US jobs growth sags, trade deficit widens; global airfreight growth strong; China debt stress grows; foreigners disappear from NZ housing sales; UST 10yr 2.16%; oil down and gold up; NZ$1 = 71.5 USc, TWI = 75.6

Here’s a special holiday update of some key events and data you may want to know about today.

The US economy added just +138,000 net new nonfarm payrolls in April, and there was a large downward revision to jobs growth in the previous two months. These figures, coupled with average hourly earnings which grew just +2.5% in the twelve months to May, may prompt the doves at the US Fed to reconsider voting for a rate increase in the middle of next week. But with their unemployment rate falling to 4.3% (which is down from 4.8% at the start of the year), and other data from the report pointing to diminishing labour market slack, most still still expect the Fed to raise rates when they next meet on June 15, NZ time.

The American trade deficit widened in April as Americans stepped up purchases of foreign goods such as cell phones and equipment. It increased +5.2% from a month earlier to US$47.6 bln. Imports grew +0.8% from March while exports fell -0.3%.

That may have been why global airfreight (as measured by tonne kilometres) grew by +8.5% year-on-year in April, down from growth at the rate of +13.4% in March. The healthiest region was the Asia-Pacific, with North America a laggard.

Meanwhile, global passenger air travel grew by +10.7% year-on-year in April – the fastest pace in 6 years.

In China, their banking distortions are growing every greater. The ratio of private non-financial debt-to-GDP is now more than 200% – a quarter above what it was in the US ahead of the financial crisis in 2008. If all off-balance lending were to be included, the total would be substantially higher. Credit continues to flow towards unprofitable projects and unproductive assets that generate little or no return. One analyst has estimated their non-performing loans are now close to 30% of GDP, over ten times higher than the official estimate. But there are no signs officials there are about to take any meaningful remedial action. A major Chinese banking crisis is just getting closer, although it is impossible to know when or how it will arrive. But when that time arrives, it will probably happen suddenly.

In Japan, data out for 2016 shows that for the first time ever, there were less than 1 mln births in the country. Japan’s population hit a peak of 128 mln in 2010, but it shrank by close to a million in the five years through 2015, according to census data. By 2060, demographers expect the Japanese population to plunge by a third, to as few as 80 million people – a net loss of a million a year, on average.

In New Zealand, data out here shows there were 9,186 new cars sold in May, the highest number in 27 years. And 56% of all new cars being sold are SUVs. However the real story is over on the commercial side. The 4,745 new commercial vehicles sold in May were the highest number in any month, ever.

And in case you missed it, LINZ has published updated details of tax residency for the 41,919 property transfers registered with them from January to March 2017. 3% were not New Zealand tax residents. In Auckland it was 5%. They are now also collecting ‘affiliation’ stats. That shows that 82% were NZ citizens or residents, 16% were corporates or businesses, and 2% were foreigners. In Auckland, the foreign buyer proportion was 4%. It is unlikely any of this extended data will satisfy those who had already arrived at conclusions without the annoying need for any data at all. Blaming foreigners for our own ills is not unique to some Kiwis. It is pervasive in Australia too.

In New York, the UST 10yr yield is sharply lower following the employment report, now at 2.16%.

The US benchmark oil price is lower today and now under US$48 a barrel, while the Brent benchmark is just under US$50.

The gold price is higher by more than +US$10 at US$1,279/oz.

The New Zealand dollar is definitely firmer following the weak US employment data and now at 71.5 USc. On the cross rates it up to 96 AU¢, and 63.3euro ce nts. The TWI-5 is now at 75.6.

The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »

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