US consumer credit sags; US jobs data uninspiring; Canada jobs fall; EU-China talks hit snag; WTO ruling challenges Trump; UST 10yr 2.50%; oil firm, gold unchanged; NZ$1 = 67.3 USc; TWI-5 = 72.1

US consumer credit sags; US jobs data uninspiring; Canada jobs fall; EU-China talks hit snag; WTO ruling challenges Trump; UST 10yr 2.50%; oil firm, gold unchanged; NZ$1 = 67.3 USc; TWI-5 = 72.1

Here's our summary of key events over the weekend that affect New Zealand, with news investors see warning signs. The US economy is losing its mojo, the US and China are having trouble striking a deal, and both the IMF and WTO are warning that global trade is wavering.

Firstly, US consumer debt growth dropped sharply and unexpectedly in February in data released by the Fed. The flow actually dropped more in February than it rose in January in an unusually large reversal.

The US non-farm payrolls survey for March reported a gain of +196,000 new jobs which was just ahead of expectations. Unfortunately this didn’t make back any of the very poor February result (which only brought an insignificant revision this month). Factory jobs shrank, as did trucking jobs. The total jobs gain in the first quarter of 2019 only averaged +180,000 per month which is -21% lower than for the same quarter in 2018. (It's also -8% lower than the average monthly gains in the 2014-2017 period even though the US workforce today is +6% larger.) Health care jobs are where the hiring is in this latest quarter.

This same data showed their participation rate staying very low, their jobless rate unchanged, and average hourly earnings were up +3.2% in the year which is lower than expected and a decline from earlier months.

The US economy is still growing, but the expansion is fading. The NY Fed estimate is that Q1-2019 grew at just +1.4% and that may rise to +1.9% in Q2-2019. The Atlanta Fed GDPNow calculation is slightly higher at +2.1% ‘now’ and falling. Both are similar to private estimates.

The US President is now calling for the Federal Reserve to cut interest rates and bring back QE to simulate their economy. It’s a white flag for the supposed power of corporate tax cuts.

The US President also plans to appoint two new economic amateurs to the Federal Reserve board, both of who seem to want to peg the US dollar to gold.

Canada reported an unexpected drop in employment in March, although most other metrics remained unchanged.

The US:China trade talks drag on. And China:EU talks seem to have hit a stumbling block on questions of access by EU companies to China’s markets.

While we reported last week that new German factory orders took an unwelcome decline, new data out shows that factory production came in in February at better levels than were expected.

In the UK, production is rising as customers demand that suppliers build stocks ahead of a hard Brexit. But this is happening as sales decline.

And over the weekend, the WTO published its first ruling about claiming “national security” as a reason for imposing tariffs, setting a legal precedent that will lead to a likely clash with the American Administration. The case involved Russia and the Ukraine, but concluded the WTO does have jurisdiction.

In Australia, a top IMF official is reported to have said Australia's housing market contraction is worse than first thought and the RBA was likely to cut interest rates in the next few months.

The UST 10yr yield is little-changed at 2.50% and that is +9 bps higher than this time last week. Their 2-10 curve is wider at +18 bps and their negative 1-5 curve is narrower at -8 bps. The Aussie Govt 10yr is unchanged overnight at 1.90%, the China Govt 10yr is also unchanged at 3.27% because they are on holiday but this is up +19 bps in the week, while the NZ Govt 10 yr is at 2.03%, also up +20 bps since this time last week.

Gold is unchanged at US$1,291, and also little-changed for the week.

US oil prices are firm, now just on US$63/bbl while the Brent benchmark is at US$70/bbl. And there was an unexpected rise in the US rig count this week, ending a seven week slide.

The Kiwi dollar is a little firmer this morning to start the week at 67.3 USc but about -1c lower than this time last week. On the cross rates we are at 94.8 AUc. Against the euro we are still at 60 euro cents. That puts the TWI-5 at 72.1.

Bitcoin is also a firmer at US$5,136 and a +24% gain for the week. 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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4 Comments

Please stop using expression "unexpected" in front of anything economically negative.
This happens in all media.
It is NOT unexpected to those of us who are not Polyanna

You are wrong. When we use the term 'expected' we base that on analyst expectations. We have access to data that averages economist and analyst expectation estimates for key market announcements before they are announced. This is a very large resource of non-official assessment ahead of the official data release. So when the official data is released, we know not only how it compares with previous levels, but also how it compares with what the professional market operators expected. We do not use it based on our personal 'feelings'.

"The US President also plans to appoint two new economic amateurs to the Federal Reserve board, both of who seem to want to peg the US dollar to gold."

Stupid amateurs, can't they see how well finances have been managed over the last 40 to 50 years....

Indeed, inflation allows the politicians and bureaucrats to fleece the populace, no wonder they are in disgrace worldwide. Trump was elected primarily because he was not a career politician.