday.
The price of gold is now just on US$1806/oz which is up +US$4/oz from this time yesterday.
Oil prices have risen by another +US$1.50 so in the US they are now just over US$71.50/bbl, while the international Brent price is now just over US$73/bbl.
The Kiwi dollar opens today just under 69.7 USc and unchanged since this time yesterday. Against the Australian dollar we are softish at 94.5 AUc. Against the euro we are firmish at 59.3 euro cents. That means our TWI-5 starts today unchanged at 72.8.
The bitcoin price is now at US$32,281 and up a minor +0.7% since this time on yesterday. Volatility in the past 24 hours has been moderate at just over +/- 2.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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34 Comments
The UST 10yr yield starts today at just on 1.26% and a -3 bps turn down.
At this point, they're aren't even trying. At least they're inadvertently being honest about not being honest. Just invented some "test" that no one would ever consider.
This just isn't analysis, it's pure inflation propaganda. - https://www.bnnbloomberg.ca/treasuries-stall-after-flunking-test-of-dem…
ICYMI, UST yields are substantially lower today. Link
View 10-Year TIPS auction results today - low yield -1.88%
Low yield at the 4 week Bill auction 0.000%. Median yield 0.04%.
The Bond markets are all pointing to extended economic issues in the worlds biggest markets at the same time that inflation is running rampant at the household level.
Essentially Bonds are pointing to deflation while households are experiencing quite the opposite.
This is the conundrum for central bankers raise rates and further suppress the economy or do nothing and strangle your consumers spending power as inflation eats at their wealth and the currency.
In my opinion it needs short sharp changes to OCR rather than long telegraphed changes. If things are running too hot lift OCR by 1% an things cool drop by a half a %. Take action by being responsive and keep the masses guessing that way everyone lives in a range and has to account for that range in all projections.
Another alternative is to have different rates for Consumers and Business.
Either way doing nothing isnt really an option
"The Reserve Bank will halt additional asset purchases under the Large Scale Asset Purchase (LSAP) programme by 23 July 2021," it said.
https://www.nzherald.co.nz/business/ocr-tipped-to-rise-in-august-reserv…
That's today!! Will be very interesting to watch the bond market over the next 2 months. The ending of the RBNZ LSAP removes the number 1 buyer from the bond market. With inflation running hot one would expect bond yeilds to spike? However iv'e noticed the banks have been going into "fear" mode. So they may start buying bonds (hoarding bond assets) instead of lending which will lower bond yields.
What could happen is the 2 year 10 year spread could blow out as the banks start hoarding short term bonds in fear. However longer term inflationary pressures could drive the 10 year rates up. In effect the 5/10 year bonds fall in price while the 1/2 year bonds hold there value. So if you sell the 10 year & buy the 2 year you make a profit.
Place your bets people, one thing is certain in these uncertain times, Cindy's casino is open for business!
Try seeing it in scale:
Her jurisdiction is the hat/coat kiosk on the way in the door.
The real casino is inside - totally insulated from the world. Take those chips outside and? There is an increasing interface problem .
Don't blame 'others' (the PM, from your slant), or if you want to, blame the others who peddled the Casino advertising - which said you could always cash you chips in, outside. You know them; they were trained in economics.........
"It is becoming clearer that northern hemisphere droughts are going to have very large impacts on food prices over the next year or so."
The last time dams on the Colorado where full Bill Clinton was in power, as I understand it this is a much longer term issue. Land is abundant, fresh water is very finite.
A longer term issue which human induced climate change is ramping up. It's the combination of climate change events that will do us in if we keep on our current trajectory - you can see this now. 500 yo houses being destroyed by flooding in Europe, unprecedented flooding all over the show. Then drought and wildfires going crazy in North America... all of which was predicted decades ago... how long do we keep our heads in the sand?
and right on cue, the msm division of the ministry of truth tells us how to read the numbers ... relax , its good news
https://interactives.stuff.co.nz/2021/the-whole-truth-covid-19-vaccine/…
"But at first glance, the death statistics are confusing.
Of the 255 people who died within 28 days of testing positive for Delta, 118 (46 per cent) of them were fully vaccinated. That’s higher than the 92 deaths (36 per cent) in unvaccinated people."
46 + 36 = some missing
hmmm
are they pushing an angle?
"The British Covid-19 deaths conundrum is a bit more complicated, because the vast majority of those who died (229 out of 255) were aged over 50.
That’s important for two reasons. One, because older people are at much higher risk of dying from Covid. Some deaths in the elderly are also likely to be frail people dying with Covid, rather than from it."
Oh
ok
so the old are dying with covid, not from it
got ya
It is interesting that you chose not to report the key sentence: "So while the bare numbers might make you think the vaccine doesn’t work, in reality unvaccinated people are dying at almost 10 times the rate of those who have had both jabs."
So, to put it in the most simple terms, once you are full vaccinated, the risk of dying reduces by a factor of approximately 10.
For those who have not read the article, the sentence refers to the latest available data from the UK.
The article is a very good example of how data should be used to come up with the correct conclusions.
KeithW
Silly me
I forgot to paste THEIR definitive conclusion
I really should learn how to read the numbers!
Do you want me to paste the whole article next time Keith?
Anyway, whats going on here?
https://threadreaderapp.com/thread/1415989536933490688.html
"Something really odd is going on: In Europe we are seeing surges at many places where most of the population has already been vaccinated. At the same time, the 15 least vaccinated countries don‘t seem to face any problem. At some point, denying this problem will get painful.
https://dailysceptic.org/2021/07/21/vaccines-not-protecting-over-60s-in…
https://www.ksla.com/2021/01/24/coronavirus-vaccine-could-affect-how-yo…
https://threadreaderapp.com/thread/1415989536933490688.html
What is happening here is most Central & Eastern Eastern European countries have stopped testing. I have friends from that part of the world. No one gets tested anymore. Vaccines + immunity though infection means that the virus is already seasonal. You get tested if you go to hospital thats about all. Delta is everywhere. The reason they don't test is because testing results in positive cases & positive cases means the the associated press starts pressuring you to lock down. Economically these countries can't afford lockdowns so they just don't test to remove the problem.
In the UK, deaths in the last big wave were running at around 2% of case numbers (with around a 15 day lag). Deaths during the current wave - with vaccination numbers much higher are running at around 0.2% of case numbers (ten times less).
Around 4 out of 10 people hospitalised have had at least one shot of vaccine - but this could have been the week before, which would have made little difference.
You can't add the numbers together H&E they're percentages from two different groups.
But this document talks about the deaths from vaccinated individuals, while in the US they are saying it is the unvaccinated people who are now catching and spreading it, And generally they are all under 50!
"Only one of 61 Israelis hospitalized with COVID in serious condition is a fully vaccinated individual under the age of 60..." - https://bit.ly/3eLDisu
Israel is registering about 798 cases per day, about 1 in 3 people experience no symptoms so the real number might be 1197 per day based on 7 day average (conservatively, as this assumes everyone with symptoms takes a test.) Takes about 14 days to recover on average so that's probably about 33,513 people with the disease currently of who 61 are in hospital (and just the one person over 60.)
You can see why fully vaccinated countries aren't too worried about Covid-19 but largely unvaccinated countries, like Australia, have to take extreme measures.
https://mobile.twitter.com/RanIsraeli/status/1417826357682257928
61/33513 is a 0.2% hospitalisation rate. This pretty independent of vaccination status (ignoring age). My simplistic interpretation of the Israeli data is that vaccination lowers the risk of over 60s to that of the under 60s which is good but not remotely close to what is being promised. Vaccine passports are worthless and you can speculate on if this good enough to open the border.
You should read to the end of the article:
"So while the bare numbers might make you think the vaccine doesn’t work, in reality unvaccinated people are dying at almost 10 times the rate of those who have had both jabs.
In fact, Public Health England estimates that vaccination prevented more than 30,000 deaths in England up to 25 June 2021."
You shouldn't cherry pick the numbers you like and ignore those you don't.
indeed
you should always be wary of the numbers
https://off-guardian.org/2021/05/18/how-the-cdc-is-manipulating-data-to…
Remember who is getting fully vaccinated 1st, Old, vulnerable, overweight, diabetic. So probably the weakest portion of the population
It does say they we FULLY vaccinated
"Of the 255 people who died within 28 days of testing positive for Delta, 118 (46 per cent) of them were fully vaccinated. That’s higher than the 92 deaths (36 per cent) in unvaccinated people."
Two thirds of those admitted to hospital were NOT double jabbed.
Pensioners and co-morbidity folk in general die not of Cv19 but with CV19 as the primary factor that finishes them off.
There is a large definitional problem with death certificates and who defines cause of death, esp when cause is multi-factoral
bad news, economically, is ALWAYS unexpected isn't it?
To me, it is entirely predictable that USA economy will take another bath as Delta variant is now spreading there.
The financial media Tod themselves it was sorted in USA and it is NOT. Only fed reserve is holding their market up. Funny also that NZ, USA and UK all have 25% pa house price inflation eh?
On that subject, peak of mania was December 2020 in NZ.
Whilst 95% of commentators seem to think it is still going on.
Sales peaked in Nov-Dec, if you compare to previous peak (as you should in any cyclical phenomena )which was 2015.Dec sales in Auckland were 43% over that peak in December. In June they were 26% BELOW that peak.
Look at monthly % rise in prices also which was 0.1% in June compared to abut 2.5% in April.
The buyers and sellers who were dormant in the low part of the cycle (mid 2017 - end 2019) have bought and sold in large part. The cycle has turned again and will now go dormant again for 2-3 years.
Yep there simply is no "dormant for 2 or 3 years" at this point your dreaming. The only thing stopping prices continuing to go up is rising interest rates and if they don't go up then prices are still going to the moon. The worst possible thing that can happen now is if they put up the rates, see the economy tank and then drop them even lower than they are now or even go negative, in which case we will overshoot the moon and land on Mars instead.
Yeah. House prices have mooned mostly because of low rates, and the low rates aren't going anywhere. I don't like it, but I have yet to see any explanation of how we back out of the low-rate trap. God knows the Japanese have been trying for 30 years, and it's not like we know something they don't.
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