Here's our summary of key economic events overnight that affect New Zealand with news we are in the northern hemisphere holiday season where news and data flows are light, the British re-launch their food-scare campaigns, and politicians take holidays. But through all this there are important economic events.
As we reported yesterday, US PCE inflation is high. Today we got more detail about household incomes and household expenditure patterns in the June quarter. that showed incomes flat and no longer falling as they did in April and May as more pandemic support was withdrawn. Household spending however inched up +1%. Most of these levels were about as expected. (But the rise of the pandemic delta variant and its wide impact is coming after these Q2 gains.)
Not expected however was the extended strength of the Chicago PMI report. A fall away from the record May levels was expected, but these appear to be holding very high in the industrial heartland of the US.
Also holding at near historic highs is the latest consumer sentiment survey, this one from the University of Michigan. It is lower in July that for June and that is due to concerns about inflation. But the extended elevation is impressive. This survey is also reporting that consumer views on inflation may be self-reinforcing. That say the way higher current prices are being viewed "will only increase the willingness of consumers and firms to act in ways that accelerate the upward spiral in prices and wages".
Following up yesterday's US Q2-2021 GDP +6.5% result, there have been a raft of other GDP growth releases around the world. Canada says its economy contracted in May, adding it its April contraction. But it rose in June and they should post a strong year-on-year gain due to the base pandemic effect. It is doubtful however Canadian economic activity in Q2-2021 will be above Q2-2019.
Hong Kong also reported a shrinking Q2-2021 level of economic activity compared to Q1-2021. Hong Kong's economy has been shrinking from well before the pandemic.
Taiwan is the mirror opposite, expanding and expanding faster. Their drought emergency seems to have passed. Economic activity is expanding fast and they now expect it to be +12% higher than the re-pandemic 2019 year.
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Germany also reported a good Q2-2021 GDP result, although not quite as good as was expected. (The miss might have been because beer sales fell.)
That enabled the EU to report a good Q2 expansion in economic activity. It is out of recession. Actually, Portugal, Austria, Spain and Italy led the way, countries you don't generally associate with economic prowess.
China is in summer holiday mode and the senior leadership of the Government typically go on holiday at this time for about two weeks, the Beidaihe break. Actually, China's leaders never acknowledge they take holidays and it is not clear why. But they do, and everyone knows it.
China also announced it is shutting its Taishan nuclear reactor after fuel damage, an event revealed by its minority French partner.
And China is fighting a new spread of the pandemic, one they say started from Russia.
The Baltic Dry index is remaining high. But the price of iron ore is now falling, and quite fast. It is down almost -20% in China trade over the past two weeks, most of that fall in this past week.
There were 170 new community cases in NSW yesterday with 93 not assigned to known clusters, so still going backwards there. Their lockdown has been extended by four weeks and masks are mandatory there now. Queensland has closed it's border with NSW, which is a last-resort action for them.
The Australian federal government is weighing advice about when and how Australia "can live with the virus", setting a 70% vaccination rate as the turning point. Nationally, that are currently at 15% who are fully vaccinated. Meanwhile NSW authorities are marshalling more than 1000 police to break up another anti-mask/anti-vax rally in Sydney later today. Australian troops are also being called in, and may be on the streets of Sydney as early as Monday - but after today's potential ugly punch-up.
On Wall Street, the S&P500 is down -0.4% since yesterday in late afternoon trade. For the week it is heading for a -0.2% slip although it remains very near its all-time highs. Overnight European markets slipped -0.6% across the board. Most markets posted a flat week although Paris gained +1.2% to stand out. Yesterday Tokyo ended the week with a sharp -1.8% drop. Hong Kong followed with its own -1.4% retreat. Shanghai, with the benefit of 'the home team' fell -0.4%. All these Asian shifts compounded to a weekly -2.5% drop in Tokyo, a -3.2% drop in Hong Kong, and a massive -4.0% drop in Shanghai. The ASX200 fell -0.3% yesterday for a flat weekly result. The NZX50 Capital Index closed yesterday down -1.1% for both the day and the week.
The UST 10yr yield starts today sharply lower at 1.23% and a -4 bps retreat as bond prices rally. The US 2-10 rate curve is to now at +105 bps and marginally flatter. But their 1-5 curve is much flatter at +64 bps, while their 3m-10 year curve is also much flatter at +119 bps. The Australian Govt ten year benchmark rate starts today at 1.21% and back up +3 bps. The China Govt ten year bond is at 2.86% and down -5 bps. It hasn't been this low in more than a year. The New Zealand Govt ten year is now at 1.53% and back up +4 bps.
In the US there is a lot of cash in their financial system. The New York Fed is reporting that their overnight reverse repo facility was holding more than US$1 tln in these temporary deposits, the first time that level has been reached.
The price of gold is now just under US$1812/oz giving up -US$19 of yesterday's big jump. But at least that is a +US$10/oz gain for the week.
Oil prices have risen by +50 USc and in the US they are now just over US$73.50/bbl, while the international Brent price is just under US$75.50/bbl.
The Kiwi dollar opens today just on 69.6 USc and back down -½c since this time yesterday on the risk-off mood. We have ended pretty much were we started the week. Against the Australian dollar we marginally higher at 94.9 AUc but that is our highest level this year. Against the euro we are softer at 58.7 euro cents. That means our TWI-5 starts today at 72.5 and -35 bps lower than this time last week.
The bitcoin price is now at US$39,111 and down -1.7% since this time on yesterday. Volatility in the past 24 hours has been moderate at +/- 2.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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39 Comments
"...the British re-launch their food-scare campaigns..."
Driver "shortages" have been a permanent feature of the UK economy. In fact the issue is rates are too low so UK truck drivers have left the industry being replaced with Eastern Europeans. Here is an article from 2018:
https://www.thesun.co.uk/news/5335306/trucker-shortage-threatens-post-b…
Not that far from low wage agriculture and service jobs in New Zealand where cheap foreign labour was used to suppress wage growth.
Mixed US data, some very strong;
Business Or Inflation Cycle?"
Like everything else, you can look at this both ways: a fed-fueled (not Fed-fueled) miracle that spending in goods was enough to offset the poor results in the services economy; or, why wasn’t PCE so much better given just how much “free fed money” (not Fed money) was poured into the system in three huge doses?
The last of those doses, the biggest one, falling squarely into Q2 2021.
What’s concerning (from the bond market perspective, as a start) isn’t just the latter possibility, it’s how this right here is the best of the best of the best for the entire global economy. Furthermore, it took Herculean effort to attain it.
That effort, along with perhaps much of the acceleration, both now potentially receding. If this is as good as it has been – and it certainly is – what truly comes next? Not just in American terms, for the US economy, more so how it plays out and works out around the rest of the world.
If it hadn’t been for the headline miss, whatever you make of it, how much would any of this been noticed? Even after it, there was going to be unnatural focus on the rest no matter what. The deflators.
Banks: "Whoa - we have so much cheap fresh cash, but its gotten a bit scary to lend it to people and businesses out there in the bubbles. Let's just tuck it away with the Fed for safe keeping and make nothing from it."
Fed to Banks: "Godammit - why aren't you STIMULATING them?!"
Germany also reported a good Q2-2021 GDP result, although not quite as good as was expected. (The miss might have been because beer sales fell.)
Germany grew 1.5% in Q2 mainly due to private consumption and public spending BUT missing 2% estimate. In addition, German 1Q GDP revised to -2.1% from -1.8% on quarter so economic performance still 3.4% below pre-crisis level. Link
Good Morning from #Germany where the financial repression intensifies. Real yields (10y Bunds-inflation) plunged to -4.25%, a fresh All-Time low after inflation jumped to 3.8% in Jul from 2.3% in Jun. Real yields are now NEGATIVE for 63 consecutive mths, another historic record. Link
4 out of 10 Americans consider themselves in financial distress. Their income today is lower than it was pre- pandemic. 1 out of 4 American households are unable to pay for basic necessities so they are borrowing on their credit cards just to make ends meet. Does that sound like a booming economy? Of course these numbers aren’t the numbers that are released in press releases, you have to dig for it.
What's hard to believe about it ? The MSM is so highly censored its not funny, if its not being censored its being avoided so simply not being reported. Many countries are now in big trouble but the only ones on the MSM are the ones that were on the brink before Covid even started so they are the first to fail. You only get to know about it the second the riots start in the streets, hard to cover that up.
Not hard to believe at all. Most common data coming out says that US incomes are soaring but if you look at what makes up most of the 'income' its all stimulus checks.
Bond yields will contine to fall until the whole curve is completely flat in my view.
We are heading down the road of UBI, THEN we will see inflation
And what about NZ? All we get is comparisons with other countries as to how rich we are because of the housing bubble. There is little to no research done on financial comfort in NZ among households and individuals compared to the U.S. The reality of 40% of the working population living paycheck to paycheck is probably not that much different in NZ. In fact the ASB-Melbourne University research is at least an indicator to suggest it is so.
More than half of Americans are living pay cheque to pay cheque:
https://www.businessinsider.com.au/broke-millennials-living-paycheck-ec…
So the report suggests 54% of Americans live paycheck to paycheck. The ASB Financial Wellbeing Study shows "more than a third of Kiwis are living pay-day to pay-day and nearly half have less than $1000 in savings." In my books, having $1000 in cash savings is not really much different from living paycheck to paycheck, so the NZ situation is not really any different to the U.S. directionally.
US sanctions Russia in media, but not in reality.
MOSCOW, July 30. /TASS/. Russia became second by total petroleum exports to the United States in May 2021, with record-breaking deliveries totaling 26.17 mln barrels, the US Energy Information Administration (EIA) reports on Friday.
The previous record was set in May 2009, when Russia delivered crude oil and petroleum products to the US totaling 25.08 mln barrels. Link
He's not a journalist, he's writer. He was never a journalist. He writes polemics. He is like a John Pilger, or a Robert Fisk. They may claim to be a journalist or reporter (and those two may have been at one earlier point in time), but they aren't. They start with their point of view and argue that. That is what a writer can do. It is not what a journalist or reporter does. It is a common misunderstanding. It would be like calling Tucker Carlson a journalist; he isn't, he is just a propagandist, and Murray has now moved into that space too. That happens when the sense of balance vanishes but they want the 'protections' of journalism. Happens on both sides of the partisan debate.
Actually, with a night to think it over, David Chastons' comments are incorrect, and need challenged.
Journalism should be about seeking truth(s) - nothing more, nothing less. That some end up speaking truth to power, is inevitable; it's just the other side of power/corruption absolute power/absolute corruption.
If one bases ones narrative on false assumptions, one tends to get further and further from the truth, finding it harder and harder to 'fit' that narrative with events (true things, events) as they unfold. Mainstream economics - and all who derive their narratives from same - increasingly has this problem - as per Mediawatch last Sunday.
The interesting thing David is that I came to your site while looking for answers to the GFC. I didn't have any clue of economic or financial matters ( I'd never looked before) so came with an open analytical mind.
I quickly found that interest is immoral, yet here you are passing judgement on what makes a journalist when your income is derived from a reporting business with this immorality building into the name and the reporting.
Perhaps it could be said that anyone who monetises news is corrupt, or will be. The time frame only depends on the ego involved.
DC surely the WMD and rape gang scandals have taught that establishment journalists group think leads to death and destruction.
"In late 2002, Vulliamy, a veteran and much trusted reporter, persuaded Mel Goodman, a former senior CIA official who still had security clearance at the agency, to go on record that the CIA knew there were no WMD in Iraq – the pretext for an imminent and illegal invasion of that country. As many suspected, the US and British governments had been telling lies to justify a coming war of aggression against Iraq, and Vulliamy had a key source to prove it.
But Alton spiked this earth-shattering story and then refused to publish another six versions written by an increasingly exasperated Vulliamy over the next few months, as war loomed. Alton was determined to keep the story out of the news. Back in 2002 it only took a handful of editors – all of whom had risen through the ranks for their discretion, nuance and careful “judgment” – to make sure some kinds of news never reached their readers.
Social media has changed such calculations. Vulliamy’s story could not be quashed so easily today. It would leak out, precisely through a high-profile independent journalist like Assange or Murray. Which is why such figures are so critically important to a healthy and informed society – and why they, and a few others like them, are gradually being disappeared. The cost of allowing independent journalists to operate freely, the establishment has understood, is far too high."
https://www.jonathan-cook.net/blog/2021-07-30/craig-murrays-jailing-is-…
Here’s some silly season news from Granny Herald:
Covid 19 coronavirus: An unexpected reaction to the Pfizer vaccine
That’s the headline, and on the face of it would seem to bolster the anti Vaxers nonsense.
But read to the end of this article and the reaction was in fact relief at taking a step to normality. The articles ok, the clickbait head totally irresponsible.
My Covid shot: a new beginning
Covid jab: I feel free again
The media really should step up and take some of the blame for this Covid hysteria.
Regarding that Pfizer vaccine. A few days ago this pfizer paper was released showing the results of the worlds largest covid19 vaccine clinical trial NCT04368728. The rather surprising info is in table S4 on page 12 of the supporting information. There were almost 44 thousand people in the trial roughly equally split between vaccine and placebo. After six months only 15 people had died in the vaccine arm (one death related to covid), and 14 people had died in the placebo arm (two deaths related to covid)! That's it folks! That trial is no longer double blind.
I'm just presenting the facts - I'll let you make up your own mind about what that means.
https://www.stuff.co.nz/life-style/homed/real-estate/125927856/is-there…
Found it interesting. Hoping the various commentators on here with critique it
Yeah. What i don't understand how that happened so suddenly. As I experienced it it took off at lockdown last year. Maybe people were house sharing till then? Crammed in? Govt decides motels are the way to go and.people put their hands up?
Where I live there wasnt much motel use pre covid but lots during and since.
Something itchs at me.
Agreed - certainly during Covid there was considerable increase from what I have observed in Napier.
In particular motels such as along Marine Parade with the lockdown the numbers increased considerably - quite likely due to lessening overcrowding issues - and had few or no regular guests.
However, at least two years prior to Covid lockdown there were a number of motels such as the Fern Motel and Marineland who seemed to be entirely being used for "homeless". From time to time I used to go to the Marineland Motel restaurant for a casual midweek meal - at least three years ago it was sold, the restaurant closed, and the motel has been used exclusively for housing "homeless" since. I was talking to a taxi driver a year or so prior to Covid who said that drivers had a number (she named six) of motels that they avoided due to issues.
Certainly in the last few months the number of people being accommodated in motels along Marine Parade seems to have decreased compared to what it was for much of last year although there is still some obvious presence.
I travel quite regularly and have learnt to be very careful about choosing motels - even good average ones. For example two reasonable motels in Napier, The Nautilus on Marine Parade (which has sea front and rooms going at $300) received $1.5m in the nine months to March 31 and the Bluewater on the yacht harbour received $2.76m in nine months. Only been caught out once; when visiting Tauranga I drove into the motel and it wasn't a great experience as the "residents" gave an intense steely look as though you were encroaching on their property . . . and issues with the cleanliness and maintenance of the rooms.
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