A review of things you need to know before you sign off on Friday; some big retail rate changes, retail sales limp, inflation boosts business inventories, swap rates steepen again, NZD slips further, & more

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
It was ASB's turn to increase fixed rates today. More here. ICBC also raised some fixed rates. Heartland Bank, which put its floating rate down unexpectedly recently, has put it hack up to 4.10%, a +35 bps rise.

TERM DEPOSIT & SAVINGS RATE CHANGES
ASB also raised many term deposit rates, following Westpac. TSB raised their TD rates as well. Most banks are settling on 2.50% for six months and 3.15% for one year.

LIMP RISE IN RETAIL SALES
Retail sales actually rose in May from April, as measured by electronic card spending, and although the rise was only modest it was unexpected. But the year-on-year rise is still very weak and not enough to account for inflation. So May might have been better than expected but that just shows how depressed expectations are. And the relative recent resilience probably can't last in the face of interest rate increases and sharp inflationary pressure on households.

BIG RISE IN WHOLSALE INVENTORIES
On thing we are seeing is a sharp rise in the value of wholesale inventories businesses are holding. In a year that increase is almost +$2.2 bln, nationwide. $1 bln is from inflation and $1.2 bln is from supply-chain inefficiencies. They are not used to having such a heavy dead weight, having grown up on JIT supply chains. Inflation is helping either. But without the extra fat, it will be hard for some to trade regularly, so it might be adding a permanent corrosive layer to businesses. Only the strong will tolerate that. 

BIGGER RISE IN FACTORY INVENTORIES
Separately, manufacturers are now holding an extra +$2.8 bln on extra finished goods stock plus +$0.7 bln of raw materials. These too are far more than just 'inflation', and are a load imposed by fractured supply chains.

PAYROLLS RISE FAST
As regular readers will recall, we have been pointing out that tax receipts from PAYE deductions have been running very high over the past few months. They are up a startling +16% in the year to April. High employment numbers, rising wage rates, plus bracket creep all combine to juice up the tax take. Today we got further confirmation in the March "Business Financial Data" release from Stats NZ. This reports that gross earnings for the year ended March 2022 were $146 bln, up +$12 bln or +9.3% compared with the year ended March 2021. But with job numbers leveling out in the March quarter, this sharp rise may soften in future.

GROCERY PRICES RISING FAST
Regular readers will also know that we monitor supermarket grocery prices on a weekly basis. But if you haven't checked our chart recently, you should know that there has been a recent surge in these living costs - not that this will surprise many but it does put rigorous weekly data evidence on the table. (Maybe it is cold comfort, but the NZ$ cost of an equivalent grocery buy in Australia costs more than here, and that is despite they pay 10% GST and we pay 15%. Kiwis are better off in this monitoring.)

GOOD, BUT ...
Every property has earthquake insurance (provided it has insurance at all). It's compulsory in New Zealand. The reasoning is obvious, but New Zealand is relatively unique in this universal cover. In places like California and Japan, its entirely voluntary - and expensive - and only about 10% of properties can afford cover. The state underwrites this natural disaster coverage. So it is good to know that EQC have $7.2 bln of reinsurance cover placed in international markets. Given what is at risk in Wellington, for example, this won't be anywhere near enough to cover "the big one", but having it is better than not. And especially when you realise that EQC has major overhanging liabilities from the Christchurch and Kaikoura/Wellington events still. Any new event is essentially up to taxpayers and the reinsurers. Your EQC premiums are still going to pay down that overhanging deficit.

INFLATION SOURCE
After being restrained in 2020 due to the pandemic pressures, the lid is back off local authority spending. Revenues the "earned" from rates and regulatory fees were up +7.7% in the year to March, contributing aggressively to non-tradable inflation.

GREEN ALUMINIUM?
In Australia, Rio Tinto is pushing ahead to develop renewable power sources (to replace coal) to power its aluminium plants at the Boyne smelter, the Yarwun alumina refinery and the Queensland Alumina refinery. They say their project will produce 4000 MWh/day of wind and solar power. But to put that in perspective, the Tiwai Point smelter draws about 15,000 MWh/day from its Manapouri source. Rio Tinto will now be desperate not to give up its green NZ power source, you would think. Meanwhile, aluminium prices have fallen from their March peak as Chinese capacity (using coal-fired power) has come back on stream.

SWAP RATES STEEPEN
We don't have today's closing swap rates yet but they have probably firmed in a steepening trend. Maybe the 1 and 2 yr rates are flat. The 90 day bank bill rate is unchanged for a third straight day at 2.52%. The Australian 10 year bond yield is now at 3.64% and up +4 bps. The China 10 year bond rate is now at 2.82% and unchanged. The NZ Government 10 year bond rate is now at 3.91%, and up another +6 bps from this time yesterday and matching the earlier RBNZ fix for this bond which was up +4 bps at 3.91%. The UST 10 year is now at 3.06% and up +1 bp since this time yesterday.

EQUITIES FALL HARD
On Wall Street, the S&P500 tailed off badly at the end of Thursday trading, ending down -2.4% on the day, and it is now down -2.2% for the week so far. Tokyo has opened its Friday trading down -1.4% and trimming their weekly gain to +1.1%. Hong Kong has opened down -1.7% and heading for a weekly rise of +1.1. Shanghai has opened down -0.6% and if that holds they will be up +0.6% for the week. The ASX200 is down -0.8% in early afternoon trade, but heading for an ugly -3.8% weekly loss. The NZX50 is down -1.1% in late afternoon trade and if that holds it will be down -2.3% for the week. Today the big losers are Air NZ (AIR, #37, -4.0%) and Fletcher Building (FBU, #9, -2.9%). There are very few gainers today, and any five are in the NZX50.

GOLD SLIPS
In early Asian trade, gold is down -US$6 from this time yesterday to US$1847/oz.

NZD SLIPS FURTHER
The Kiwi dollar is suffering the rejection most commodity currencies are at present, now at 63.9 USc, and down another -½c from this time yesterday. Against the AUD we are firmer at 90.1 AUc. Against the euro we are firm too at 60.2 euro cents. That all means our TWI-5 is lower at 71.3.

BITCOIN"S YO-YO CONTINUES
Bitcoin is now at US$29,785 and down -1.3% from where we were this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.

This soil moisture chart is animated here.

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