Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes here so far today.
TERM DEPOSIT RATE CHANGES
None here either.
DOWN BUT NOT OUT
Dairy prices fell -2.9% in the overnight auction with WMP down -4.9% from the prior event two weeks ago. Overall demand was low from China, but most other regions took advantage of the recent price correction to pile in for some bargains. When China returns (both demand and supply-chain easing), demand is likely to exceed supply and prices will rise, maybe even sharply on a catchup. In the meantime, Westpac have downgraded their 2021/22 milk price forecast by 20 cents to $9.30/kg.
GOOD OVERALL, BUT NOT GREAT
The FMA has been assessing how professional fund managers have been managing members investment funds. They reckon most are showing repeatable performance, relative to appropriate market indices. However, the benefits of their skill to investors in some funds is reduced by fees, and the costs of commission paid by managers to third parties. Value for money is also undermined by some fund managers not using an appropriate market index as a reference point for the performance of their funds and to benchmark performance fees.
ENFORCEMENT PRINCIPLES & CRITERIA
The RBNZ issued some high-level principles about how they will go about their regulatory and enforcement roles. They have concluded the will use a risk-based approach that enables them to be proactive and forward-looking by ensuring that their enforcement resources are used where risk is greatest and where they can have the most impact. They will be proportionate, meaning the burden and cost of an enforcement response will be proportionate to the relevant non-compliance, level of harm involved, and expected benefits from that enforcement response, for both us and our regulated entities. And they will be transparent in process and outcomes, to ensure that the public, regulated entities, and other stakeholders are aware of their enforcement processes and responses.
TRACTOR MARKET TURNS UP
More than 200 new tractors were sold in April (that is, sold and registered for the road). This was the most for an April since 2016. It also extends the recent rise of double-digit percentage annual gains to eight months, the most since 2012.
HEAVY TRUCK MARKET TURNS DOWN
The same database shows that there were only 1400 trucks sold in April over 3.5 tonnes capacity. This is an unusually low number for an April and might have been affected by importers supply chain difficulties. Ignoring 2020, the average sales of heavy trucks in an April over the past five years was more than 4200. Another relevant factor is that more than 11,000 were sold in March, an unusually large amount.
#1 TARGET
The Commerce Commission says that under the new Retail Payment Systems Act 2022, the Mastercard and Visa credit and debit card networks will be the initial focus of their work to promote competition and efficiency in the retail payment system.
SOFT BUT NO SLUMP
The amount of new mortgage lending in March 2022 remained relatively high even if it was falling away. New mortgage commitments (C40) in March were $7.3 bln, down from $7.9 bln in December and $10.g bln in March 2021. New mortgage commitments with high DTIs (>5) in March were 55.1% of total mortgages, down from 59.3% in December. The share of lending to investors with high DTIs fell from 70.5% in December to 66.7% in March, and to owner occupiers with investment property collateral fell from 75.4% to 69.2%. Also see this.
LACKLUSTER
Australian wages rose +2.4% in the year to March , marginally better than the +2.3% in the year to December, but not as strong as expected (+2.5%). Even the q-on-q was a tad disappointing (annualised +2.8%), and this won't really bolster the RBA's case for a quicker return to 'normal' for monetary policy. But the weakish data will accentuate the political points at the end of their election campaign that wage earners are losers in the cost of living pressure.
YO-YOING
Japan's economy shrank in the first quarter of 2022 at an annualised rate of -1.0%, continuing a recent trend of oscillating between growth and contraction. Accelerating inflation and a surge in pandemic cases contributed to gross domestic product, adjusted for inflation, dropping -0.2% from the previous quarter. A decline was expected, in fact a decline of -0.4%, so in the circumstances they might take this as a 'win'.
HOUSING STALL
Average new home prices in China's 70 major cities rose by just +0.7% in the year to April, slipping from a timid +1.5% gain a month earlier. But 50 of those 70 cities recorded house price falls from the prior month, 4 recorded no change, and of the 16 that recorded a gain, none exceeded +1%. Shanghai recorded no change, presumably because it was locked down. This was the weakest rise in new home prices since October 2015, as Beijing's deleveraging campaign triggered a liquidity crisis in some major property developers.
CAR SALES STALL
In all of Shanghai, population 25 mln (in a greater metro region of 41 mln people), their car dealers sold zero new cars in April. Not even one. But because they order in advance, they still had to buy inventory. It must be tough.
SWAP RATES TURN UP FURTHER
We don't have today's closing swap rates yet but they are probably higher following global trends. The 90 day bank bill rate has jumped +5 bps at 2.21%. The Australian 10 year bond yield is now at 3.45% and up +5 bps from this time yesterday. The China 10 year bond rate is now at 2.83% and down -1 bp. The NZ Government 10 year bond rate is now at 3.67%, up +5 bps from this time yesterday and now matching the earlier RBNZ fix for this bond which was up +9 bps, also at 3.67%. The UST 10 year is now still at 2.97%, and up +7 bps from this time yesterday.
EQUITIES UP
Wall Street pushed on up strongly today on generally good results and data, ending its Tuesday session up a full +2.0% on the S&P500. Tokyo, which led the trend yesterday, is now up another +0.7%. Hong Kong, which had a great day yesterday, is now down -0.7% because they probably overdid it yesterday. Shanghai is down -0.4% in early trade. The ASX200 is up +0.9% in early afternoon trade. The NZX50 is up a full +1.0% in late trade today, led by Meridian (MEL, #8, +3.4%) and Mainfreight (MFT, #5, +3.0%)
GOLD SOFT
In early Asian trade, gold has fallen to US$1816/oz and down -US$10 from where we were at this time yesterday.
NZD FIRMISH
The Kiwi dollar has firmed to 63.5 USc from this time yesterday. We are also up slightly at 90.6 AUc. But we are softer at 60.3 euro cents. That all means out TWI-5 is now just on 70.9 and up +20 bps from this time yesterday.
BITCOIN LITTLE-CHANGED
Bitcoin is now at US$30,147 and up +0.6% from where we were this time yesterday. Volatility over the past 24 hours has been moderate at +/-2.2%.
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35 Comments
I see our jobseeker benefits numbers and live unemployment estimates are now clearly showing the start of a slowdown. Median earnings are also flattening out - particularly at the low end although minimum wage increases might provide a bit of scaffolding.
Like Australia, it is becoming clear that any fears of the dreaded wage / price spiral are clearly misplaced. Although the price / profit spiral looks worthy of exploration. Also worth nothing that our benefits numbers remain well above pre-covid levels. People might be getting back to work, but many thousands more people can't live on the wages they are earning. And, yet, we call this a hot labour market?!?
Obviously the facts do not get in the way of economic commentators saying that wages are on the verge of spiralling out of control. What they mean of course is that, if we are not careful, workers might start getting a tiny bit of power back... and, well, we simply can't have that. What if workers decide to take a better job near their family and nobody is willing to rent a bed in a shed and pick fruit on minimum wage?
Sounding a bit like Marx in the last paragraph :-P
Best to not let the surfs in on what is really going on.
The current trajectory of loose monetary policy to enrich the asset owners/capitalists while simultaneously using budget deficits to keep the surfs/wage earners/labour happy enough via socialist welfare policies is not a sustainable long term strategy.
Bound to cause financial and social stability issues at some point. Not wise leadership. Very short term, populist based policies. Bandaids for fatal bleeds type thinking is sinking parts of the global economy towards bad outcomes (often if you look back in history resulting in financial crisis and geopolitical instability).
Where marx/bakunin types simply influencers who helped push politics towards a more social slant... children in chimneys = bad etc.
Or the first to predict the collapse of capitalism which is yet to come.
Just need a little kick... in 1848 it was a global famine.
2035... Global warming.. energy crises?
I've said this before: all the economists on their inflated salaries blithely pontificating about the need for everyone elses restraint so as to conform to their macroeconomic theories don't feed or house your family. Your responsibility at the microeconomic household level is to maximize your family income & improve their wealth & wellbeing circumstances.
UK inflation keeps climbing, 9%. A warning that team transitory need to be ignored.
Wow, just heard a statement from Bernard Hickey (on TV3) who is stating that NZ interest rates will start falling at the end of this year and that inflation will also peak in 2022. His reasoning is the world economies of Europe, China and US are all heading into slow-downs and recession territory.
- US looks OK to me.
- China's main short term economic problem is the CCP won't just buy the vaccine and get on with finishing the job. Eventually they'll have to form a sensible policy. Long term it's still demographic.
- EU will probably improve once the Ukrainian invasion finishes though raising interest rates pose a large threat to Southern Europe due to debt.
- Developing countries will be screwed by being overindebted and rising food prices. Sri Lanka has been the first due to its tax policies but Tunisia, Egypt and several African countries are also under pressure.
- Oceania commodities offset housing bubble.
Yeah heard that too Just after another doomberg medico warning about alcohol leading to cancer. Which induced me to have a cheeky IPA, after a long day: concrete pour to house piles and poles today so a lot of prep and then clean down. Just about sprayed the IPA all over the screen.....
Just out of Australia - building giant Metricon in financial difficulty. 2500 staff. 4000 homes under construction. Co-founder passed away after suffering recent mental health issues (suicide?)
https://www.news.com.au/finance/business/crisis-talks-underway-as-build…
I mean, order books are still full for years, commercial, regional and national public projects, etc. New residential is fairly high volume low value. Maybe a few less subdivisions get built but you could half the activity and it'd still be too much. The bigger risk short term is builders' inability to complete projects in even triple the time it should take.
Unless the wider economy falls apart, but then in that instance everyone's screwed.
Yeah, that's the "it's not just the construction sector we need to worry about" scenario where there's just nothing happening in the economy.
You're pretty hot on a residential construction apocalypse. I think it'll just be depressed for a time, but most of the skilled human resources will likely have jobs still.
I 100% agree with you HM. The simple fact is developers work their feasibilities on circa 30% margins. The problem is for residential if they have commenced building their construction costs have risen 15%, their timeframes/financing costs have increased ~10%, and their end values have dropped 10%. In simple terms they are underwater.
I very recently turned down a job as an Estimator for a group home builder. I'm sort of kicking myself, but in my opinion there's too much uncertainty at the moment. Yes there's a backlog of work (they have 40 houses on the go) so it's busy at the moment, however I'm currently with a company that supplies to Local & Central Government civil infrastructure which is much closer to the stimulus if things go tits up.
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