A review of things you need to know before you sign off on Tuesday; house buyers elusive, productivity retreats, eyes on CPI, Auckland bribery prosecuted, swaps up, NZD down, & 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/LOAN RATE CHANGES
Nothing to report again today.

TERM DEPOSIT/SAVINGS RATE CHANGES
Nelson Building Society today trimmed its 1, 2 and 3 year term deposit rates.

SELLERS PLENTIFUL, BUYERS ELUSIVE
House prices slid in March as the housing market finishes summer on a soft note. Low sales volumes, falling prices and high stock levels suggest it's going to be a difficult winter for the housing market.

SHADOWS GROW
Sales rate at last week's residential property auctions dipped to 28%. Auction activity is easing back as the housing market heads deeper into autumn.

OUR PRODUCTIVITY ISSUE GETS WORSE
Productivity is falling. We are committing more resources for the level of output we are achieving. In the "measured sector", overall productivity fell an alarming -2.2% in 2023, and that was after a -0.1% fall in 2022. Since this proper measure of productivity was established in 1997, we have never before had two consecutive years of decline in those 27 years. Not even after the GFC. Interestingly, labour productivity declined far less than capital productivity, -0.9% in 2023 vs -3.8% for capital. Clearly many organisations have pulled back in modernising their equipment relying of 'labour' to stay in the game. The decline in labour productivity should not be a surprise, given that unemployment fell to very low levels, so the extra people being encouraged into our workforce probably had the least skills. It will be an irony that when the jobless rate rises, the least productive will tend to be laid off first which will bring a boost to labour productivity. The capital productivity issue is unlikely to get a similar boost. Old equipment doesn't deliver the same effect. Investment is required. But investment won't happen if the prospect of future returns aren't there. And then there is the unmeasured sector ... (or non-market sector as it is called in Australia). That includes health, education, Public admin & safety. Owner-occupied dwellings and unallocated taxes are also excluded. They are excluded because Stats NZ don’t have a good way of measuring output.

EYES ON DAIRY PRICES
There is another GDT dairy auction tomorrow. Prices over the past few weeks have held fairly stable for both WMP and SMP. But given fast rising on-farm costs, "stable prices' won't cut it for farmers for very long. There will be a nervous watch on this auction signals even though probably all the 2023/24 season is probably sold. The signals for the remaining volumes being offered are setting the stage for the 2024/25 season which doesn't start until after September.

EYES ON CPI INFLATION
A year ago, overall CPI inflation was running at 6.65%. Tomorrow we get the Q1-2024 CPI rate update and the average of the various analysts is a 4.1% rate (3.9% to 4.2% is the range). By any measure that is too high, and still far above what the RBNZ needs to take its foot off the brake. Of course, it will be the recent change that analysts will look closely at, and the monthly price indexes suggest a cooling over the past 13 weeks. But will that be enough for the RBNZ? It seem unlikely. As at today, financial markets have fully priced in only one -25 bps rate cut this year in October - and the conviction levels for this are easing away. Also, see this.

UNCOVERING BRIBERY
The Serious Fraud Office has filed bribery and corruption charges against a former Auckland Council building inspector and a director of an Auckland building company. Nicholas Bright faces many charges of corruption and bribery of an official. The building company director has interim name suppression. Following an Auckland Council internal investigation, the SFO alleges that between 2018 and 2020 Nicholas Bright received bribes in the form of cash and other benefits in connection with his work as a building inspector.

INCONSISTENT CHINESE DATA
In China, electricity production rose just +2.8% on March from a year ago, a huge retreat from the +8.0% frise in December. This is an important background data that should be reflected in China's economic activity (GDP). But Beijing reported Q1-2024 GDP rose +5.3% (up from 5.2% in Q4-2023) and this was despite retail sales only rising +3.1% and national real estate investment falling -9.5% in official data. They say industry expanded +4.5% (and down from the +6.8% rate in December). While we have raised our eyebrows at how they can deliver a credible GDP result just 16 days after the quarter end (no-one else can), few of the major components show expansions at the level of the claimed overall growth, and readers can draw their own judgements on the credibility of the rising 5.3% growth in Q1. Certainly ex-Premier Li Keqiang did.

HOUSING RETREAT WORSENS
Meanwhile, China's new home prices dropped by -2.2% in the year to March, faster than the -1.4% fall in February. It was the ninth straight month of decline and the steepest pace since August 2015, despite multiple support measures. For second-hand dwellings none of the 70 largest cities reported any rises, and the average fall over this set is now -5.9% year-on-year.

'NATIONAL SECURITY' - IT'S ALL GOOD & "GETTING BETTER"
Today is National Security Education Day in China, and every year we get some examples of model espionage cases. We also get reminded that it is crime there to undermine the positivity of the country's growth and prospects. In China, everything is 'national security'. There is an emphasis this year to bring Kong Kong's "education" up to speed.

ITS NATIONAL EMBARRASSMENT DAY IN THE US
An ex-president is in court today facing criminal charges. Shares in the company DJT fell -18.4% today, have fallen -28.7% in the past week, and -59.8% since they peaked on March 27, 2024.

SWAP RATES UP AGAIN
Wholesale swap rates are likely to be back up today probably more than cancelling yesterday's modest falls. Our chart below will record the final positions. The 90 day bank bill rate is down - bp to 5.64%, a level it has hovered around for 30+ days. The Australian 10 year bond yield is up +9 bps at 4.36%. The China 10 year bond rate is holding at 2.29%. The NZ Government 10 year bond rate is up +6 bps to 4.94% and the earlier RBNZ fix was at 4.82% and up +5 bps. The UST 10yr yield is up +8 bps to 4.61%. Their 2yr is up only +1 bp at 4.92%, so the curve is down to -31 bps.

EQUITIES SINK EVERYWHERE
In late trade today, the NZX50 is down -1.0%, taking the two day retreat to -0.8% and giving up all of Monday's surprising late gain. The ASX200 is down -1.9% in its growing risk aversion mood, down -2.4% for the first two days of the week. It is even tougher in Tokyo which has opened down -2.1% to be down -2.9% for the two days. Hong Kong is down -1.4% at its open. Shanghai is down -1.3%. Singapore has opened -0.9% lower. The S&P500 fell -1.2% on Wall Street in its Monday trade.

Oil prices have risen +50 USc to just over US$85.50/bbl in the US while the international Brent price is now just over US$90/bbl.

GOLD RISES AGAIN
In early Asian trade, gold is up +US$29 from yesterday, now at US$2384/oz.

NZD TUMBLES
The Kiwi dollar has extended its retreat from this time yesterday to 58.8 USc and more than a -½c fall from an already low level. It was last at this level on November 14, 2023. Against the Aussie we are holding at 91.7 AUc. Against the euro we are almost -½c to 55.4 euro cents. This all means the TWI-5 is under 68.7 in a general retreat away from commodity currencies.

BITCOIN RETREATS
The bitcoin price has fallen today from this time yesterday, now down to US$63,234 and a -3.7% retreat. Volatility of the past 24 hours has been high at just over +/- 3.6%.

This soil moisture chart is animated here.

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