Here's my summary of the key events overnight that affect New Zealand, with news the IMF is calling out China's dangerous credit growth.
First up today however, the latest dairy auction was a disappointment. Prices did not gain as the derivatives market signaled. In the end, they were essentially unchanged in USD, dipping just -0.4% overall. However, given the fall in the New Zealand dollar since the last auction, these prices actually represent a gain of +3% in NZD terms. Among the key components there were few movements of note. This was a market event that gave no hint of future direction for dairy prices. There will be no forecast milk price changes based on this.
In the US, retail sales recorded their biggest increase in seven months in July as consumers boosted purchases of cars and raised discretionary spending, suggesting the economy continued to gain momentum early in the third quarter. This data is somewhat at odds with the weak car maker reports, but their sales to the rental car companies (which were very much lower) aren't in consumer retail sales. Along with higher retail sales, business inventories rose a little, which is where some of that car production probably went.
A detailed national survey by the New York Fed shows household borrowing is growing modestly but credit card delinquencies are rising. Total household debt rose by +4.5% to $12.8 tln in the second quarter of 2017 from the same period a year earlier. There were small increases in mortgage, car, and credit card debt, no change to student loan debt, and a decline in home equity lines of credit. Flows of credit card balances into both early and serious delinquencies climbed for the third straight quarter - a trend not seen since 2009.
American household credit may be generally under control, but the same cannot be said for China, according to the IMF. They are warning that China's credit growth is on a "dangerous trajectory". They say there is an increasing risk of a "disruptive adjustment" and/or a marked slowdown in economic growth" and they want to see "decisive action" to deflate the credit boom smoothly.
And investment in and by China is shrinking. Inbound foreign direct investment stopped growing and actually slipped -1.2% in July on a year-on-year basis. But Chinese outbound foreign investment plunged -44% on the same basis.
In Canada, sales of existing homes in July fell from the prior month, the fourth straight monthly decline amid a widespread cooling of the Canadian housing market. Sales volumes are down -12% year-on-year, and the national average prices are unchanged from a year ago, now having given up C$80,000 in gains in those four months. The average Canadian home sells for C$478,700 (NZ$518,200).
In Australia, political conversations are getting extreme and silly. All sorts of unseemly accusations are flying about "the day New Zealand conspired" to take down Malcolm Turnbull. The Trumpification of political discourse has gotten seriously out of hand in Canberra and their news media.
In New York, the UST 10yr yield is higher today, now at 2.27%.
The price of oil is unchanged today US$47.50 a barrel, while the Brent benchmark is still at US$50.50.
The price of gold is lower, down -US$7 to US$1,273/oz.
And the Kiwi dollar will start lower today at 72.3 USc, a one month low. On the cross rates we are unchanged at 92.5 AU¢, and at 61.6 euro cents. As a result that puts the TWI-5 index at 75.1.
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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