Here's our summary of key events over the weekend that affect New Zealand, with news we start the week with worldwide economic signals on the 'down' side.
But first in the US, their economy slowed less than expected in the third quarter of 2018 as a tariff-related drop in exports was partially offset by stronger consumer spending. An almost +5% rise in defense spending also helped boost the result. Their headline growth is "+3.5% pa" - but on the basis the rest of the world uses, Q3 grew at a rate of +3.0%, while the year to September 2018 was +2.8% higher than the same period one year ago. (New Zealand won't release its Q3 GDP data until late December; our Q2 growth was +2.7% pa.)
US personal disposable income (that is, after taxes) was up +5.2% but their personal expenditure was up +5.5%. That mismatch means that personal savings growth is very weak, up just +0.6%. On a per capita basis, it fell.
Perhaps that is one reason that a key measure of consumer sentiment fell more than expected, even in the face of the GDP outcome. This measure is now -2.1% lower than a year ago. The headline gains are starting to look a bit hollow.
Markets have also been unimpressed by the American results and Wall Street fell -2% in Friday on the news although it clawed back a little ending down -1.7%. In fact, they have now dipped into "correction" territory, being more than -10% lower since the recent peak. Benchmark bond yields have fallen sharply too, down to just 3.08% for the UST 10yr benchmark.
But more interest rate rises are on the way. The Federal Reserve's Vice Chairman confirmed the central bank’s plans to gradually raise interest rates and pinpointed the behavior of inflation as key to deciding when to stop. The new Administration appointees to the Fed are leaning firmly against the President's outbursts against Fed policy - and their steel is strengthening.
In Canada, there are strong signs that household there are taking on less debt. Official data shows debt growth in September was the smallest rise since 1983.
In China, industrial firms are reporting lower profits in the official survey. This is the fifth consecutive month of slowing and they rose just +4.1% in September, down from a +9.2% rise in August.
In Singapore, manufacturing output unexpectedly fell in September, with output falling -3.9% year-on-year and suggesting their economy was finally beginning to feel the chill from trade tensions and slowing growth elsewhere.
The UST 10yr yield ended last week sharply lower at just 3.08%, a -12 bps drop in a week. Their 2-10 curve dipped further to under +27 bps. The Aussie Govt 10yr is at 2.59% (down -11 bps over the week), the China Govt 10yr is at 3.55% and down -3 bps for the week, while the NZ Govt 10 yr is at 2.57% and down -12 bps over the week. New Zealand swap rates were unchanged last week for durations out to three years, but have slipped and flattened for longer durations. In fact, our 2-10 swap curve is now under +80 bps for the first time since November 2016. In between it had gotten as high as +127 bps.
Gold is at US$1,233/oz.
US oil prices are little changed today at just over US$67.50/bbl. But the Brent benchmark is up +US$1 to US$77.50/bbl. But both are pullbacks from this time last week. The Brent price rise may be because of some Chinese moves which will resonate here.
The Kiwi dollar is starting the week at 65.2 USc. On the cross rates we are at 92 AUc, and at 57.2 euro cents. That puts the TWI-5 at back at 69.6. Also, keep an eye on the Chinese yuan as it approaches the 7-to--the-greenback level. Official manipulation and market speculation are battling each other and commodity currencies like the NZ dollar may be at risk of being collateral damage.
Bitcoin is still at US$6,423, unchanged from both Saturday and this time last week. This rate is charted in the exchange rate set below.
This chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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