Here's our summary of key economic events overnight that affect New Zealand with news of some relief the US didn't surprise with its inflation report.
American CPI inflation for July was reported overnight at 5.4%, the same as for June. Components of their core inflation (that is, excluding food or petrol) slipped slightly to +4.3% for the year to July, raising the prospect that it may have peaked. But analysts say a retracing lower from here may take a long time
US Federal budget deficit in July came in at -US$302 bln, almost exactly as expected. That makes the deficit for the prior twelve months as -US$2.9 tln or -12.6% of GDP. In the equivalent 2020 year it was -16.1% of GDP so that is creditable progress over the past year. (The New Zealand Government deficit to June is still to be finalised, but on roughly the same basis as the US, it looks like it will come in as a deficit of about -3.3% of NZ GDP.)
There was a US$59 bln auction for the US Treasury 10year Note overnight and the Fed took US$18 bln. The remaining US$41 bln attracted $108 bln in bids which was almost +20% more than for the prior auction a month ago. This time the median yield was 1.32% pa compared to 1.31% at the last equivalent event.
China's new yuan loans in July have stunned analysts by coming in at a very weak level, confirming the overall China economic slowdown - right for the month the CPC celebrated its 100 year successes under the leadership of Chairman Xi. The economy has delivered him a rebuke, it seems. The debt growth was -10% below analysts' forecasts, and a stunning -50% below the June level. And it is essentially the same as in July 2019. For a country powered by new debt, this is a worrying signal.
Worse, China's July new vehicle sales came in at under 2 mln, and its lowest July since 2015. Given that 2020 was pandemic-affected and 2021 basically isn't, this isn't a strong result.
China is banking on exports to bolster its 2021 economic position as the local momentum seems to be fading.
However, its geographic neighbour and economic competitor turned in some very good data overnight. Japan's iconic machine tool manufacturing industry is booming again and turned in a cracker month in July in terms of new orders. At ¥135 bln for the month, this is the highest since mid 2018, and is one third higher than the July 2019 level. It is a recovery that augers well for Japan's industry and export sector.
Singapore's economy grew by +14.7% year-on-year in the second quarter of 2021, faster than expected. Singapore appears to be on track to have an economy +4.2% larger in 2021 than 2019. They also upgraded their GDP growth forecast for 2021 to 6 to 7%, up from 4 to 6%.
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Australian new home sales fell by -20% in July, with declines experienced in almost all major states. With lockdowns in multiple states restricting trade and eroding confidence, it is not surprising that fewer people were able to visit display homes, says their homebuilding industry body. Consumer confidence isn't flash either.
The iron ore price is lower again today, and is now down -25% in just 4 weeks. This is a bear market now and it probably has more to run because China is cutting steelmaking sharply.
There were another 344 new community cases in NSW yesterday with another 229 not assigned to known clusters, so they are still not getting on top of their outbreak. Victoria is reporting 20 new cases yesterday including 5 new mystery cases and their lockdown is to be extended. Queensland is reporting 4 new cases. Overall in Australia, more than 23% of Aussies are fully vaccinated, 45% have now had at least one shot.
Wall Street us up a marginal +0.2% in Wednesday afternoon trade. Overnight, European markets were up about +0.5%, led by London's +0.8% gain. Yesterday, Tokyo rose by +0.7%, Hong Kong by +0.2% and Shanghai by a minor +0.1%. The ASX200 ended up +0.3%, while the NZX50 Capital Index dipped by -0.1% in a late by small selloff.
The UST 10yr yield starts today at 1.34% and unchanged since yesterday. The US 2-10 rate curve is still just on +111 bps and little-changed. Their 1-5 curve is slightly flatter at +72 bps, and their 3m-10 year curve is also a bit flatter at +128 bps. The Australian Govt ten year benchmark rate starts today at 1.21% and little-changed. The China Govt ten year bond is at 2.90% and also little-changed. The New Zealand Govt ten year is now at 1.73% and up another +2 bps overnight.
The price of gold has recovered somewhat today. It rose +US$21 from this time yesterday to US$1753/oz on the no-surpises US CPI data.
Oil prices are up +50 USc/bbl from this time yesterday, so in the US they are just over US$69/bbl, while the international Brent price is just over US$71/bbl.
The Kiwi dollar opens today at just under 70.6 USc which is its highest level since late June. Against the Australian dollar we are up at 95.6 AUc and its highest level this year. Against the euro we are firm at 60 euro cents and a four month high. That means our TWI-5 starts today at 73.7 and now near the top of the narrow range of between 72 and 74 we have been in for ten months now.
The bitcoin price has firmed slightly today and is now at US$46,479 and is up +1.1% from this time yesterday. Volatility in the past 24 hours has been low at just over +/- 1.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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46 Comments
Despite reasonably high vaccination rates in the US the hospital system is being overrun with the latest Delta spike. Israel announces a third shot booster program for the most vulnerable as Pfizer efficacy drops to below 40% after 6 months. We need plans beyond the initial vaccination program which at the current rate has months to run. Modena maybe more effective against the Delta variant? We still aren’t controlling our borders well. Be nice to know we had a more robust and aggressive forward looking plan.
I increasingly believe we should be vaccinating those most likely to spread it, not the vulnerable. This essentially means the young. They will test the vaccines more thoroughly, simply because they are generally too stupid to follow the rules.
But I had a look for other news on it and couldn't easily identify reliable sources, where did you get your information?
No. Don't twist my words. Firstly I'm a boomer and I am vaccinated. But look at the evidence from Aussie and the US now, it is young apparently healthy who are dying from it. The elderly who die are often carrying co-morbidities which mean they are more vulnerable. and yes while technically it is an experimental vaccine, it has gone a long way past that now, even though the evidence is still developing. But the sociological evidence is that it is mostly those under 40 who are still partying, going out and socialising and then spreading it when they are catching it. By protecting those who will push the boundaries, we protect all the others too. It just doesn't work the other way around.
"yes while technically it is an experimental vaccine, it has gone a long way past that now ..."
ahem ... arent those "long term" studies on the guinea pigs due to run through 2023?
There are plenty of medical opinions that would dispute your statement ... but unfortunately i cant post links without spreading misinformation
https://www.reuters.com/world/uk/england-says-delta-infections-produce-…
https://www.cdc.gov/coronavirus/2019-ncov/variants/delta-variant.html
These suggest that the fully vaccinated are well able to spread the delta variant. Maybe a bit less but it doesn't seem like good news for the herd immunity plan.
Arohaha - I see what you did there :). This government has made magic of staying still. Think about what they will be remembered for, effective lock down, essentially government decision making on our movements. They have achieved absolutely nothing except an excellence at doing nothing.
They will be remembered for this: https://ig.ft.com/coronavirus-lockdowns/
Maybe it is time to consider that the elimination strategy is not going to work since we do not have an effective sterile vaccine and probably never will. This virus is here to stay and there is no magic pill. Our public health officials should let our primary care doctors do their job and let them treat people early with the various protocols now in place in many countries. If they really want to do something helpful, the gvt should focus on educating people about metabolic health.
https://rumble.com/vkw3wt-more-covid-facts-the-cdc-and-biden-administra…
Something tells me you don't work in healthcare or understand how stretched the system is without covid. Look at what's happened to the NHS waiting lists in the UK.
See "previous monthly diagnostics" link https://www.england.nhs.uk/statistics/statistical-work-areas/diagnostic…
meanwhile Professor Sir Andrew Pollard, director of the Oxford Vaccine Group, has tweeted saying there is nothing “the UK can do to stop the emergence of new variants”. “Herd immunity is not a possibility” because the Delta variant “still infects vaccinated individuals”.
ie the conspiracys are going mainstream
all while NZs experts reccomend vaccine passports ... clueless
"Despite reasonably high vaccination rates in the US the hospital system is being overrun with the latest Delta spike."
This is absolute misinformation and a moderator should remove that post. Here is the CDC dashboard:
https://www.cdc.gov/nhsn/covid19/report-patient-impact.html
https://www.cdc.gov/media/releases/2021/s0730-mmwr-covid-19.html
"some of those data were published in CDC’s Morbidity and Mortality Weekly Report (MMWR), demonstrating that Delta infection resulted in similarly high SARS-CoV-2 viral loads in vaccinated and unvaccinated people. High viral loads suggest an increased risk of transmission and raised concern that, unlike with other variants, vaccinated people infected with Delta can transmit the virus. This finding is concerning... "
https://www.theguardian.com/commentisfree/2021/aug/09/america-is-flying…
" Ironically, on 1 May, the CDC announced it would stop monitoring post-vaccination breakthrough infections unless they led to hospitalizations or deaths. This decision can be seen as exceptionally ill-advised and has led to a country flying blind in its attempt to confront its fourth wave of infections – one that has rapidly led to well over 100,000 new cases per day and more than 60,000 hospitalizations, both higher than the US first and second pandemic waves. It is unfathomable that we do not know how many of these are occurring in people who were vaccinated."
On the contrary
Im spending time telling people not to take the one source of truth as a given ....
Is it now attack the messenger stage?
I had a workmate get their vax the other day .... they asked "does it protect against Delta?" ... the Answer was Yes.
Yip, nothing to see here.
How does that compare with this CNN report which cites the CDC as their source?
https://edition.cnn.com/2021/08/11/health/one-month-later-these-maps-sh…
There was a US$59 bln auction for the US Treasury 10year Note overnight
Indeed - Yields Plunge After Strongest 10Y Auction On Record
"Transitory" Inflation Cooling As "Sticky" Heats Up: Here Is The Heatmap From Today's CPI Report
First the facts: core CPI rose 0.3% (0.33% unrounded) mom in July, coming in a touch below consensus at 0.4% mom and cooling off notably following the prior three months of average 0.8% spikes. Unfavorable base effects led to the % yoy rate dropping to 4.3% (4.27% unrounded) from 4.5% yoy in June. At the same time, headline CPI came in stronger at 0.5% (0.47% unrounded), boosted by a 1.6% pop in energy and 0.7% jump in food, which kept the % yoy unchanged at 5.4%.
US 'Has Made Clear' to OPEC That Agreement on Reduced Oil Output Must Be Reconsidered, Biden Says
Mid term elections woes? US could reduce unilateral import tariffs applied to China's exports to US.
Inflation More Than Hints ‘Transitory’
Still, for one month, anyway, the rapid acceleration easily observable in the same index has at least paused. This though continued oversized, stout contributions from the narrowest parts of the consumer bucket still highly influencing its outcome: energy and autos. Of the latter, still huge numbers (+41.7% y/y used car prices plus an almost 40-year high of 6.4% new vehicles).
In terms of oil’s reach, July’s energy index was up 22.9% from last year, though down from 24.0% in June and a peak rate of 28.4% during May (large base effects somewhat wearing down). Motor fuel (gasoline) prices were likewise shockingly higher, 39.1% y/y, and also decelerating from a peak rate two months before (56.5% for May).
This slowing down of consumer price gains is far more prevalent the more you get away from these narrow if huge factors. The CPI’s core rate slowed by twenty bps rather than two. The June index had gained 4.47% in a year’s time, while for July 4.27%.
That still fails to illuminate the more complete picture of the second derivative, though. On a monthly, seasonally-adjusted basis, the increase in July over June (both 2021) was way down, back to 0.33% after three consecutive months of very large rises. Breaking those consecutives for July, anyway, cuts against the necessary inflation component “sustained.”
China is banking on exports to bolster its 2021 economic position as the local momentum seems to be fading.
In terms of estimated trade volume, the actual tonnage of goods being transited across oceans, destination one of the world’s vast port complexes, the latest numbers seem quite good; if only in the same way as all recent statistics have. Base effects showing up when comparing to the previous year tell us little or nothing about how everything is truly getting along, except that it must not be nearly as bad as the worst global trade setback since the Great Depression.Even then, total world trade volume in Q1 2021 was only 5.9% more than during Q1 2020. And if current estimates are anywhere close, the annual change in Q2 will have been around +21%.
However, either of those are barely better than volumes put to sea (land and air) years ago. For all the fuss about America’s Pacific ports, that only deepens the deception. At its purportedly inflation apex during the first three months of this year, the WTO thinks global volumes were just 1.7% more than they had been during Q1 2019 – which was already a whole year into a worldwide slump (wrongly attributed to hurt feelings allegedly produced by “trade wars”).
Compared to Q4 2017, when in economic (small “e”) reality the eurodollar began to turn the overhyped globally synchronized growth into the unappreciated globally synchronized downturn, the world’s worst since 2008 before 2020, volumes aren’t even 4% more. That was more than three years ago.
And yet, you hear how container prices have skyrocketed which, like some particular vessel rates, makes it seem like there is and has been a truly robust rebound in worldwide demand and trade. Link (red imports chart label should read exports)
All the uncontrolled release of water and flooding villages overnight is going to have an impact on local demand. Especially when people are washed away in their sleep.
In terms of shipping the cost of containers going from $3k USD to $15k USD indicates part of the problem. A lack of staff to process containers that are already unloaded. The article picks up on stimulus demand but doesn't appear to note the import surge to avoid Trump tariffs on imported electronics (such as graphics cards). That demand in response to the tariffs is a one off event.
The market...
https://i.stuff.co.nz/business/126013617/market-betting-doublehike-in-o…
Market is under estimating the mind and power of gentleman in image - Mr Orr. Knowing his love for housing market, him doing even 0.25% is rare as his task was to start discussion and distract, that has been achieved.
Many excuses and best is Delta Virus.
The price of gold has recovered somewhat today. It rose +US$21 from this time yesterday to US$1753/oz on the no-surpises US CPI data.
Hmmm...negative real US sovereign yields resumed their downtrend after an abrupt upward move.
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