American consumer credit is growing modestly; China’s foreign trade swells and foreign exchange reserves increase; healthy Australian rural economy; Australia’s credit rating has been improved; 10-year UST slips to 1.57%; gold rising and oil unchanged; NZ $ 1 = 72.4 USc; TWI-5 = 73.9
Here is our recap of the major holiday weekend economic events affecting New Zealand with news China’s export trade boom is holding up well.
But first, American Consumer credit only increased by + US $ 19 billion in April compared to March and less than expected. Compared to April 2019, it was + 4.2% higher (the 2020 comparison being essentially meaningless).
Meanwhile, Janet Yellen has been pointing out that the huge “US $ 4 TLN Biden Budget” is over a ten year period and involves increased spending of around US $ 400 billion per year. She said this may put some upward pressure on inflation, in terms of the size of the US economy which will be relatively small.
China reported a May trade surplus of + US $ 45.5 billion, which is slightly lower than expected as imports grew faster than exports. Their surplus with the USA was + $ 31.8 billion as the improving US economy inflated it. Its deficit with Australia was -8.7 billion dollars, the new “iron ore” being natural gas. Its May deficit with New Zealand was -US $ 830 million. Of course, year-to-year comparisons suffer from the pandemic base problem. It is therefore better to compare with May 2019. On this basis, China’s surplus is + 9% higher and the surplus with the United States is now much higher than the 2019 + US $ 26.9 billion. The rates failed, and like any Econ101 student might have expected; it was the American who paid the taxes. The United States moves to compete on product characteristics and supply chain security, a much more promising strategy.
from China May foreign currency reserves edged up to US $ 3.22 billion or 22.2% of GDP (11.2 weeks), but down slightly from 22.4% of GDP at the same time last year.
In Australia, another services PMI survey for May confirms a booming sector and its strongest in 18 years. Prices continue to rise, but the increases may have peaked. However, the wages paid increase more rapidly.
And Australian jobs are growing faster and are at a high for 12 years, which suggests a rapid and continued tightening of their labor market and a steady decline in their unemployment rate (5.5%) but which is still higher than New Zealand (4.7%).
Australia’s rural economy is running at full speed, but hampered by China’s concerted efforts to cripple it. Dams fill up and the mood improves as a bumper harvest occurs record crop harvest expected in 2021, a sharp turnaround compared to the last three years of decline. Production is expected to reach A $ 66 billion, but exports are expected to fall to A $ 46 billion. They expect things to improve next year, however.
S&P rating agency confirmed Australia’s credit rating to AAA and improved its outlook to “stable”. This is similar to Moody’s rating. Moody’s also notes New Zealand like Aaa, but S&P rates New Zealand a notch lower at AA + and with a “stable” outlook.
Wall Street opened with the S & P500 recording a small decline of -0.3% early in the afternoon. Overnight, European markets were mixed with only minor changes. Yesterday, the very large Tokyo market closed up + 0.3%, Hong Kong ended down -0.5% and Shanghai posted a minor gain of + 0.2%. The ASX200 ended its Monday session down -0.2% and of course the NZX was on vacation.
The 10-year UST yield still starts today at 1.57%. The US 2-10 yield curve is little changed at +142 bps. Their 1-5 curve is slightly firmer at +74 basis points, while their 3m-10 year curve is thus at +157 bps. The benchmark Australian government ten-year rate is +3 bps higher than 1.60%. But the Chinese government’s ten-year bond remains at 3.13%, and the New Zealand government’s ten-year bond remains at 1.86%.
The price of gold today starts at US $ 1897 / oz, and + US $ 5 per night.
Oil prices today start slightly lower at just over US $ 69 / bbl in the United States, while the international price of Brent is slightly lower at US $ 71.50 / bbl.
The Kiwi dollar opened slightly firmer today at 72.4 USc. Against the Australian dollar, we strengthened slightly to 93.3 AUc. Against the euro we are at 59.4 euro cents. This means that our TWI-5 starts today at 73.9.
The price of bitcoin is now US $ 35,684 and down -0.9% from the same time yesterday. Volatility over the past 24 hours has been moderated at +/- 2.2%.
The easiest way to stay on top of the risks of events today is to follow our Economic calendar here ».