US politics gets very ropey; Canadian retail rises; China household debt risks

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Here’s our summary of key economic events overnight that affect New Zealand, with news that as the US seems to be imploding, China is moving quickly to take advantage of the vacuum.

In the US, officials who are about to lose their positions after the election result are sabotaging the US Federal Government programs ahead of the handover. The Treasury Secretary is canceling pandemic support programs (to the horror of the Fed), regulators are suddenly ending Federal oversight protections, and there is a push to sell off public resources in protected areas. It is getting very unseemly, childish and very third-worldish. And the upshot is that millions of Americans are going to face a harder winter economically, already severely stressed by the pandemic.

Over the northern border however, Canadian retail sales for October came in surprisingly strong, up +4.6% year-on-year and well above the September +3.7% gain. It was the fifth consecutive monthly increase since the record decline in April and the best rise so far.

In China and in an article on the official RBoC website, their central bank governor noted that “nearly 70%” of China’s household net worth is represented by housing. That is a stunningly high level, and brings with it very high risks. In New Zealand where we think we have a problem with excessive investment in housing, ours is ‘only’ just on 50%. Perhaps they are insulated because their industrial and commercial sector is such a larger proportion of their economy. But all the same, the risks posed by their household reliance on housing wealth could turn toxic at any moment.

And the Chinese leader has apparently said they are open to joining the TPP. It would be a real humiliation for the Americans if that should happen. The TPP was their construct to try to block expanding Chinese influence. But Trump’s ill-advised exit has opened this door.

But there are other things to worry about coming from China. They are apparently pushing to have their domestic law apply internationally. 习近平法治思想. The idea is to promote “the rule of law” in so far as it furthers Chinese aims and controls.

In China, iron ore and coking coal prices are on the move higher again as economic activity moves back to boom conditions. The recent softness in shipping costs looks like it is turning back up again.

Japan’s deflation rate worsened in October, now running at -0.4% is a very disappointing result. And their factory PMI for November doesn’t actually inspire any confidence their are moving in the right direction.

But Taiwan does seem to be making progress, especially with its exports. Export orders by Taiwanese companies were up +9.1% in October, continuing a strong run that started in June.

In India, bank loan growth is picking up in a sign they may have turned a corner from their pandemic funk.

But in Europe, consumer sentiment, which was already quite negative, has gotten much worse in November. They are not heading for a happy festive…



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