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/LOAN RATE CHANGES
No changes to report again today.
TERM DEPOSIT/SAVINGS RATE CHANGES
No changes here either.
LOWER. BUT THE DETAILS STILL CONCERNING
Annual inflation dropped to 4.66% in the December quarter, down from 5.64% in the September quarter and down from 7.22% in the December 2022 quarter. Food prices declined, albeit domestic inflation tops RBNZ expectations. Tradable inflation came in at a lower-than-expected 3.0% but non-tradable inflation was 5.9% and higher than expected. Analysts viewed the outcome with surprisingly varied views. How the RBNZ sees where we are now at will be revealed on Tuesday.
FOUR YEAR LOW
Residential property sales commissions were at a four year low in 2023 but showed signs of improvement in December. Annual commissions were -$780 mln lower in 2023 that they were at their peak in 2021.
GOING EASIER ON THE BANKRUPT
Westpac says it is updating its bankruptcy policy to improve access to basic banking services for people going through tough times. A 2022 survey undertaken by the Insolvency and Trustee Service found about half of respondents faced bank account closures after being declared bankrupt, while almost a quarter had difficulty finding a new bank or credit union. Westpac’s policies have now been updated so that customers who are in bankruptcy are able to continue to operate transactional accounts, open new transactional or savings accounts and retain or apply for a debit card.
EXTENDED WARINESS
Domestic billings on locally issued credit cards were essentially unchanged in December from the same month a year ago. That however means real spending on credit cards fell by the amount of intervening inflation. (But we did spend considerably more on these cards outside New Zealand from a year ago as we recovered our travel enthusiasm. But this increase has tailed off since mid 2023.) Balances due on credit cards was flat in December from November and only up a very modest +1% from a year ago. It was the same last year. This is unusual; in the prior ten years the rise from November to December averaged +$125 mln for the holiday impulse. But not recently. We are becoming wary of using expensive credit card debt.
NEW FEATURE
We have expanded the coverage of our NZX50 analysis with sector monitoring, helping explain how capitalisation in this equity market changes over time. It is a companion to the individual NZX50 company profiles here.
EXPORTS UP, IMPORTS DOWN
Japanese exports are firing impressively. They were up +9.8% in December from the same month a year ago, more than expected. And with the sharp drop in oil prices, the cost of their imports fell equally impressively, down -6.8% on the same basis. That enabled them to log an unexpected trade surplus in December. (They can probably thank the missteps from Xi and Putin for this result.)
SWAPS RISE
Wholesale swap rates will probably be higher today, possibly +7 bps, because today's CPI data suggests rate cuts will come much later than markets were pricing. However, the key reaction will come at the close. Our chart below records the final positions. The 90 day bank bill rate is unchanged again at 5.65%. The Australian 10 year bond yield is up +5 bps at 4.27%. The China 10 year bond rate is little-changed at 2.52%. And the NZ Government 10 year bond rate is up +9 bps at 4.82% following the CPI release, while the earlier RBNZ fixing was at 4.70% and down -5 bps from yesterday. The UST 10 year yield is now at 4.14% and up +4 bps from yesterday. The UST 2yr is at 4.34% and down -5 bps, so that key inversion is now back down to -20 bps.
EQUITY WINNERS & LOSERS
The NZX50 is little-changed in late trade today, but on the 'plus' side. The ASX200 is also little-changed in afternoon trade, but on the 'minus' side. Tokyo is down -0.3% in morning trade.. Hong Kong is up +1.8% in early trade, still optimistic about the upcoming impact of home team market support plans. Shanghai is up +0.6% at its open on the same view. Singapore has opened up +0.3%. In New York, the S&P500 ended its Tuesday session up +0.3%.
OIL HOLDS
Oil prices are holding at just under US$74.50/bbl in the US while the international Brent price is soft, now just over US$79/bbl.
GOLD FIRMS
In early Asian trade, gold is now at US$2028/oz and up +US$8 from this time yesterday. It closed earlier in London at US$2022/oz.
NZD RECOVERS SOMEWHAT
The Kiwi dollar is now just on 61 USc and marginally higher than this time yesterday. Against the Aussie we are back up +40 bps to 92.8 AUc. Against the euro we are +30 bps higher at 56.2 euro cents. That means the TWI-5 is now at just under 70 again and up nearly +40 bps.
BITCOIN HOLDS
The bitcoin price has moved up today to US$39,925 and up a minor +0.5% from where we were this time yesterday. There's been moderate volatility over the past 24 hours of just on +/- 2.2%.
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56 Comments
Japanese exports are firing impressively. They were up +9.8% in December from the same month a year ago, more than expected.
Watch those trading houses fly:
Itochu - Past 12 months +61%; Past 5 years +237%
Marubeni - Past 12 months +58%; Past 5 years +200%
Mitsubishi - Past 12 months +74%; Past 5 years +144%
Mitsui & Co - Past 12 months +52%; Past 5 years +232%
Mitsubishi! Firing impressively. Reminds me, I once had a company Sigma in which my father refused to even sit. In the Solomons, he had been bombed by a Betty and piloting a Catalina only just got into clouds before being spotted by a Zero. Still look at them now. Integral industrial and commercial giant in the world’s third largest economy.
Different companies. Mitsubishi Motors largest shareholder is Nissan. I assume company referred to is Mitsubishi Corp or Mitsubishi Heavy Industries. All historically related but now only minor shareholders in car business. To complicate further the Mitsubishi truck and bus business is owned by Daimler…. There are a lot of Mitsubishis, and I remember the Sigma fondly too!
Mitsubishi Corp. Primarily a trading house - distribution of chemicals, fuels, electronics, metal and provides information technology and professional consulting services. It operates is Natural Gas, Industrial Materials, Chemical Solutions, Industrial Infrastructure, Automotive/Mobility, Food industry, Consumer Industry, Power Solution, Urban Development.
some of this may just be chinese money fleeing their market
Yes. But the Chinese are largely buying Nikkei ETFs.
Chinese investors are so tired of losses in the country's stock market, they're flocking to Japanese ETFs.
https://markets.businessinsider.com/news/stocks/china-economy-stock-mar…
Aussie apartment buyers getting reamed. This is tragic. NSW Building Commissioner admits that recently built Sydney apartments are riddled with defects.
“There’s over 60%, nearly 70% of developments and buildings that have defects out there that we don’t know about”
https://www.abc.net.au/news/2024-01-19/consumer-rights-defects-sydney-a…
Residential sales commissions at four year low.
Sorry REA's the increase of the last twenty years is still way too high compared to salaries. How about one twenty year old agent portrait on the advertising I pay for and you reduce the commission to one percent. Better still agree on a minimum price and if that is not achieved then commission is reduced to half a percent.
My base budget, rechecking annually, is the single NZ Super rate, I can manage to buy a couple of beers a week as well. It was easier with the couples Super rate (my wife passed away in 2021).
I have no debt & have other passive income if necessary for occasional extras such as o'seas trips to see family. I have a couple of inexpensive hobbies & no dependent dependents.
Yes its easy to quote the inflation rate for food etc, but insurance, rates, electricity, water etc make up a big chunk of outgoings... I truely pity wellington they are screwed re water bills, there is no way a central government can ride to the rescue with no water meters......
I am truely grateful I pay for no water..... (well I do in the fact that I have 100KL of water tanks, now to get the wind and solar sorted.). Anyone here put one of those 5kw wind turbines in?
Yes but wind blows at night - we have a great ridge line
I have 3 tanks for house and one for stables. Stock water is dam But I can pump to a tank and feed from there if needed.
This year is no drought - we use about 1000L a day on average , could do 500 if pushed and desperate. Remember if you are low so is every one else.
Here we go again with random reckons on inflation based on outdated (or plain daft) definitions.
It is now abundantly clear that the component prices still pushing on inflation are not demand-sensitive. If we buy less insurance does it get cheaper? Do higher interest rates / borrowing costs persuade Local Govt to charge lower rates (or quite the opposite!) If RBNZ drive up unemployment in the regions, will this make rents in big cities here population growth has exploded go up by less? Is the price of cigarettes and tobacco demand sensitive in any meaningful sense? How about household energy bills? If we use less gas and electricity and RBNZ keep interest rates high to dissuade electricity companies from investing in infrastructure - will the cost of electricity go down?
I could go on (and on). We live in a stupid world. Blind faith in reckonomics.
I don’t understand why rates are included in the CPI. It is effectively a tax which increases with inflation (often at a higher rate). It is not avoidable at a macro level and does what the OCR does by taking money out of peoples pockets. The higher your rates the less you have to spend on other things. It seems cruel to increase your mortgage rate due to a tax increase.
Yes, I have. My whole point here is that higher interest rates trigger a range of responses across multiple markets - they put pressure on landlords to push up rents, but higher rates also reduce employment meaning that less people can afford to pay rent (which helps restrain rents). Reduced consumer demand might persuade businesses to get into a price war, but high costs of credit for multiple businesses across a sector (hello horticulture) could have the opposite effect. An increase to the OCR will cause house prices to drop, which will reduce the fees people pay when they sell their house etc.
The BIG question is whether the net impact of all of these mutliple interacting factors is to slow price increases - or speed them up?
So let's look at the top ten items pulling so-called domestic (non-tradable) inflation UP in 2023Q4... Will a combination of higher costs of credit and reduced consumer demand slow or speed up the prices of these items?
- Actual rentals for housing
- Cigarettes and tobacco
- Purchase of housing (cost of getting a house built)
- Electricity
- Dwelling insurance
- Domestic accommodation services
- Vehicle insurance
- Dental services
- Telecommunication services
- Medical services
Now look at the top ten items that are pulling domestic inflation DOWN in 2023Q4... Is a combination of higher costs of credit and reduced consumer demand stopping these prices going up (or deflating them)?
- Pets and pet-related products
- Therapeutic appliances and equipment
- Credit Services
- Spirits and liqueurs
- Other property related services
- Life insurance
- Milk, cheese and eggs*
- Meat and poultry*
- Bread and cereals*
- Domestic air transport
* Should not be considered domestic - prices predominantly set on global markets
My guess is that anyone doing this exercise will quickly see that there are opposing dynamics here and that maybe we should think twice before applying a treatment that basically involves making families with mortgages poorer and leaves 70,000 people unemployed.
Rates increases fuel price increases. I do wonder how helpful OCR increases are at lowering prices. Take a cafe for example, if people have less money, they will buy less coffee. Cafes have a lot of fixed costs. Those costs have to be recovered and if they are selling less then the cost per cup goes up and the owner increases prices to offset it. Suppressing demand has more effect on prices when supply is constrained (e.g wages when there is a labour shortage). I would love to see how much the OCR actually reduced inflation. Food prices were affected by Covid, war and natural disaster.
I used to think a flat white or whatever is your preferred coffee is expensive because of the cost of milk. Which would explain why in some cafes the large cup is half the size of what it used to be. Nope that isn't true... Doing a few sums I realised the milk and coffee and paper cup are only 50 cents or so. There are wages to the barista but the govt gst (80 to 90 cents) and the cafe owners profit margin are the largest slice
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