90 seconds at 9 am: Healthier consumers drive trade growth

OECD says G20 trade rising faster; US consumer credit scores hit record high; Draghi still has tap turned on; Aussie LVRs falling; UST 10yr yield 2.25%; oil and gold unchanged; NZ$1 = 70.6 US¢, TWI-5 = 75

30th May 17, 7:26am by David Chaston

Here's my summary of the key events from overnight that affect New Zealand, with news household credit worthiness is well and truly mended in the US.

But first up today, the OECD is reporting that the international trade in goods rose in the March quarter for the fourth straight time, and at its fastest rate since the June quarter in 2011. New Zealand is not included in this G20 survey, but Australia recorded the highest export growth of any country.

It is likely that the recovered American consumer is behind this upswing in international trade. In the US, new data shows their consumer credit scores have now hit a record average high of over 700 in April. And the share of Americans deemed to be some of the riskiest borrowers hit a record low. Further, more than 6 mln Americans will have their personal bankruptcy status disappear over the next five years, adding to the pool of new customers for lenders.

In Europe, ECB boss Mario Draghi says he is not yet ready to turn his stimulus tap off. The ECB is still adding to its QE program at the rate of €80 bln per month and has bought over €2 tln of securities.

In Australia, new data shows that the average mortgage LVR for new home loans is falling and now down to 73.4%. Rising house prices are a part of this, but analysts say that banks are being far more picky on who they will lend to in Australia and that is crowding out many first home buyers and their skinny deposits.

In New York, the UST 10yr yield is unchanged at 2.25%.

The price of oil is also basically unchanged today with the US crude benchmark is now still just under US$50 a barrel, while the Brent benchmark is just over US$52.

There was no trading in gold in either New York or London and the price remains at US$1,267/oz.

And the Kiwi dollar is also little changed at 70.6 USc. On the cross rates the Kiwi is at 94.8 AU¢, and 63.2 euro cents. The TWI-5 index is now at 75.

If you want to catch up with all the changes on Friday, we have an update here.

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

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10 Comments

by MortgageBelt | 30th May 17, 8:02am 1496088172

NZD heading for parity with AUD.

by jfree | 30th May 17, 8:22am 1496089351

Steve Keen on over the weekend, a sobering interview.

http://www.radionz.co.nz/national/programmes/sunday/audio/201845436/ste…

by Stephen Hulme | 30th May 17, 8:41am 1496090504

It is likely that the recovered American consumer is behind this upswing in international trade. In the US, new data shows their consumer credit scores have now hit a record average high of over 700 in April. And the share of Americans deemed to be some of the riskiest borrowers hit a record low. Further, more than 6 mln Americans will have their personal bankruptcy status disappear over the next five years, adding to the pool of new customers for lenders.

They have a lot of lost domestic durable goods shipments to fund into recovery.

A better way to start describing the change is by referencing just the size disparity then to now. As stated above, in April 2015 using the benchmark set in May 2014 it was believed durable good shipments were $177.6 billion; a month later, also for March 2015, the new estimates suggested it was only $171.7 billion; a year after that, $164.5 billion; and as of today, $162.8 billion. That’s a difference of nearly $15 billion for one single month. You can’t ignore almost 10% of activity that never happened.

What that means is not that durable goods contracted by that amount, but that amount very likely never existed. Thus, the economy of +0.5% and $177.6 billion in March 2015 looks very different from -1.4% at just $162.8 billion. Read more

Is this the deficit Trump promises to rectify? Replacing exported jobs with debt hasn't worked out for the many, so far.

by Stephen Hulme | 30th May 17, 8:53am 1496091187

In Europe, ECB boss Mario Draghi says he is not yet ready to turn his stimulus tap off. The ECB is still adding to its QE program at the rate of €80 bln per month and has bought over €2 tln of securities.

Hmmmmm...

“We remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary,” Draghi told lawmakers on Monday in Brussels. “Domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation toward our medium-term objective.” Read more

He (Draghi) needs to address the theory underpinning the missing expected efficacy of the previous €2 tln securities purchases if more of the same "stimulus" is necessary.

by JetLiner | 30th May 17, 9:27am 1496093237

Law of diminishing returns at work? Certainly more of the same stimulus doesn't seem very inspiring.

by Cowpat | 30th May 17, 8:57am 1496091446

Interesting story regarding Altair Asset investment liquidating in Australia.

by JetLiner | 30th May 17, 9:19am 1496092795

Hmm, caught my eye too, Cowpat (http://www.afr.com/markets/fund-manager-hands-back-cash-to-clients-citi…).

Australian asset manager Altair Asset Management has made the extraordinary decision to liquidate its Australian shares funds and return "hundreds of millions" of dollars back to its clients, citing an impending property market "calamity" and the "overvalued and dangerous time in this cycle".

"Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client's assets is what all fund managers should put before their own interests," Philip Parker, who serves as Altair's chairman and chief investment officer, said in a statement on Monday.

The 30-year veteran of funds management said that he had on May 15 advised all Altair clients that he planned to "sell all the underlying shares in the Altair unit trusts and to then hand back the cash to those same managed fund investors".

[...]

"I would like to make clear this is not a winding up of Altair, but a decision to hand back client monies out of equities which I deem to be far too risky at this point," Mr Parker's statement said.

That's a high-conviction move if ever there was one. When big money starts moving like that because of perceived risk, you've got to pay attention.

by rastus1 | 30th May 17, 10:52am 1496098358

Huge balls to do this. If another major player makes the same move..and then another, we will have the correction they are trying to avoid hitting much sooner than anticipated.

by Conrad | 30th May 17, 11:40am 1496101221

Didn't Warren Buffett do something similar back in the 60s or 70s? Saying somehting like, "Here's your money back, I can't find anything decent to invest in at the moment."

by ham n eggs | 30th May 17, 9:30am 1496093412

"more than 6 mln Americans will have their personal bankruptcy status disappear over the next five years, adding to the pool of new customers for lenders."

Its almost comical ... American military polices the world to ensure resources flow into America in exchange for some fiat US currency ... so that another round of US consumers can give their credit worthiness a workover at the malls... and round and round it goes till the resources are stuffed.