What happened Tuesday

Business / news

A review of things you need to know before you sign off on Tuesday; no retail changes, weak retail, traffic activity ok, recession avoided?, Orange remains, swaps retreat, NZD holds, & more

9th Aug 22, 3:59pm by David Chaston

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
None to report here today - so far at least.

TERM DEPOSIT RATE CHANGES
None to report here either.

NO FRILLS
Whatever way you slice the data released today, retail sales are falling. They fell in July from June, and they fell in July from the same month a year ago. Core retail sales activity declined as well. There were two categories that rose - sales of petrol and sales of 'consumables' like groceries. All this data is problematic because is isn't inflation-adjusted so retail volumes are clearly falling quite hard. The July declines were more than expected and show momentum in household spending is flagging.

ON THE EDGE
ANZ says our economy will probably avoid a recession, but that’s only because exports will save us. But from a domestic perspective, they expect a contraction over the first half of 2023. They do note that payrolls are up more than +7%, which will help.

A TOUGH WINTER
ANZ's Truckometer monitoring traffic activity finds it tough going this winter. 'Light traffic' (cars etc) is down in July but still up on a year-on-year basis.(*) But 'heavy traffic' (trucks etc) is now lower than year ago levels and pointing to weak goods movement. (*= The contrast with public transport usage is start. People are still using their cars at normal levels but if Auckland's AT Patronage reports are a guide to national trends, they have forsaken this alternative. July alone will end up -30% lower than year-ago levels, less than half the levels of pre-pandemic levels.)

STAYING AT ORANGE
The Government has announced that New Zealand will remain at the Orange traffic light setting, while hospitalisations remain elevated and pressure on the health system continues through winter.

BROAD REVERSAL
QV says the average value of NZ homes is down -$74,000 since start of the year, with Auckland values down -$131,000. Average dwelling values declining throughout NZ with values in Wellington, Palmerston North and Dunedin having the sharpest percentage falls. Queenstown is the only urban area that has not had a fall in the past three months.

BUSINESSES CAN SEE SOME LIGHT, CONSUMERS CAN'T
In Australia, the Westpac-MI consumer confidence survey found slipping sentiment - not huge from June, but it is the ninth consecutive monthly decline they have recorded. Consumers may be drooping, but business sentiment actually improved in July, according to the widely-watched NAB survey. It's an unusual and unexpected rally in the face of headwinds from inflation and rising interest rates, as well as a deteriorating global economic outlook.

A STRONG #2
And staying in Australia, banking giant NAB reported a AU$1.85 bln profit in their April-June quarter (Q3 for them), earnings growth of +6%. In this ASX update, they made no mention of the BNZ contribution - even though the result was also released on the NZX exchange. As is usual, they warned of "higher costs", but of course those risks never seem to materialise as inhibitors to future results. NAB reported AU$7.05 bln in statutory net profit in the year to June and from these results it is clear their housing market isn't hurting banks - yet. After CBA, NAB is the clear #2 in Australian banking.

LIVE TRIAL
The Aussie central bank says it is about to start a live trial using their digital money. It is to be part of a collaborative research project into how it could be used by consumers and businesses. It will involve the development of a limited-scale pilot that will operate in a ring-fenced way for a limited period of time and is intended to involve a pilot CBDC that is a real claim on their central bank.

SWAP RATES SLIP BACK
Wholesale swap rates are probably lower today on the back of the international trends, reversing yesterday's rise. The 90 day bank bill rate gave up all of yesterday's rise, down -6 bps at 3.23%. The Australian 10 year bond yield is now at 3.20% and down -4 bps from this time yesterday. The China 10 year bond rate is now at 2.76% and up +1 bp. The NZ Government 10 year bond rate is now at 3.32%, down -11 bps from this time yesterday, and still below the earlier RBNZ fix for this bond which was down -10 bps at 3.35%. The UST 10 year is now at 2.76% and down -7 bps from this time yesterday.

EQUITIES DRIFT
Lacking momentum, direction and volume, Wall Street closed flat today with the S&P500 down -0.1%. Tokyo has started its Tuesday session down -0.9%. Hong Kong is down -0.6%, and Shanghai is trading flat in its early Tuesday session. If there are any positives, they are local. The ASX200 is up +0.2% in afternoon trade. The NZX50 is up +0.4% in late trade.

GOLD FIRM
In early Asian trade, gold is dup +US$11 from this time yesterday, now at US$1,785/oz.

NZD HANGING IN THERE
The Kiwi dollar has firmed today to 62.8 USc from where we were this time yesterday. Against the AUD we are softer at just under 90 AUc. Against the euro we are also little-changed at 61.6 euro cents. That means our TWI-5 is now at just on 71.2.

BITCOIN RISES
Bitcoin is now at US$23,779 and up +2.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/-2.1%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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44 Comments

by Foxglove. | 9th Aug 22, 4:34pm 1660019689

Exports, the ANZ says, will likely save NZ from a recession. That must include export of dairy & meat product. Blimey! Sacrilege! Don’t then let the Greens onto this, shut the gate to the left field pronto. Better the nation should fail, rather than have the dastardly knights of the farm save it.

by OldSkoolEconomics | 10th Aug 22, 6:46am 1660070788

Great that our exports are well balanced across multiple trading partners.

Just imagine if we were reliant on exports and had one major export trading partner who was in thr midst of a major falling out with our traditional allies.

by Pa1nter | 10th Aug 22, 7:11am 1660072263

So the major partner has less mates?

Probably a good idea we remained mostly impartial then.

by J.C. | 9th Aug 22, 4:07pm 1660018031

One thing that Kiwis and the NZ media in general do not pay much attention to is the rampant and "alleged" corruption in Aussie federal and state politics. The latest episode re John Barilaro and his $500K trade commissioner post-retirement plan is getting zero attention by our media, even though it's ripping apart the top brass of NSW politics. And one thing I thought was particularly interesting is that Barilaro's references for the role come from two ex-high-level pollies both under the spotlight for corruption. Such low level of self awareness.

Even in NZ, we have ethically questionable people like Trevor Mallard representing the country, regardless of him even holding the relevant skillset (arguably).

Australasia is politically broken.

https://www.abc.net.au/news/2022-08-09/nsw-barilaro-us-trade-job-inquir…;

by Pa1nter | 9th Aug 22, 5:34pm 1660023259

May I suggest visiting other countries.

by kiwikidsnz | 9th Aug 22, 6:37pm 1660027037

However the Aussies have "Honest Govt Ads" to call their politicians out, NZ has...the best media money ($55M) can buy

https://youtu.be/Gz4IkzM217U

by Yvil | 9th Aug 22, 4:12pm 1660018378

Falling retail sales are suggesting higher interest rates are starting to hurt. Then again, people shunning half price public transport in favour of their cars in a time of very expensive fuel, might suggest things are not that bad (yet perhaps)

by Baywatch | 9th Aug 22, 4:37pm 1660019849

Or working from home?

by Yvil | 9th Aug 22, 5:00pm 1660021239

If working from home was the reason, then use of private vehicle would reduce at about a similar rate to public transport use,

by Baywatch | 9th Aug 22, 4:55pm 1660020903

fuel, down $39 million (6.1 percent).

by Yvil | 9th Aug 22, 5:03pm 1660021421

That's $ Baywatch, because the price of fuel has been going down. On the other hand car use is steady:

'Light traffic' (cars etc) is down in July but still up on a year-on-year basis.The contrast with public transport usage is stark.

by HouseMouse | 9th Aug 22, 5:49pm 1660024161

No. Not at all.

many people, like me, use public transport for commuting to work. But hardly ever use it beyond that.

by DaveB1978 | 9th Aug 22, 9:12pm 1660036378

Not true. Public transport best serves office workers who work in the cbd. Those are the people than can best work from home. Doesn’t work so well for the bar tender that finishes at 3am or the night fill person at the supermarket

by Nifty1 | 9th Aug 22, 4:41pm 1660020070

Or the public unable to rely on sub par public transport services...

by Pragmatist | 9th Aug 22, 5:59pm 1660024746

Very much this would be my guess. If the amount of whinging on various fora about public transport cancellations in Auckland is anything to go by. Images of the AT app showing 3 buses in row cancelled (due to lack of drivers turning up to work apparently)

by Nifty1 | 9th Aug 22, 6:14pm 1660025658

Half price for half arsed services...

by Baywatch | 9th Aug 22, 6:33pm 1660026810

When did you last use Public Transport Nifty?

by Nifty1 | 9th Aug 22, 7:20pm 1660029607

Use it twice a week currently, how about you Baywatch? Alot people I know don't use it because of how unreliable it is unless you're on a main route... I'm barely sticking with it.

by Yvil | 9th Aug 22, 7:45pm 1660031147

That's true Nifty, just this morning I had to drive my daughter to school, because her bus was cancelled, yet again!

by The Person | 9th Aug 22, 8:49pm 1660034966

get her a bike, $129 at KMart, a wise investment, it's dangerous to her health getting driven everywhere.

by sit23 | 9th Aug 22, 7:49pm 1660031379

I have a transport business which does work for a lot of very disgruntled public transport users. Do the relevant councils get the subsidies paid for services that do not run? I hope not. But a government that pays dead, and foreign residing people cost of living payments will probably not even check.

by DaveB1978 | 9th Aug 22, 9:10pm 1660036219

A lot of people that would have taken public transport to work are probably working part time from home. Public transport doesn’t work so well for a lot of people. The cost wasn’t the issue for many.

by company of heroes | 9th Aug 22, 4:19pm 1660018789

July month

Changes in the value of electronic card transactions for the July 2022 month (compared with June 2022) were:

spending in the retail industries fell 0.2 percent ($11 million)

spending in the core retail industries rose 0.2 percent ($8 million).

By spending category, the movements were:

consumables, up $52 million (2.2 percent)

apparel, up $1 million (0.4 percent)

motor vehicles (excluding fuel), down $0.8 million (0.4 percent)

durables, down $9 million (0.6 percent)

fuel, down $39 million (6.1 percent).

Judging by having a big drop for fuel price, these retails figures are not looking bad at all. In fact, consumables had quite a bit increase comparing with June's number released by last month...

June month

Changes in the value of electronic card transactions for the June 2022 month (compared with May 2022) were:

spending in the retail industries rose 0.1 percent ($5 million)

spending in the core retail industries fell 0.3 percent ($16 million).

By spending category, the movements were:

fuel, up $18 million (2.9 percent)

apparel, down $0.4 million (0.1 percent)

consumables, down $6.5 million (0.3 percent)

durables, down $10 million (0.6 percent)

motor vehicles (excluding fuel), down $3.3 million (1.6 percent).

Electronic card transactions: July 2022 | Stats NZ

Electronic card transactions: June 2022 | Stats NZ

by Jonny.Foe | 9th Aug 22, 4:30pm 1660019404

These are terrible figures for July. They show very clearly that low confidence + significant reductions in disposable income mean that people are prioritising necessities (more expensive food and bills) and cutting back hard on optional stuff like clothes, hospo, appliances etc. The doom has been building for months (and I admit to being a broken record on it). Next month, the interest charged on mortgages will top $1 billion in a month for the first time ever as higher rates continue to work their way into the economy. Many workers simply do not have enough money to deal with the cost of living - and employers in sectors that are seeing falling demand are cutting hours. It's a disaster.

by company of heroes | 9th Aug 22, 4:59pm 1660021140

I wouldn't say it's terrible. If you are referring of transactions, sure, comparing with July's figures in 2021 and 2020 , there are some decreases in number of transactions. However, those two years, we all experienced some soft of lock down restrictions. People tend to spend more in lockdown or out of lockdown. But if you have look at the core retail industries and retail industries electronic card transactions in July 2019. The differences between this year and 2019's numbers are minor.

Yes, there seems not much growth. But also remember, we just only opened our borders for tourists to come. But in 2019, there is no restriction for any tourists. Based on this, in my view, we are no where near to a recession that you are talking about, at least for now, I can not see any data to backup what you've claimed.

by Jonny.Foe | 9th Aug 22, 5:13pm 1660022025

I guess we each look at the same data with a healthy dose of confirmation bias. The truth is probably somewhere in the middle and time will tell. What I would say is that card transactions (volume) were tracking at a 4% annual growth rate during most of 2019, they are now relatively stable at -7%!

My forecast now is a 2nd quarter of GDP falling. I had a nice little bet on two successive quarters - the first one was an easy call but my confidence in a fall in the second quarter is growing. I also think unemployment is now firmly on the march upwards.

by David Chaston | 9th Aug 22, 5:59pm 1660024798

"Next month, the interest charged on mortgages will top $1 billion in a month for the first time ever as higher rates continue to work their way into the economy."

I doubt that is true. The real cost of mortgage interest is in the RBNZ C35 series. It is only quarterly. Both the Dec-17 and Dec-18 quarters had interest charged over $3 bln for the quarter, so at least one of those months must have exceeded $1 bln.

I actually doubt the June-22 quarter will exceed $3 bln, so your claim isn't correct. More than 60% of current mortgages haven't rolled over even yet, so there will be a lag into 2023 before the current rates really bite to the $1 bln/mth level

by Jonny.Foe | 9th Aug 22, 6:19pm 1660025972

I am using the mortgage yield data (RBNZ B6), which gives monthly figures but may lack the accuracy of the consolidated C35 series?

In Dec 2018 (previous peak), yield was 4.6% on mortgages totaling $259 Bn in value ($991M interest / month).

In June 2022, yield was 3.51% on mortgages totaling $339 Bn ($992M interest / month).

On current trends (yield is increasing at around 15 pts per month), July 2022 yield will be around 3.65% on at least the same level of outstanding mortgages $339bn - surpassing $1bn in interest.

by Tee | 9th Aug 22, 4:16pm 1660018574

FBI raids Trump's Mar A Lago. "They even broke into my safe".

by Foxglove. | 9th Aug 22, 4:27pm 1660019276

Perhaps they were after Epstein’s videos?

by Baywatch | 9th Aug 22, 4:38pm 1660019913

Putin has those in his safe.

by Beanie | 9th Aug 22, 10:46pm 1660042016

He thinks he does, but Bond swapped them for blanks. The Queen has them now.

by tim52 | 9th Aug 22, 4:27pm 1660019250

The Ministry of health have updated the HSU population (with those the turned up to get vaxed) and it turns out we are only 90% vaxed. (this is even lower than using stats nz data)

This means that its much easier to every to calculate that the vax currently has negligible to negative efficacy using the way back machine. If anyone is interested, you have to calculate the delta from a previous publication.

by sit23 | 9th Aug 22, 8:03pm 1660032191

We all know people who had no vaccinations. My favourite one is the complete absence of Covid amongst dairy factory workers and freezing workers during all the lockdowns. Possibly an indication of what might have been if we had not been forced to lockdown.

by Pa1nter | 9th Aug 22, 5:44pm 1660023899

Whatever way you slice the data released today, retail sales are falling. They fell in July from June, and they fell in July from the same month a year ago

International departures June 2021:90,000

International departures July 2022:220,000

Could it just be that people are spending disposable income on holidays instead of shoes and TVs now they're allowed out?

by Audaxes | 9th Aug 22, 5:58pm 1660024736

Yep, off sailing on a friend's around the world yacht tomorrow for 10 days, starting a few degrees latitude closer to the equator.

by Pa1nter | 9th Aug 22, 6:11pm 1660025469

There's one less toaster sold.

Have fun enjoy the warmer climes.

by Audaxes | 9th Aug 22, 6:29pm 1660026564

Cheers

by Sluggy | 9th Aug 22, 9:05pm 1660035917

My wife is in travel, I can confirm business is back to pre covid levels. I've been in and out 5 times since the border re-opened for work and holidays.

by HouseMouse | 9th Aug 22, 6:32pm 1660026756

David you continue to peddle a bullshit narrative around public transport usage.

How do you know people are ‘foregoing PT’ for the alternative of driving cars? Your circle of mates?

I, and many people I know, are using PT a lot less because we are working from home a lot more. Not because we are suddenly driving a lot more to work.

That will be one key reason for lower use of PT.

Another reason will be widespread Covid and winter illnesses. This will be impacting on both the amount of service offered (ie. lots of drivers are genuinely sick), and also patronage (people off sick from work or more reluctant to go to work)

by JimboJones | 9th Aug 22, 6:41pm 1660027275

It feels like the same kind of reasons they didn’t build any houses after the GFC. We had a housing problem that temporarily went away but then came back much worse.

by The Person | 9th Aug 22, 8:54pm 1660035250

Yes, and PT is concentrated on routes into the CBD, where people do office work, the sort of work you can do at home. People working in the industrial and warehousing districts mostly drive to work, and mostly cannot 'work from home'

So certainly it's not people choosing driving over PT. That said, if you look at the level total patronage, it is PT seeing a bigger drop off than driving, probably due to those factors.

Not sure where David gets his latest data from, the source he links says "Daily patronage report updated each week on Monday." and "Last updated 27 July 2022.", so it's a few weeks out of date. Based on the data to 24 July, that does indeed forecast a 30% drop over July 2021, but anecdotally i've noticed the busses stopping allot more to pick up passengers the last couple of weeks - keen to see what the real figures are.

by Mark L | 9th Aug 22, 8:11pm 1660032681

As per my yesterday comment, Kiwibank has raised their sub 1year T/D rates.

by Pagz | 9th Aug 22, 9:42pm 1660038140

CBDC trial, nothing to see here.