US service sector strong, but not traditional retail; China service sector grows; Japan insurer adopts AI; Vancouver house prices fall -2.2%; UST 10yr 2.37%; oil up, gold jumps while bitcoin slumps; NZ$1 = 70.3 USc, TWI = 76.4

US service sector strong, but not traditional retail; China service sector grows; Japan insurer adopts AI; Vancouver house prices fall -2.2%; UST 10yr 2.37%; oil up, gold jumps while bitcoin slumps; NZ$1 = 70.3 USc, TWI = 76.4

Here's a special holiday update of some key events and data you may want to know about today.

First up, the American services sector activity held at a one-year high in December as new orders surged. Meanwhile the number of Americans filing for unemployment benefits fell to near a 43-year-low last week. But the non-farm payrolls precursor report from ADP came in weaker than expected. Still, overall, the evidence is that the US economy ended 2016 with strong momentum.

That momentum however does not extend to traditional bricks-and-mortar retailers and some of the largest of them are struggling. Sears is divesting key assets to help stay afloat, and Macys has said it will cut more than 10,000 jobs.

In China, their services sector also saw improving 'new orders' although employment growth was soft.

In Japan, Fukoku Mutual Life Insurance is laying off employees and replacing them with an artificial intelligence system that can calculate insurance payouts. The firm believes it will increase productivity by 30%. It expects to save around NZ$1.7 mln a year in salaries after the NZ$2.5 mln system is installed later this month. The system is based on IBM's Watson, who say it is a "cognitive technology that can think like a human".

In Vancouver, sales of residential property in the city reached 39,943 in 2016, a -5.6% decrease from 2015, and a +20.6% increase over 2014. The composite benchmark price ended the year at C$897,600, a -2.2% decrease over the past six months but a +17.8% increase compared to December 2015.

In New York, the UST 10yr yield is sharply lower today, now at 2.37%.

The US benchmark oil price is marginally higher and now just over US$53.50 a barrel, while the Brent benchmark is just over US$56.50. The latest data on US crude stocks shows a lot lower levels that were expected.

The gold price has jumped US$16 today, now at US$1,181/oz.

The New Zealand dollar is higher against the greenback and now at 70.3 USc. On the cross rates it has held its own at 95.7 AU¢, and 66.3 euro cents. The TWI-5 is unchanged at 76.4. A dramatic rally in value of bitcoin came to a spectacular end earlier today with a plunge of up to -20% as China's yuan rose sharply - further evidence of an odd inverse relationship between the pair.

The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »

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29 Comments

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What's the cause of the fall in Vancouver house prices?

What fall?
~2.2% over 6 months?
Seems pretty benign to me..

17.8% Gain in house prices in Vancover. I will take that fall any day.
Rock on Auckland and give the Reserve Bank Governor the middle finger come February.

Single minded cherry picking.

Yes you're right nymad, Ted is an Estate Agent so he'll always try to paint a positive picture of the housing market to keep people buying even when there are very real reasons why it's on the decline.

Vancouver's taxes on foreign buyers were only introduced towards the end of the year so it will take a few more months (Say 6 months) before we can really gauge their effect.

It's the trend that matters.

@ NissanGTR: The sudden Vancouver property fall was due to two new taxes one on Foreign Buyers at 15% stamp duty and the Empty Home tax

In October 2016 the average-priced detached home throughout Greater Vancouver now costs $1,470,265, compared to $1,764,682 in July.

According the their Huffington Post article: http://www.huffingtonpost.ca/2016/09/02/vancouver-detached-home-price-cr...

That sounds like a bigger drop that 2% that Ted is saying above. My math might be a bit off...

It doesn't matter.
CJ's point is that even after that huge short term reaction, medium term is only slightly lower.

''artificial intelligence system'''' is already alive and well in The BEEHIVE.

Intelligence?

A warning as to what happends when one upsest the "father". Good luck with that dodgy steel issue.

https://qz.com/876998/south-korea-says-china-is-retaliating-against-its-...

“Sometimes we’re invited to take experts as though they were prophets, as though their words were carved in tablets of stone and that we had to simply meekly bow down before them and accept their verdict.

“I think the right response in a democracy, to assertions made by experts, is to say ‘show us the evidence, show us the facts’. And then, if experts or indeed anyone in the debate can make a strong case, draw on evidence and let us think again – then of course they deserve respect. Read more

The imposition of robots to take the place of economists should not be delayed a moment longer.

The central innovation, if it may be called that, was his own: rational expectations theory. There is no other way to state it, but rational expectations is a mathematical solution to a problem of infinities. It simply does not exist in the real world, for how can it? To describe it in layman’s terms is to reveal the dodge: economists model consumer and individual behavior as if every single one of us is either himself a social scientist in the same mold, or at the very least has one on retainer so as to consult with for every single economic and financial decision.
The problem is knowledge and the future. We simply cannot know it, and even if we could there is still the non-trivial problem of trying to understand it. In a 2013 Bloomberg interview taken with also Nobel laureate Edmund Phelps, Phelps touched on this glaring inconsistency:
You’re right that people are grossly uninformed, which is a far cry from what the rational expectations models suppose. Why are they misinformed? I think they don’t pay much attention to the vast information out there because they wouldn’t know what to do what to do [sic] with it if they had it. The fundamental fallacy on which rational expectations models are based is that everyone knows how to process the information they receive according to the one and only right theory of the world.
http://www.alhambrapartners.com/2016/12/30/dr-strangeyellen-2-the-belate...

You are overstating. Economists have never thought that every human, every time, will always make the best and most rational choice he possibly could, and most certainly not that the rational choice would be the same for everybody.

What they have assumed is that most people, most of the time, will act in what they believe to be their own interests, and that most people are better placed to judge what is in their own interests (taking into account their own personal circumstances, preferences, priorities) than is any third party.

Therefore, the fact that I take a different decision from you in response to the same signal in the same circumstance is not evidence that I am irrational, or that you are. It simply indicates that you and I have different preferences.

If you're going to reject even that, what are you left with? Either

that people will consciously, consistently and predictably behave in a way that is bad for themselves and against their own interests (really? What happened to selfishness and greed?); or

that each individual will respond, or not respond, in a completely random manner to any given event or signal and therefore that we cannot possibly have the faintest hope of anticipating, even in the most general directional terms, what is going to be the consequence of any Government action or indeed any event.

Therefore, anybody who claims to know what is going on and how the Government should act in response to it - be he Barack, Bill, Bernard or Blogger - is wrong and there's no point Government doing anything.

Is that what you're saying?

Well put.
Andrewj seems to fall into the quote-happy group that rely on singular critiques for their understanding of a concept.

I'm a sheep farmer, I do the best I can with what i've got.

And very often right.

Even in this case?

Correct

A person at age 30 may respond to a specific signal in a particular manner, then 20 years later at age 50 will probably respond in a completely different manner to an identical signal

Their circumstances at age 50 will be (most probably) completely different to what they were 20 years before

Thus the 30 yo cohort will probably act quite differently to the 50 yo cohort

Sufficient to say an individuals preferences are never constant and will change over time

That's pretty irrelevant, though isn't it?
Where it is an issue it is almost certainly controlled for.

The rational expectations assumption still holds - it's not as if your tendency to make arbitrary or random signal based decisions changes relative to age, is it?

so what did rational expectations tell us about MPI's goal of doubling agriculture production by 2025?

In what respect?
The goal was set on the basis of irrational expectations?

Therefore, anybody who claims to know what is going on and how the Government should act in response to it - be he Barack, Bill, Bernard or Blogger - is wrong and there's no point Government doing anything.

In respect of Bill English pressuring the "independent" RBNZ to repeatedly cut interest rates, hence assuming without evidence this is a relevant action associated with raising the CPI rate, I would have to say yes.

Einstein supposedly defined insanity as repeating the same thing and expecting different results. This may have to be modified for modern monetary theory incorporating the random walk, to where insanity is treated instead as even bothering to realize the repetition. Read more

Excellent Andrew
may I add we now live in a world of increased disinformation or lies
example of this was the 2016 US election where lies were spread across FB & Alt Right media
So facts aren't even valued indeed are corrupted.
E Con omists also fail to factor in the do nothing response
I find one heck of a lot of people procrastinate their lives away and they are still part of the population but never factored in I think to any great extent anyway.
My Gosh if we get more writing likeAndrew this the whole site will go up in value!
Perhaps you should move to the Northern lights

Very interesting recent World Business Report from the BBC on: China: Renewables to Create 13m Jobs in 5 years,
Trump's tariffs, UK Farming and Brexit, plus AI.
http://www.bbc.co.uk/programmes/p04ms0fw

i said at the time i bet in five years the UK are stronger now the BOE are admitting the Brexit fears are unfoundered
http://www.stuff.co.nz/business/world/88181243/bank-of-england-admits-br...
French oppostition now talking about rolling back some of the Eur
Germans want interest rates up
this has all the hall marks of unwinding in the next five years

Seems to be a trend globally that most Media entities threaten economic disaster if a certain 'incorrect' choice is made by the ' ignorant' voters. Then they blame other entities for the 'poor' choice.
The benefit of this phenomenon is that the public can now see through the biased information that they once used to trust.
Is there any reasonably trustworthy mainstream media voice in NZ other than Fairfax and NZME? (Note the E = Entertainment). Interest.co.nz serves this purpose of course. Or who will offer reasonable alternative jounalism?

Michael West

House prices surge on China black money; authorities dither

We have just entered the ninth year of equivocation by assorted governments over anti-money laundering laws which should have been fully implemented by now. The first tranche of AML-CTF (Anti-Money Laundering and Counter-Terrorism Financing Act) legislation was introduced in 2006.

The second was supposed to be enacted in 2008. For the sake of stating the obvious, it is now 2017. The past eight years has been a dither-fest, a shaggy-dog story of ‘finalising industry reviews” and “consultation with stakeholders”, a festival of stonewalling.

http://www.michaelwest.com.au/house-prices-surge-on-china-black-money-au...

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