A review of things you need to know before you sign off on Monday; TD rates topped out?, service sector expands faster, fewer jobs more applicants, ETS reform, swaps unchanged, NZD stable, & 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
The Cooperative Bank raised its one year fixed rate by +20 bps today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None to report today. But see this where ASB economists think TD rates may have topped out for now.

SERVICE SECTOR RESILIENT
The services sector expanded at a good pace in May, "arguably help[ing] calm a lot of nerves" said BNZ. Retail and hospitality remained weak, but not as very weak as Communication. On the positive side, it was the Health & Community subsector, Finance & Insurance, and Property & Business which all bounced back strongly. The April service sector expansion was minimal, so this good May expansion is 'significant', BNZ analysts noted.

FEWER JOBS, MORE APPLICANTS
The May BNZ-Seek Employment Report notes fewer jobs being advertised, and more applications. Wellington recorded largest fall in jobs advertised, as Gisborne bucks the national trend.

EXPLAINING THE 'RECESSION' CALL, I
There isn't a huge amount of economic data released today. In lieu of that, these two items may help readers understand the "recession" label that has been applied to the NZ economy. The reported Q1-2023 GDP dip was -0.1% (actually -0.06%) on top of the -0.6% Q4-2023 drop, making it two quarters in a row of apparent decline, enough to earn the R label. In 1974, it was the US economist Julius Shiskin who described a recession as `two consecutive quarters of declining growth’. That definition has gained traction since because it is simple enough for anyone to understand. But even Shiskin realised there is a lot more to to it than his simplified shorthand. You can only really tell after the event if there has been a recession. The US doesn't use the Shiskin rule. It uses a much more broad set of data to decide as part of its monitoring of business cycles.

EXPLAINING THE 'RECESSION' CALL, II
The easiest way to understand the issue is to realise that announcements of GDP are estimates, estimates that get progressively revised. In New Zealand those revisions happen continuously and can span 5 to 10 quarters (obviously less invasive as time goes on). Almost certainly the announced Q1-2023 -0.1% dip will be revised, just as the Q4-2022 drop was revised last week. (The Q4-2022 fall was revised to be smaller in the Q1-2023 release.) If the same happens in the Q2-2023 GDP data (as some think it could), the -0.1% could easily become a positive. So then it won't be two quarters of decline. This is a pretty crude way of deciding. In NZ, neither Stats NZ nor the RBNZ use the two-quarters definition. We will only really know a year or so down the track whether the shifts in employment, output, consumption, exports and imports, etc. really caused our economy to shrink in real terms. A 'real recession' won't be known for some time yet. And the data released so far is far from conclusive we are in one on a national economy basis. Some regions? yes, probably. Some industries? yes, probably. But overall? I have my doubts.

GOING DOWN A DIFFERENT TRACK
The Ministry for the Environment has opened public consultation on changes to its Emissions Trading Scheme (ETS). The aim is to revise the scheme so there is a greater incentive to reduce CO₂ emissions rather than just offset them.

REPLACE & RENEW
The RBNZ board is looking for two new 'suitably qualified' candidates to join the central bank's Monetary Policy Committee to replace two departing members who are at the end of their terms.

SWAPS LITTLE-CHANGED
Wholesale swap rates are likely ending the week little-changed again today. However, the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is also unchanged yet again at 5.68% and still +18 bps above the 5.50% OCR. That makes it 17 trading days it has been at this level, +/- 1 bp. We haven't seen this sort of 'stability' since the end-of-year holiday period in 2021/22 and prior to that in November 2021. The Australian 10 year bond yield is down -3 bps from this morning's open at 4.00%. The China 10 year bond rate is up +2 bps at 2.73%. And the NZ Government 10 year bond rate is at 4.53% and down -1 bp, but that is still higher than the earlier RBNZ fix which was up +4 bps to 4.49%. The UST 10 year yield is unchanged from this morning at 3.77% and up +3 bps from Friday.

EQUITIES TURN CAUTIOUS
The NZX50 is down -0.4% in late trade today and giving up some of last week's gains (see next item). The ASX200 however is up +0.7% in afternoon trade, bucking the regional trend. Tokyo has opened little changed. Hong Kong is going backwards today, down -1.0% at its open. And Shanghai is down -0.4% in their early trade. The S&P500 futures suggest Wall Street will open on Wednesday NZT after their holiday ("Juneteenth") up +0.9% from their Friday close.

LAST WEEK ON THE NZX50
This index closed up a creditable +0.9% in capitalisation, helped along by two of their property sectors. The listed commercial property component rose +1.1% largely on the back of Stride's +3.0% gain. But PFI and Investore slipped. And the retirement village sector rose +1.0%. The biggest riser in this group was Summerset, up +1.8%, but Oceania fell a rather sharpish -2.6% for the week. Outside these two subsectors, Vista rose more than +18% in the week, and F&P Healthcare was up a notable +4.1%. But Restaurant Brands shed more than -5% last week.

GOLD HOLDS
In early Asian trade, gold is at US$1955/oz and down -US$3 from this morning's open, bacut only back to where it was on Friday.

NZD ESSENTIALLY UNCHANGED
The Kiwi dollar has slipped marginally today, down -20 bps and now at 62.2 USc. Against the Aussie we are unchanged at 90.7 AUc. Against the euro we are softish at 56.9 euro cents. That means the TWI-5 is little-changed at a tad less than 70.

BITCOIN STALLS
The bitcoin price has slipped marginally a bit today and is now at US$26,416 and down -0.8% from this morning's open. And volatility has been low at +/- 0.8%.

This soil moisture chart is animated here.

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