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
SBS Bank raised its floating rate by +50 bps to 6.29%.
TERM DEPOSIT RATE CHANGES
SBS Bank has raised term deposit rates for terms 6-18 months
TRADE DEFICIT BALLOONS
The June trade deficit was large. That took the annual trade deficit to June was -$10.5 bln and more than twice the annual deficit for any other June year. In the year ended June 2021 there was a deficit of just -$277 mln. In June itself, there was a -$701 mln deficit in a month where normally we have surpluses. Trade and current account deficits don't seem to matter much - until they do. And we might actually be getting towards that tipping point. You have to go back to the Clark/Cullen years to find a worse trade result over a sustained period (2002-2009).
EXPLAINING THE BAD TRADE RESULT
Of our major export trading partners, exports to the United States, the European Union, and Japan rose in June, while exports to China and Australia fell. Imports from all our major partners rose. Our imports of fuel rose +206% in June from June 2021 and made up 17% of all imports. That increase ($405 mln) only explains about 40% of the trade deterioration.
WELL SUPPORTED NZGB TENDER
$400 mln was tendered in NZ Govt bonds today, attracting bids totaling just over $1 bln. The May 2026 $200 mln attracted $474 mln in bids and went for a yield of 3.70% pa which as up from 3.39% two weeks ago. The April 2029 $150 mln attracted $424 mln in bids and went for a yield of 3.73% pa versus 3.51% two weeks ago. The $50 mln May 2051 bond attracted $136 mln in bids and went for a yield of 3.98% pa, unchanged from two weeks ago. Overall there were 117 bids and 54 were successful and a much improved spread of winners.
THE NUMBER ON PUBLIC BENEFITS VERY STICKY
The number of people on the jobless benefit continues to fall, now 170,762 as at June and a fall of more than -10% in year, a year where labour shortages have been acute. You might have expected it to fall much more than by just -19,500. The number of people on the Sole Parent Benefit rose by more than +10% in the year, and the numbers on the Supported Living Payment rose as well, and to a new record high.
CREDIT STRESS REMAINS AT RECORD LOWS
The number of personal bankruptcies plus No Asset Procedures have remained very low at 1168 for the year to May and the lowest absolute number we have seen since we started tracking this in June 2004. On a per population basis (20yrs+) it is even lower. Moaners aside, very few people are in serious credit stress.
CREDIT CARDS STILL OUT OF FAVOUR
Billings on credit cards are inching back to year-ago levels, but remain below pre-pandemic levels. Inflation is not boosting these transactions (C13). Credit card balances (C12) are still +4.6% lower than year ago levels, and -20% below the December 2019 level. But still, just over half of these balances are incurring interest (which is also near an all-time low).
HEARTLAND FIELDS REGULATORY QUERY OVER RISING SHARE PRICE
Heartland Group Holdings, parent of Heartland Bank, says it continues to comply with NZX continuous disclosure obligations. This follows an enquiry from market regulator NZ RegCo about a 10.7% increase in Heartland's share price over just one week.
SHARE BUYBACKS START
Fonterra (FCG) has made its first purchase of shares under the $50 mln buyback program announced last month. The first purchase was tiny, 21,900 shares at $2.70 or $50,060.
MUSICAL CHAIRS
Westpac NZ has announced the appointment of Reuben Tucker to the role of General Manager of Institutional and Business Banking and Dirk McLiesh to the role of Chief Risk Officer. Tucker was (prior to his Balthazar & Co venture) a long-time senior ANZ manager and replaces Simon Power. McLiesh has been a senior BNZ manager.
SQUIRREL CLIMBS HIGHER
Squirrel Mortgages is boosting its Wellington presence through the acquisition of The Home Loan Shop, as it also unveils referral relationship with financial advisor enable.me. It is also seeking more capital.
JAPAN'S EXPORTS VERY STRONG
As expected, Japan reported a larger trade deficit in June from the higher cost of oil. But the deficit wasn't as large as some had feared. However, the more important news here was the unexpected strength in Japanese exports, reinforcing that there is strong global demand for Japanese high-tech machinery. Exports rose more than +19% in June from a year ago, the 16th straight month of gains.
FMD FEARS RISE
In Australia, there are growing calls to shut their border with Bali to keep the foot & mouth disease out. Fear of what it will do there is rising fast.
SWAP RATES FLAT
Wholesale swap rates may have marked time today, holding yesterday's rise. The 90 day bank bill rate was up +4 bps to 3.16%. The Australian 10 year bond yield is now at 3.57% and down -1 bp from this time yesterday. The China 10 year bond rate is now at 2.79% and also down -1 bp. The NZ Government 10 year bond rate is unchanged at 3.80%, and now just below the earlier RBNZ fix for this bond which was up +4 bps to 3.79%. The UST 10 year is now at 3.01% and down -2 bps from this time yesterday.
EQUITIES MIXED
The S&P rose another +0.6% on Wall Street earlier today, building on the prior day's big gain. Tokyo has opened -0.1% lower. Hong Kong has opened down a sharpish -1.2%. Shanghai is down -0.4 in their early Thursday trade. The ASX200 is flat in afternoon trade. The NZX50 is up +0.7% in late trade and another good rise. For the four days this week, the NZX50 is up +1.2% so far.
GOLD DROPS UNDER US$1700/oz
In early Asian trade, gold has fallen -US$19 from this time yesterday, now at US$1693/oz and a 16 month low.
NZD FIRM
The Kiwi dollar has risen +¾c to 62.3 USc. Against the AUD we are stable at 90.4 AUc. Against the euro we are still at 61.1 euro cents. That means our TWI-5 is now just under 71.1 and holding most of yesterday's rise.
BITCOIN HOLDS
Bitcoin is now at US$23,276 and down -0.7% from this time yesterday, so holding its recent gains. Volatility over the past 24 hours has been moderate at +/-2.9%.
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58 Comments
I'd like to know more detail. There's this
Our imports of fuel rose +206% in June from June 2021 and made up 17% of all imports. That increase ($405 mln) only explains about 40% of the trade deterioration.
Where's the rest from?
Higher freight costs?
Differences in the dollar?
We're just making and exporting less stuff, while importing ever increasing amounts?
But the other side of the coin is a weaker NZD would help our exporters - you know, the ones that actually generate income for the country
Yes and no. It can make export receipts more attractive for sure. It doesn't necessarily drive growth. For ex, Zespri seems to have done well in the Japan market in the last few years, but it's really unclear the extent to which that market can grow. Japan is now looking at South-East Asia for other fruits such as dragon fruit that it can get much cheaper than NZ kiwifruit. Another interesting thing about Kiwifruit is that if Japanese experience a sour taste when they first try Kiwifruit, they're unlikely to ever buy or try it again.
Nah, let the market sorts itself. We can not just keep intervening the market by creating artificial weak dollar value to keep our exports up. We've been doing this for years, just see where it got us, unproductive industries became less competitive. If dairy industry couldn't keep up with competition, maybe for once, they should figure out a way to keep themselves competitive?
Nah, let the market sorts itself. We can not just keep intervening the market by creating artificial weak dollar value to keep our exports up. We've been doing this for years, just see where it got us, unproductive industries became less competitive. If dairy industry couldn't keep up with competition, maybe for once, they should figure out a way to keep themselves competitive?
How much more sexy can milk powder get?
[Japan's] Exports rose more than +19% in June from a year ago, the 16th straight month of gains.
Is China still the largest importer of these exports?
Japan's trade balance shifted to a deficit of JPY 1,383.8 billion in June 2022 from a surplus of JPY 369.4 billion in the same month a year earlier. While coming below market consensus of a gap of JPY 1,509.7 billion, the latest figure marked the 11th straight month of trade shortfall, amid a surge in imports. Inbound shipments climbed 46.1% yoy to JPY 6,854.4 billion, while outbound shipments grew by 19.4% to JPY 7,223.8 billion. Considering the first six months of the year, Japan posted a trade gap of JPY 7,924.0 billion, compared with a surplus of JPY 847.7 billion in the corresponding period of 2021. Link
Aussie state politics gets little attention and coverage in NZ. The self entitlment, rorting, and "corruption" is rife and the John Barilaro situation is interesting. Remember this is the ex-deputy leader of NSW who sued Google for defamation and received damages of $700K when an independent journalist exposed all kinds of oddities.
It seems like NZ is relatively clean but the self entitlment issues are still obvious.
https://www.abc.net.au/news/2022-07-21/john-barilaro-staffer-sought-gov…
I worked for Ford during the 80's recession. They essentially became used car dealers by buying Swan vehicle rentals, a very large business. Most of the new production cars went to Swan for 3 months and popped out the other side at the used vehicle auctions.
I'm expecting the builders who can afford to do similar to flood the market with brand new rental properties and sell them when the market yields a profit. look out slumlords !
Missed this last week, Saudi is now importing Russian Oil.
https://www.euractiv.com/section/global-europe/news/saudi-arabia-double…
Worth a listen to the recent OddLots podcast - they get into how currency traders have started to look at trade balance forecasts rather than central bank interest rate forecasts when working out where currency exchange rates will go in the future.
It is also very clear that the Fed is hiking rates to strengthen the dollar to tackle imported inflation. Obviously the impact on other countries that have to buy stuff in US dollars (like oil) is... higher imported inflation. Maybe it is time to work on our energy security?
Nationalise petrol and diesel infrastructure (cost + margin contracts with existing companies) and use Govt balance sheet to smooth out the troughs and peaks in prices for consumers (whilst allowing price to increase up to a gradually increasing ceiling price). Go hard on electrifying transport. This will take years, but we are going to have to do it anyway and it won't happen by fiddling with incentives or adjusting the number of emissions trading scheme credits on offer.
OMG the govt to set the price of fuel for consumers to 'smooth out troughs and peaks'?
Prey tell, is the current price a peak to be smoothed out, or a trough to be filled in? Better get the comcom a crystal ball to set forward fuel prices.
Are there any countries that pull this off? Usually it's associated with a government going broke and the masses rioting when the govt passes through market price increases.
You have hit the nail on the head. We have an imported product on which we are totally reliant and it is critical to the literal functioning of our society. Yet, this important product is subject to wild swings in price level - we don't know whether we are at the top, bottom, middle or whatever. So, let's say we aim to almost completely move away from petrol and diesel over the next 15 years. To make the transition smooth, we would have to smooth out the price at a country level - holding it steady whilst we move onto alternatives. This is not without precedent at all. In fact have a look at one of the reasons Switzerland currently has relatively low inflation.
Certainly, part of the reason for low Swiss inflation is because the cost of living here is already so high.
"One of the aspects of Switzerland is that we tend to have high prices in practically everything when you compare it with our neighbours in Europe," said Nannette Hechler-Fayd'herbe, global head of economics & research at Credit Suisse.
Eurostat figures show the price level for household consumption expenditure was still 60% higher in Switzerland in 2020 than the euro area average.
Is that what you mean?
Other links tend to explain it's cause they aren't so exposed to petrol prices in their energy mix. I guess they have high PT usage in some of their cities, so people aren't filling up with gas.
Nothing about a government plan to set the price of fuel.
My take from the conversation (and others like it) is that currency exchange rates in the short- to medium-term are a function of trader expectations. What shapes trader expectations in usual times is the spread between central bank and market interest rates (how much return can you get by putting a given currency into a bond denominated in that currency).
At the moment, traders are increasingly looking at real things - commodities, oil etc - things that countries often need to buy in a given currency. So the relative value of that currency is shaped by the desirability of the things you can buy with it. So, the US dollar is flying up because the yields on US Bonds are OK AND many countries need US dollars to buy important things like oil on the global market. I am not sure that this impacts on your Yen / NZD trades - whether the Yen would increase in relative value because of high-tech exports from Japan, and, if they did, whether this would outweigh the low desirability of BoJ bonds, which offer basically zero return. The foreign exchange part of macro is pretty new to me though so I am only having reckons here.
Most worrying is the decline in the quantity of exported milk powder. In June 2022 28% compared with June 2021. And this is on top of a decline in May 2022 of 23% compered with May 2021. The explanation of lockdowns in China is not holding up any more. China is just buying less!
If that trend continue there will be not an inch warehouse space left in this country soon to store the milk powder.
While commodity is undeniably less sexy than than ready to retail product etc, it is undeniably too, the foundation for it. It is all very well selling plenty of pretty polished pebbles but if the boulders ain’t moving, then activities start to shorten up very quickly. The historic EEC beef mountains for instance.
While commodity is undeniably less sexy than than ready to retail product etc, it is undeniably too, the foundation for it. It is all very well selling plenty of pretty polished pebbles but if the boulders ain’t moving, then activities start to shorten up very quickly. The historic EEC beef mountains for instance
You get it. Tell me in which countries NZ dairy brands are killing it. I knew that Anchor was strong in Sri Lanka. Fonterra brands have very low mkt share in China. Westgold butter done very well in Japan, but the Japanese still buy local brands. The Westgold brand is Chinese owned now.
I trust that was a rhetorical question. I am long retired now and my comment relied on past experiences which I imagine still hold true. I remember though well enough, from my contacts in Malaysia in the 80’s, the hopeless and hapless antics of the then Dairy Board and their precious pottles of yoghurt that pissed off just about every importer who counted.
I see Vector said today that they added a net 9,300 new connections in the year to June. Take out a few new business connections and you perhaps have perhaps 9,000 new dwellings connected. Someone less lazy than me would be able to compare that to building consent data and see if they correlate. Probably need to do it over time to get a decent idea of what is consented but not built. Infill housing would muddy the waters also. ie rip down one house, build two townhouses is only an increase in one connection to Vectors network but two building consents.
What I took as positive from todays comment was that finally NZ citizens are becoming more frugal in their spending. This will be good for our future but I know there will be those who say it is no good for the internal economy.
One thing I wonder about is, What are we importing besides energy that maybe we could do with out.
OK PDK will say it is ALL about energy but just maybe there is something there that we are importing that we don't need?
Let's try to preserve the few good things we have going for ourselves in this country. We can't afford to lose more homegrown skills and enterprises to greener pastures but our policymakers appear unscathed by this trend.
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