US bank lending dips; durable goods orders rise; US house sales contracts fall; China services deficit narrows; UK insurers hit; Aussie eyes on C/A deficit; UST 10yr yield at 2.36%; oil and gold higher; NZ$1 = 72.2 US¢, TWI-5 = 77.5

US bank lending dips; durable goods orders rise; US house sales contracts fall; China services deficit narrows; UK insurers hit; Aussie eyes on C/A deficit; UST 10yr yield at 2.36%; oil and gold higher; NZ$1 = 72.2 US¢, TWI-5 = 77.5

Here's my summary of the key events overnight that affect New Zealand, with news that markets are waiting for some highly spruiked announcements from the new US president.

In the meantime, banks are showing restraint and caution lending into a Trump economy. Total outstanding bank loans have dipped for two consecutive months with declines in December and January, and that marks first time in five years that bank lending has contracted. (See line 9.)

US durable goods orders rose in January by +1.8% and came after two consecutive months of declines. Aircraft sales were a key contributor. Backlogs fell however.

A lack of supply has seen contracts to buy previously owned American homes drop in January especially in the Midwest and West regions. But prices rose sharply, with the median price up +7.1% from the same month a year ago.

And the latest reading of the Atlanta Fed's GDPNow calculator shows an American economy that will grow +2.5% in the first quarter of 2017.

In China, their trade surplus in goods is well known. But not so well known is that they run large trade deficits in services. In January, that deficit in services was NZ$29 bln, although that is a little lower than in recent months. It is also dwarfed by their trade surplus in goods, which in January was NZ$74 bln. 

Here's a story about insurance premiums and interest rates. In the UK, long term accident victims have been paid a lump sum for their loss, discounted at 2.5% pa for the period of their expected full recovery on the basis that the time value of money was related to the return on UK Government bonds, less inflation. But that formula was changed overnight to a more realistic -0.75% pa, dramatically increasing personal injury claim payouts. Company profits will suffer and share prices have been marked down. Insurers have threatened to raise premiums sharply. The industry wants their Government to change the rules to go back to the cozy deal they had.

In Australia there has been a 'blockbuster' NZ$14 bln surge in business profits in the December 2016 quarter, led by their miners on the back of resurgent Chinese minerals demand. This data has stoked speculation of a turnaround in economic growth across the ditch. It is also in contrast to wage growth over there.

Later today, the Aussies will be releasing their Q4-2016 current account data. It might be worth following because most analysts reckon that deficit could be its smallest in decades - in fact some are saying a current account surplus could be possible in future quarters. If that turns out to be the case, expect the Aussie dollar to strengthen sharply - perhaps starting later today.

In New York, the UST 10yr yield is rising again and now at 2.36%.

Oil prices are up marginally and now just over US$54 for the US benchmark, while the Brent benchmark is just over US$56 a barrel.

The gold price is up a little further at US$1,260/oz.

And the New Zealand dollar starts the day at 72.2 USc. On the cross rates we are at 93.9 AU¢, and against the euro at 68 euro cents. The NZ TWI-5 index is still in its three-week tight range at 77.5.

If you want to catch up with all the changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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6 Comments

In the meantime, banks are showing restraint and caution lending into a Trump economy. Total outstanding bank loans have dipped for two consecutive months with declines in December and January, and that marks first time in five years that bank lending has contracted. (See line 9.)

I am not sure of the comparison period for the credit cateogory and table you have chosen.

Nonetheless, FRED provides a not so dismal, easy to read, one year comparison table for US bank credit,.for a few given cutoff dates. View table

US durable goods orders rose in January by +1.8% and came after two consecutive months of declines. Aircraft sales were a key contributor. Backlogs fell however.

Hmmmm....

The current rate of expansion for both new orders as well as shipments places the manufacturing economy in parallel with where it was in early 2014. The year-over-year rate for durable goods shipments was 4.6% in January 2017, about equal to March 2014 which was estimated contemporarily to have been about 5.1% growth (subsequent benchmark revisions have brought estimates down to just +1.9%, something to keep in mind). That figure was released in late April 2014, and was consequently used as more evidence for QE’s potency. Read more

But that formula was changed overnight to a more realistic -0.75% pa, dramatically increasing personal injury claim payouts. Company profits will suffer and share prices have been marked down. Insurers have threatened to raise premiums sharply. The industry wants their Government to change the rules to go back to the cozy deal they had.

LOL - this reality has long been documented employing simple analysis.

To add insult to injury, debtors are bombarded by government and central bank
propaganda. “Stand still little lamb, the ‘haircut’ is good for you! You will love the lower interest rate environment that is yours free of charge!” The truth is that, in effect, a great injustice has been perpetrated. A huge transfer of wealth from debtors to creditors has been put into effect under
handedly.
Read more

" Zero interest will never be reached this way, yet each halving causes great damage to the economy"

Still reading that garbage. Lowering interest rates is a response to a stuffed economy and not the cause. Now possibly there is a feedback effect. "Possibly" the Q is is it negative as is claimed by Austrians like fekete or positive and is the effect significant or even the significant cause/effect.

Meanwhile outside in the real world there is ample evidence that raising interest rates slows an economy this is demonstrated time and time again. Meanwhile fekete claims the reverse also happens??? wtf. So no matter what we do to the interest rate it damages the economy in his view. So the Q is then is there any other process under way such as gaming the system that lowering interest rates gives riseto that cause this effect? if so then this gaming needs to be stopped and not rise interest rates.

Meanwhile the banks continue to bribe and buy politicians who then ignore the voter. Brexit and Trump are but two symptoms which are being ignored by the elites convinced they are safe from the masses, bound to end well.

This piece seems relevant:
Systems that are dying are rigid, mal-adapted, resistant to change, obsessed with obscuring their failure and retaining their grip on cronyist privilege and power. Big Pharma: dying. Banking: dying. Governance, a.k.a. political processes: dying. Enforced consensus: dying.

Those slices of the economy that are exposed to competition and innovation have a choice: adapt or die. Everything that is protected by monopoly--private-sector cartels, government, government-managed sectors such as Big Ag, Big Pharma, Military-Industrial Complex, Higher Education and the entire intelligence agency alphabet soup--are focused on maintaining their grip on power.

http://www.zerohedge.com/news/2017-02-27/those-systems-arent-busy-being-...

I guess it's the idea of evolutionary forces working on social institutions.

No sympathy for UK Insurers , or elsewhere for that matter .

From what I have read and heard , they are a nightmare to deal with at claim time .

I am all for any business making a profit , and Insurers in particular need a strong balance sheet and a robust war chest for provisions for claims , but while insurers should be stable and able to meet claims , the profits they make are OTT

Go to any major city in the world and the most prestigous buildings are owned by Banks , Insurers or global operations of multinationals .

The rise in property trusts is significant , but these funds are often owned, managed or controlled by Insurers , even in the case of NZ where AMP have a property fund in which they invest along with you and I