US growth slows; Canada C/A deficit swells; China factory PMIs contract again; China coal use up; India growth slows; key Japan data slips; US beats China at WTO; UST 10yr 2.71%; oil unchanged and gold down; NZ$1 = 68 USc; TWI-5 = 72.5

Here's our summary of key events overnight that affect New Zealand, with news of weakening growth tracks nearly everywhere.

Firstly in the US, their economy slowed less than expected in the fourth quarter amid solid consumer and business spending. Growth in that quarter was +2.6%, above the +2.2% expected, but below the +3.4% in the third quarter and the +4.1% in the second quarter. The trend is a sharp softening, just not as soft as some had expected.

That higher-than-expected result has boosted both the US dollar and US Treasury bond yields. But it hasn't boosted Wall Street which is softer so far today, following surprisingly positive gains in Europe (except London), and sharp declines in Asia yesterday.

Canada reported its Q4-2018 current account deficit and that swelled to -C$15.2 bln and higher than expected. But for the whole year, the result was -$59 bln, the lowest deficit in four years. Canada runs deficits for both goods and services.

In China, they reported their official PMI and they show a factory sector shrinking, in fact for the third month in a row and the weakest in three years. On the other hand their services sector is still expanding at a moderate clip and at an average rate for the past year. China also released its final 2018 national accounts showing GDP growth at +6.6% and energy consumption per unit of GDP down -3.1% which is the slowest gain in energy efficiency in a long time.

China’s coal consumption and carbon dioxide emissions climbed last year, even as renewable energy generation made big gains and coal’s share of the nation’s energy mix fell below 60% for the first time. Coal’s share of the overall energy mix fell to 59%, but China actually consumed +1% more coal year-on-year. Solar and wind made big advances, with total installed capacity increasing by +34% and +12% respectively.

India also released its GDP results, showing Q4-2018 growth of +6.6%, but down from +7.0% in Q3 and +8.0% in Q2.

In Japan, they reported beef imports data that showed that TPP countries enjoyed a surge in sales there, up more than +50% after the agreement was signed, all at the expense of the American share. Australia, New Zealand, Canada and Mexico all gained in the expanded market.

But Japan's industrial output in January fell -3.7% from December, a third straight monthly decline amid sluggish export demand. And retail sales fell at a -2.3% rate in January from December, but were still +0.6% higher than the same month a year ago.

At the WTO, and after bagging the organisation as anti-America First, the US has won a trade dispute against China and the subsidies it pays for rice and wheat production. This puts both parties in a bind, but China most of all because it has been championing its support for such international multilateral dispute resolution bodies. Observers now await how China will respond. China may still be able to snatch victory from the jaws of defeat if it appeals the case to the WTO appellate body, which will soon be paralysed due to the Trump Administration’s block on nominees.

The UST 10yr yield is at 2.71% after a rise of +3 bps. Their 2-10 curve is higher at just on +20 bps while their 1-5 curve is still a negative -3 bps, but pared back quite a bit. It has been negative all year. The Aussie Govt 10yr is up +3 bps to 2.14%, the China Govt 10yr is up +2 bps to 3.21%, while the NZ Govt 10 yr is also up +2 bps at 2.19%.

Gold is down another -US$5 today at US$1,315/oz.

US oil prices are little-changed at just over US$57/bbl while the Brent benchmark is up to just on US$66/bbl.

The Kiwi dollar is starting today lower again at 68 USc. On the cross rates we are unchanged at 95.9 AUc. Against the euro we are lower too at 59.8 euro cents. That puts the TWI-5 down to 72.5.

The bitcoin price is virtually unchanged at US$3,796. This rate is charted in the exchange rate set below.

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

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6 Comments

GDP Rose by $1.0 Trillion in 2018, US Gov. Debt by $1.3 Trillion. Where would GDP growth be without federal borrow-and-spend?
https://wolfstreet.com/2019/02/28/gdp-rose-by-1-0-trillion-in-2018-us-gr...

WTO: too little too late

China is a communist country. They try to guess agriculture production and then pull a few leavers to try and fill in any holes and incentivise, command economies are devilishly complex things. Then they wait to see what mother nature does. Then have to subsidise farmers if they get too much rice or poor quality wheat. They really are a very different animal.

Japan shutting a lot of US beef out, is another story, Japan and the USA are joined at the hip, it only needs a phone call from Mr Trump to fix.

What is now established, though, is a mathematical fact. The last eleven years have been worse than the Great Depression. According to the updated estimates, using 2012 dollars as a reference, the current economy has underperformed the worst economy.
Most people believe this is an absurd interpretation, and it is in some ways. The last eleven years probably haven’t been nearly as bad for Americans as it was for their predecessors who lived through the calamity. But that’s not really the point. GDP is a simplified measure of economic progress which is suggestive of broad conditions.
https://www.alhambrapartners.com/2019/02/28/the-best-year-in-over-a-deca...

Apocalypse Sweden! Why is this happening?

https://www.youtube.com/watch?time_continue=165&v=9yYcJzOZnas