US Q1 GDP revised down slightly; US inventories rise; US house sales fall; Wall Street slips; China mulls yuan defense; Aussie housing consents tank; UST 10yr 2.22%; oil slumps and gold up; NZ$1 = 65.1 USc; TWI-5 = 70.3

US Q1 GDP revised down slightly; US inventories rise; US house sales fall; Wall Street slips; China mulls yuan defense; Aussie housing consents tank; UST 10yr 2.22%; oil slumps and gold up; NZ$1 = 65.1 USc; TWI-5 = 70.3

Here's our summary of key events overnight that affect New Zealand, with news the week is ending with a bit of a whimper, with overnight data giving few signals.

The update to the US's Q1 2019 economic growth brought the expected downward revision from 3.2% to 3.1% but this was less than expected.

This data shows that American inflation remains stubbornly low and that is putting pressure on the US Fed to consider reversing some of its recent rate cuts.

The American April merchandise trade balance came in at -US$72 bln for the month, massive yes but about what was expected.

Inventories in the US economy are rising, both at the wholesale and the retail levels.

But house sales fell in April, coming in below expectations and down -2% from April 2018, completing sixteen straight months of declines.

Canada's first quarter current account deficit came in pretty much as expected.

Overnight, European markets rose about +0.5% but Wall Street hasn't followed their lead and is down again today. Not by a lot, but a decline all the same turning negative in late afternoon trade. Yesterday, Shanghai fell -0.3% with similar declines in Hong Kong and and the larger Tokyo markets. All three have a market capitalisation of about US$15 tln, while Wall Street is capitalised at about US$33 tln. And to complete the picture, European equity markets including Frankfurt, London and Paris, capitalise in total at about US$10 tln.

In China, their central bank has been defending their currency, holding it below 7 to the US dollar for the past two weeks after racing toward that level. Now, with the trade war well entrenched, they are mulling whether the costs of such a defense are work it. Despite their warnings against market shorters, they could let the value slide again and quite soon.

In Australia, residential building consents were down a massive -24% in April from the same month in 2018. That is nine consecutive months of double digit percentage year-on-year falls. It is turning into a bit of a rout.

The UST 10yr yield is lower again today, now at 2.22% adding to yesterday's sharp drop. Their 2-10 curve is holding at +16 bps while their negative 1-5 curve is at -26 bps. The Aussie Govt 10yr is at 1.43% and up +4 bps. The China Govt 10yr is down -1 bp to 3.32%, while the NZ Govt 10 yr is now at 1.80%.

Gold is up +US$8 to US$1,289/oz.

US oil prices are sharply lower today, down by more than -US$2 and are now just on US$56.50/bbl. The Brent benchmark is at US$66.50/bbl. A slowing US economy is using less crude oil and stocks of petrol are jumping.

The Kiwi dollar will start today unchanged at 65.1 USc. On the cross rates we are also stable at 94.2 AUc. Likewise the euro we are still at 58.5 euro cents. That holds the TWI-5 at 70.3.

Bitcoin is marginally softer today at US$8,620. 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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Here's another Brexit reality slap in the face for the UK: BBC: Brexit shutdown slashes UK car production by 45%

Quote: "Even though Brexit is delayed the factories still closed and production fell 44.5% according to the Society of Motor Manufacturers and Traders (SMMT)". In what it called "an extraordinary month", the SMMT said only 70,971 cars rolled off production lines. That was 56,999 fewer than in April a year ago.

Mike Hawes, SMMT chief executive, said: "Today's figures are evidence of the vast cost and upheaval Brexit uncertainty has already wrought on UK automotive manufacturing businesses and workers.

CJ goes to the EU funded BBC for his daily Brexit news. Like going to PETA for a advice on steaks. Try and look at the big picture. Record breaking exports and unemployment levels not seen since Elvis.

"The unemployment rate in the U.K. fell in the first quarter of 2019 to its lowest level since 1974, highlighting the health of the labor market even as concerns over the U.K.'s future relationship with the European Union weigh on the outlook for growth."

"Data released today last week (10th May) by the Office of National Statistics (ONS) shows the 2018/19 financial year was a record-breaking year for UK exports, as they reached £639.9 billion. Total exports grew at a rate of 3.0% and increased by £18.5 billion compared to the 2017/18 financial year. Despite the uncertain global economic outlook, UK exports have been growing for the past 36 consecutive months on an annual rolling basis"

I thought the car plants closing down were the ones that made diesels? Everyone who has bought a new diesel car in Europe is very, very, pissed at the car manufacturers and the EU and their own government for lying about them being good for you. They were promoted purely to help the car industry at the expense of the health of the population. Diesel fumes are a significant killer of urban populations, due to the very small particulate pollution they produce which enter the bloodstream directly.

In 2018, sales of new diesel cars in the UK fell by nearly 30%, according to the SMMT.
The government had previously introduced tax breaks on diesel cars, when Gordon Brown was chancellor, but sales have been falling since 2016. (warning strong pro EU and left wing bias ).

...the ecotards bought in diesels to try and change the climate - even though the UK only produces 2% of industrial CO2. Net result more pollution in the cities and then a mandate to switch back to petrol and then to 50% can't be petrol by 2030.
So net result of green policies in last two decades -more pollution, climate not changed and UK car industry driven offshore. Though the last bit was probably the plan all along. And for those not keeping up - just blame Brexit.

I think you are talking nonsense. Perhaps we should call you a cotard for your love of CO2. My brother was doing his mechanical engineering degree in the 80's and told me back then the future of development of the ICE was with diesels as there was a lot of headroom to improve them. Kyoto Protocol wasn't until 1997. A diesel engine is a lot more efficient than petrol, so has always made sense from that point of view.

Profile is one of the new breed - paid to obfuscate.

He/she/s not the only one around here pushing a barrow. The problem is when those types are funded enough to sway elections, but I guess that comes down to the ignorance of the masses...

I agree that Profile's post if obscure but you claim he/she is paid/funded to post, who would fund someone to make confusing comments?

You're just jealous you can't get any Koch money PDK. Ever occurred that people may just have a different opinion to your Maltusian world view? Have a great weekend.

Gotta love CO2!

No CO2, no plants. No Plants, no life!

Its ok to love CO2 and O2, its the balance that matters, at 410PPM of CO2 we are still at historically low levels on the longer timeline.

Has the focus on greenhouse gases has been at the expense of all the real pollutants that are causing real harm......

It's just a shame that the higher levels on the longer timeline don't coincide with human civilisation as it is now. I don't believe we're going to destroy the planet if we don't deal with the greenhouse gas issues, but we are going to cause some pretty significant disruption to humans and animals in many parts of the world.

All so that we can fully run down our non-renewable resources before we think about what to do without them. Perhaps it would be better to make the switch while we're in a position of relative strength?

Scarfie, hard to believe I know. You couldn't make it up if you tried. "Encouraging motorists to trade in their petrol cars for diesel vehicles was one of the last Labour government’s biggest environmental mistakes.
Barry Gardiner, the shadow Environment minister, said the party was trying to cut CO2 emissions when it introduced new vehicle tax rates in 2001. It meant that motorists switched to diesel vehicles and parts of the country saw a big increase in nitrogen dioxide and other harmful chemicals in the atmosphere."

It's not surprising that exports have increased given the depreciation in the pound since the Brexit vote. Good for exports, but makes the rest of the country poorer through higher inflation.

I note that the BBC received 4 million pounds from EU grants against a total budget of somewhere north of 4 billion pounds. Is that 0.1% of their funding so critical that it drives their agenda?

edit: the contributions from the EU which the express described as "worryingly large". Personally I'd describe them as a rounding error for the BBC.

2013-14 £878,000
2014-15 £779,000
2015-16 £676,000

Grasping at straws - the pound wasn't falling before the Brexit vote? Have a look at a USD:GBP chart for the last 5years...

I did. On the 22nd of June 2016, 1 USD buys you 0.68 pounds. On the 24th June, you get 0.73 pounds. Do you see many other 7% currency swings on single days in that 5 year chart?

Of course the USD has been appreciating over that period which hides the magnitude of the change a little. Try the NZD to GBP 5 year - Brexit stands out like a sore thumb.

BBC is not funded by the EU, its funded by British households through the TV license.

Your assertion of bias is insulting to a painfully neutral media organisation.

@ profile: I see you're still too dumb to realize that Brexit has NOT happened just yet. I and others have tried to explain this too you several time and have now given up. But I will explain to you why exports are doing better in the UK and that's simply down to the POUND IS TRADING MUCH LOW IN VALUE! And the reason why the Pound is low, is sole due to them having pushed it down to guess what; help improve exports. And it's also due to the general global market reaction to Brexit where the Pound plummeted and soon a Mr Boris Johnson opened his big mouth and uttered "Lets leave the EU".
Just think if the NZD suddenly dropped in value, people from overseas would be able to buy more products from us too! Hey Kiwis would say, our economy is picking up we're exporting more. But sadly here, we're too addicted to selling houses and not letting those prices fall which helps keep the value of our NZD up at the cost of a real economies. Oh well.

And lastly; No the BBC is NOT funded by the EU, now that just proves how dumb you are!

Thanks theglc, here's the main paragraph:

"Britain’s car industry has faced a barrage of bad news in 2019. Honda is the latest casualty, announcing it will close its Swindon car plant, which employs 3,500 people, in 2021. It follows notice from Nissan that it is withdrawing investment from its Sunderland plant and the announcement of job cuts by Jaguar Land Rover and Ford."

The budget is a joke

I don"t get the joke - can you expand?


Its Boatman, and a Labour led Govt budget. It was a foregone conclusion he'd think it was [insert negative comment of choice here]. Ignore him and move on.

Bitcoin broke 9k last night. Big retreat now

You must regret selling out the other week then,

and a few hours later $8100

Tried looking at it on my phone. Probably a good perspective as the derivatives become incomprehensible.
I laughed when I realized the point of the graphics but really it's not all that funny is it.

Thanks for sharing, AJ. Scared the bejesus out of me.


I've been wondering if I should do a Friday book again. If you want me to you need to hit like or I won't bother.
John Valliant wrote this book and also The Golden Spruce. The reviews tell it all.

The Bureau of Economic Analysis (BEA) piled on more bad news to the otherwise pleasing GDP headline for the first quarter. In its first revision to the preliminary estimate, the government agency said output advanced just a little less than first thought. This wasn’t actually the substance of their message.

Accompanying this first revision was the first set of estimates for corporate profits. For the second straight quarter, net incomes in the sector fell. This part of economic life can be noisy, a single quarter’s minus perhaps not all that meaningful. Two in a row, however, this reduces the chances of randomness and introduces a very likely real trend. Link

That should be on the front page of every news website!

edit: Politicians have been quick to blame this abject failure on things such as size of our population and distance from the rest of the world but how do we explain the fact that our economy was more productive in 2012 than in 2018. It is safe to say digital connectivity has improved dramatically and our we've added nearly 800k extra people to our population in these 6 years; so by their logic we should be better off now, not worse off.

Michael Reddell and Eric Crampton should be on everyones' bookmarks. Contrarians they may be, but they seem to me to state more Troof, more elegantly, and with less obvious cheerleading and pom-pom shaking, than almost anyone else around, always excepting the editors of this 'ere august site.....

I put this on a National MP's post where he was denegrating Labour. Started off quite an argument with one of our mutual friends. That quickly turned ad hominem as he didn't have a factual response.

Exactly - how long before the NZ government 10 year notes, currently at 1.77% trade below OCR at 1.5%? - this abnormal reality has already unfolded in the US where effective Fed Funds at 2.39% are 17 bps richer than 10yr UST note yields. Punters are scrambling for liquidity hedges due to the deteriorating economic reality despite official insouciance.

10 yr in USA is %2.22 ours is 1.74% down from 2.2% in a couple of months, something is not right, -30 basis points in two months. Somebody wants to protect their capital. No wonder the CEO of ANZ is on sick leave.

I guess the 40% collapse in the price of Fonterra's shares since the beginning of 2018 is not helping sentiment. There are probably many outstanding collateral calls against shares pledged for loans.

once deflation gets baked in it's going to be hard to turn the ship around. Bonds are calling the inflation growth bluff.

OMG that second graph is telling....