What happened Monday

Economy / news

A review of things you need to know before you sign off on Monday; Kiwibank & Westpac cut retail rates, auctions slow, food not pressing inflation, services contracting, expectations ease, swaps & NZD stable

[updated]

13th May 24, 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/LOAN RATE CHANGES
Westpac and Kiwibank cut rates today. One of the Kiwibank new rates is notable. Details here.

TERM DEPOSIT/SAVINGS RATE CHANGES
Kiwibank also cut some key TD rates. Heretaunga Building Society also reduced rates

WINTER STARTS EARLY IN GLUM HOUSING MARKET
A winter downturn is hitting the residential property market. Fewer properties are being auctioned as winter takes hold - only a third sell under the hammer.

FOOD NOT PRESSURING CPI, BUT RENTS ARE
Food prices rose for the first time in three months in April sparked by higher olive oil, potato crisps and chocolate block prices. Statistics NZ says they rose +0.6% in April from March to be +0.8% higher than a year ago. Meanwhile international airfares surged +7.2% from the prior month but are still -21% lower than a year ago. Rents continued to rise keeping CPI inflation elevated, up +4.6% from a year ago.

FBU STILL STUMBLING
Ailing construction giant Fletcher Building (FBU) has slashed earnings guidance as housing sales slow. It's share price tanks. After removing its CEO, a cleanout is underway. But it is warning that profits for the year to June could be as much as $140 million lower than it forecast less than three months ago.

GRIM OUTLOOK
The services sector continued to contract further in April, according to the BNZ-BusinessNZ Performance of Services Index (PSI). Led by weak new orders, it failed to bounce in April from March which itself was a 'slump'. . At 47.1, it was marginally lower than the 47.2 it had slumped to in March. None of this augers well for Q2 GDP. Combining today’s weak PSI with last week’s PMI yields a composite reading that would be consistent with GDP tracking below year earlier levels into the middle of this year.

UP +9% AND IT IS STILL "NOT ENOUGH"
Stats NZ updated its 2023 local authority stats today. That reminded us to check the change in Rates & Other Regulatory Income by councils. Overall to December 2023, this revenue is up +9.1%. It is not an insignificant contributor to inflation.

BACK IN RANGE?
The Business Survey of Expectations in Q2-2024 are rapidly reverting to within the target range or 1-3 percent. One year out, that expectation has fallen to 2.7% (it was 4.3% a year ago). Two years out the expectation is down to 2.3% (2.8% a year ago). This RBNZ survey is designed to capture the expectations that forecasters and business leaders have on a variety of economic data. More here.

NOTHING TO WRITE HOME ABOUT
Australia's closely-watched NAB business confidence index stood at +1 in April, holding steady for the second straight month while staying below its long-run average. Weak sentiment in retail, wholesale, and mining offset improvements in recreation, personal services, construction, and manufacturing. But the main feature is the lackluster current conditions.

SWAP RATES MARGINALLY FIRMER
Wholesale swap rates are likely to be little-changed today, perhaps marginally higher. Update: Wrong, at the end they actually slipped slightly. Our chart below will record the final positions. The 90 day bank bill rate is unchanged at 5.63%, a level it has hovered around for more than 70 days. The Australian 10 year bond yield is down -3 bps from this morning, now at 4.38%. The China 10 year bond rate is down -3 bps at 2.31%. The NZ Government 10 year bond rate is down -2 bps to 4.81% and the earlier RBNZ fix was at 4.75% and up +2 bps from Friday. The UST 10yr yield is down -1 bp from this morning's open at 4.49%. Their 2yr is now at 4.82%, so the curve is little-changed at -36 bps inverted.

NZX50 DRAGS THE CHAIN, AGAIN
The NZX50 has started the week on the back foot, down -1.0% in later Monday trade. The ASX200 is -0.1% softer in afternoon trade. Tokyo is down -0.2% in morning trade. Hong Kong is up +0.2% in early trade. Shanghai is down -0.3%. Singapore is up +0.2%. The S&P500 futures suggests Wall Street will open tomorrow up +0.4%.

OIL DRIFTS LOWER
The oil price is -50 USc softer today from this morning's open, at just over US$77.50/bbl in the US, while now at just on US$82/bbl for the international Brent price.

GOLD SNOOZING
In early Asian trade, gold is unchanged from this morning's open at US$2360/oz.

NZD HOLDS
The Kiwi dollar has hardly changed today at just over 60.1 USc. Against the Aussie we are holding at 91.2 AUc. Against the euro we are also little-changed at 55.8 euro cents. This all means the TWI-5 is now about 69.4, and basically unchanged as well.

BITCOIN HOLDS
The bitcoin price has risen to US$61,362 and virtually unchanged from this morning's open at US$61,614. Volatility of the past 24 hours has been low at under +/- 1.0%.

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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69 Comments

by HughJorgan | 13th May 24, 4:01pm 1715572876

If you want to get a feeling for grass roots employment levels, take a look on the Facebook page “Auckland Builders”.

Lots and lots of requests for work and people commenting that it’s dead.

Edit: I am not celebrating the fact. This is just an observation.

by JimboJones | 13th May 24, 4:14pm 1715573673

Yep, its going to become a HughJissue.

by HughJorgan | 13th May 24, 4:17pm 1715573868

;-)

by ChrisOfNoFame | 13th May 24, 5:34pm 1715578480

Perhaps ... Not so much now.

For Australia beckons ...

But when the RBNZ finally does start to normalise ...

And people are looking for builders ...

They will be far fewer ...

Well done RBNZ. (Nov '23 was the time. You're way late now. NZ Inc. is not impressed.)

by HouseMouse | 13th May 24, 5:47pm 1715579244

Construction is tanking there too

by tis i | 13th May 24, 6:06pm 1715580416

Not infrastructure construction though.

Seen it all before. I’ll wait then come back in with another big jump in rates. Just like the last 2-3 times.

by HouseMouse | 13th May 24, 6:18pm 1715581103

True

by tis i | 13th May 24, 6:42pm 1715582558

It definitely doesn’t seem like the easy road it used to be though. Rentals are scarce and home prices are rising fast.

by solardb | 13th May 24, 4:24pm 1715574251

Electrical subcontractor rates gone from take your pick at $ 85 , to not much avaliable at $ 55. Alot looking to Australia.

by Jonny.Foe | 13th May 24, 5:07pm 1715576853

Yep, the only thing keeping the Wellington pubs going at the moment is leaving drinks for public servants taking redundancy and construction workers heading off to Aus.

by HouseMouse | 13th May 24, 5:16pm 1715577387

Of course, no one could see this coming 2 years ago, so no contingency could be initiated to prevent or at least mitigate *yet another* (eyes roll) construction sector boom to bust.

sarc

by sgtshortcut | 13th May 24, 5:31pm 1715578310

And the cycle continues…although will we see the boom again or just a continued slip until rates start to drop then underwhelming plateau for construction on the assumption the rates won’t drop enough to stimulate?

by HouseMouse | 13th May 24, 5:55pm 1715579706

Hard to know for sure, but what you have set out there would be my central view.

After the boom of 02-06, it wasn’t until 2016-2017 that things really started to crank up again.

As I have said before, OCR will need to be circa 3.5% before any life whatsoever is breathed into the sector.

There will be isolated spots of activity. For example I am expecting some of National’s mates to get some fast track approvals for greenfield development.

by JimboJones | 13th May 24, 6:19pm 1715581167

Hard to make greenfield stack up these days. Maybe outside the big centres it can.

by HouseMouse | 13th May 24, 6:26pm 1715581564

Yes but one very important exception- land that has been bought at a bargain basement price in the last couple of years, because it’s riddled with flooding etc. Of course not cheap to design and build solutions for, but that won’t stop them.

And counter cyclical - secure consent later this year, build with more competitive build rates through 2025, then sell in circa 1.5-2 years when interest rates are lower and the market is recovering.

There - easy.

by Peter M | 13th May 24, 5:26pm 1715577972

Your observation is correct! I have put out a tender for major rewiring and electrical upgrading work for a property in Christchurch and those who did put a quote in were very positively surprising to the downside with both rates as well as material. But others who didn't put a quote in stated to me that they were intending to wind up their business in New Zealand. So both aspects of the economical downside observed: Lower prices and lower capacity.

by Sapere Aude | 13th May 24, 6:35pm 1715582130

We are currently talking to a mid-size builder in Christchurch working at half capacity. Our briefing was $3,500 - $4,000 incl of landscaping psqm for a nicely designed home, nothing too flash. First proposal came back at $4,400 psqm with loads of provisional sums. Not happy. Builder agreed to get quotes in the market to turn PSs into FPs. With the exception of one small item all quotes came in significantly above PS, in one instance double the PS. Builder is reluctant to negotiate and is now apparently less interested to take us on as client.

It is anecdotical evidence that the construction industry still lives in la-la-land thinking that boom times are there to stay. Perhaps we should wait a few months before signing up with another builder.

by Foxglove. | 13th May 24, 6:38pm 1715582293

PS’s are a just as much a death trap as alterations are to the plan along the way. These are a loopholes ripe for the builder’s picking. Some PS’s though are legitimate and unavoidable, but clause each one that any variation must be given good notice with the proviso that alternatives, different products etc, are explored and costed.

by Justa comment | 13th May 24, 4:56pm 1715576180

Despite the dovish talk, none of the banks have the confidence to offer a 5.99% 5 yr mortgage rate yet. FBU and RYM continue to get hammered on the NZX. FBU could get worse if they are liable for the IPLEX issues in WA, worst case scenario up to a bill.

by HouseMouse | 13th May 24, 5:08pm 1715576925

That could wreck them.

by solardb | 13th May 24, 4:10pm 1715573459

Lucky Ministry of Transport , they get to be responsible for 10 extra new roads, with no extra funding.

And who knew Drury was regional ?

by Baywatch | 13th May 24, 5:11pm 1715577074

I see managed to get Penlink SH1 Papakura to Drury in there, cheesecake at Judith's tonight!

by Silvi | 13th May 24, 5:53pm 1715579617

Sorry you missed mine baked last night. One slice left.

by Whatwillhappen | 13th May 24, 5:35pm 1715578520

NZTA. Ministry doesn't do the building, just have to fight Treasury for the money to do it.

by solardb | 13th May 24, 6:21pm 1715581272

Correct , thanks. I must say I find the "live" coverage of these announcements by media confusing. I'd rather they just waited till the announcement was over , and write a summary at the end .

by pacifica | 13th May 24, 6:11pm 1715580702

Transit through to Hamilton and the super massive housing developments that went in around that area. So many new exhurbs put in that it is a sort of crisis roading was not available before.

by solardb | 13th May 24, 6:23pm 1715581383

Tauranga even worse.

by pacifica | 13th May 24, 10:32pm 1715596349

Otago worse still, all their new developments are also on well established floodplains that regularly flood on a biannual basis.

by J.C. | 13th May 24, 4:14pm 1715573673

Food prices rose for the first time in three months in April sparked by higher olive oil, potato crisps and chocolate block prices

Using a glass-half full POV, at least we can say these three foods fall into the 'nice to have' classification. We don't want to see flour, milk and potatoes driving food price inflation.

My mate had a crack at colleagues at Mars who decided to put prices up to maintain profit margin on Snickers in Thailand and Vietnam markets post-Covid. She told them to be careful as shoppers can forgo purchase if price is a barrier. Needless to say, sales volume plummeted and Mars had to resort to discounting to shift stock and trigger behaviors.

by K.W. | 13th May 24, 4:44pm 1715575466

The snickers bars are so small now its pointless buying them. Especially egregious considering their tagline used to be "snickers really satisfies"

by J.C. | 13th May 24, 4:52pm 1715575952

Snickers has different sizes. But if you're suggesting they've been subject to shrinkflation, you're likely right.

by Whatwillhappen | 13th May 24, 5:15pm 1715577303

Mars put in a max calorific value for their bars, hence the shrinkage, which also made the shrinkflation look justified. But last night at the supermarket, Nestles' chocolate tabs have gone from 220g to 170-180. The Rolo tabs are now ultra thin. I'm going to write to Whittakers to urge them not to cut their block sizes.

by pacifica | 13th May 24, 6:21pm 1715581318

Whittakers retains top spot for NZders most trusted, favourite company. (phone & power companies are often the least)

by HouseMouse | 13th May 24, 8:38pm 1715589538

Not really the dreaded customer service component to chocolate is there?

by IT GUY | 13th May 24, 8:51pm 1715590276

Cadbury managed to F it up.....

Bud Lite?

by pacifica | 13th May 24, 10:47pm 1715597223

Ah but any food processing is bound to have much more criticism, along with the where did they source the coco beans aspect. You would have almost no contact with a phone company if they did not screw up connections and billing as much but the impacts of a food item take a longer time to be digested and certainly could be far more aggrieving the next day if they screwed it up. Some people are naturally allergic to contents in half the products so the chances of severe issues are much more apparent and much more harmful. Yet they can prevent much of the cross contamination. So it is actually something that means as a company they already have customers they will naturally harm if they don't QA as much and there could be many more complaints when things go wrong.

Cadbury F d up in a large way by routinely changing recipes and flavours of the same product that they thought would be indistinguishable to their customers. They tried charging more for smaller amounts and thought no one would notice. Then they screwed over the staff in a big way. Tie that in with any further individual complaints that are unpublished and the overall customer voting did not approve of them.

Hence those who vote against companies the most are usually those who have been harmed by them and those who feel tricked by them. However as all public votes perception is always variable. Likewise in the food provider field I don't forsee supermarkets ranking highly in NZ (even though being in an agricultural nation one would think we would have more access to fresh food and cheaper staples & enjoy sourcing them). I think killing the sound speakers in any of the stores would help a lot to the experience.

by Jonny.Foe | 13th May 24, 5:03pm 1715576628

Overall to December 2023, this revenue is up +9.1%. It is not an insignificant contributor to inflation.

Indeed, local Govt rates make up just over 3% of the CPI basket, so a 9.1% increase in rates adds about 0.31 percentage points to the annual CPI.

Rents make up about 10% of the basket, so a 4.6% increase adds 0.46 p.points.

Insurance cost increases added another 0.42 p.points last year.

Add another 0.32 p.points thanks to higher tobacco taxes and 0.47 p.points for higher petrol costs.

What do we have in total? A CPI of 2%. That's the target isn't it? Great (as long as the price of everything else stays still). Higher for longer etc.

by Te Kooti | 13th May 24, 5:35pm 1715578530

I received an insurance renewal today (via a broker), +10% up on last year. Straight online and identical insurance at the first online was -10% on last year. Shop around.

by Whatwillhappen | 13th May 24, 5:47pm 1715579255

I dipped my toe in the water for house insurance brokers this year, after having ever only used a mortgage broker (once). Tried two different brokers, and both were significantly more (more than 10% than my current insurer.

by Te Kooti | 13th May 24, 5:58pm 1715579883

What's the deal with that, their business model is customer inertia? Would you believe the cheaper party was the actual party they are reinsuring with (they have to disclose it). 25% cheaper to go direct.

by Blackdog | 13th May 24, 5:58pm 1715579922

Try a direct insurer

by Jonny.Foe | 13th May 24, 7:01pm 1715583705

That is how Stats NZ gather the insurance price data for the CPI - they literally shop around.

by ChrisOfNoFame | 13th May 24, 5:27pm 1715578064

The people who work within the PSI sector are highly mobile and difficult to replace.

Countries 'not in Recessions' will beckon.

The RBNZ knows not what it is doing to NZ Inc.

by lonewolfnz | 13th May 24, 5:49pm 1715579388

I have some good news for NZX investors.

At the current rate of decline, at most you will have 364 days more of this, then you are done.

by Audaxes | 13th May 24, 5:54pm 1715579660

Things are starting to look increasingly ugly for the NZ economy. The PMI weakened further in April.

by JimboJones | 13th May 24, 6:24pm 1715581448

Starting to think we might get a surprise rates cut at the next review. NZ economy has collapsed, it’s hard to see that any demand based inflation could be left. Unless Orr is going to tough it out to show National the big finger.

by Zwifter | 13th May 24, 9:41pm 1715593266

Been saying the first rate cut will be August for over 6 months now. The banks are already virtue signalling with small cuts to let the RBNZ know which way to go...

by IT GUY | 13th May 24, 6:34pm 1715582092

Things feel pretty crap, what will make RBNZ Blink?

by HouseMouse | 13th May 24, 8:37pm 1715589458

Maybe the next unemployment rate release on 7 August?

I don’t quite buy the rhetoric that they don’t care about employment anymore. If inflation has moderated close to target band, and unemployment surges higher, I think there’s a good chance they will cut.

by IT GUY | 13th May 24, 8:52pm 1715590342

I totally agree.

But it will not stop what's coming

by HouseMouse | 13th May 24, 10:01pm 1715594463

Exactly

by pacifica | 13th May 24, 10:28pm 1715596102

More then a few of them experiencing the unemployment and being forced to move as they want others to be.

by nigelh | 13th May 24, 6:51pm 1715583086

Still too many hospitality businesses. 25% could fall by the wayside and most won't notice the difference. Some customers may pine but will soon find another to take the fallen ones place.

by Jonny.Foe | 13th May 24, 7:16pm 1715584566

Almost all hospo businesses are labours of love with people / families working 80 hours a week to earn what would be a reasonable wage for 40 hours of work. Similar labours (without the love) include dairies, uber, and, if you include travel time, home care, food delivery, couriers etc.

This is a final stage capitalist economy - the uberisation of the workforce and the carefree destruction of the ecosystem. The battle between capital and labour is over. You have workers desperate to work / live being exploited by corporate asset owners and landlords. The rentier class is basically accumulating assets that help them compete in a gigantic game of hungry hippo - all trying to grab a decent share of the flow of credit money that keeps the economy going. What do they do with their spoils? Buy more assets so they can compete harder; maybe throw a few dollars at philanthropy for the feel goods. I don't blame them of course - the objective and rules of the game are clear.

Before pdk gives me a kick, we should also recognise that, in material terms our economy is powered by labour, materials, machines and fossil fuels. We should also note that as our ecosystem destabilises, the rules of the game will change quickly.

by IT GUY | 13th May 24, 7:21pm 1715584896

I don't think they can print there way out of it again.......

by HouseMouse | 13th May 24, 7:32pm 1715585532

Man you are a living treasure and comfortably this website’s ‘MVP’.

Nailed it, eloquently, once again.

by lonewolfnz | 13th May 24, 7:37pm 1715585839

"You have workers desperate to work / live being exploited by corporate asset owners and landlords. The rentier class is basically accumulating assets that help them compete in a gigantic game of hungry hippo "

I don't know if you can say workers are being exploited by landlords. Annual rent up 4% year on year - that's a cut after inflation. And with housing costs so high some rentals have a net yield of only 1-2%.

I'd say anyone wanting to be a landlord right now is mad. Better to just invest for VOO or QQQ index funds - you'll make a fortune more and the tax treatment is better

by Te Kooti | 13th May 24, 7:41pm 1715586072

For even a half decent place in Welly or Auckl rates and Insurance are starting at $10k per annum, that's $200 p/w of rent vaporised immediately.

Without capital gains investment property just doesn't stack up at th emoment, not unless you get hit on the bid.

by IT GUY | 13th May 24, 8:55pm 1715590524

which points to how much trouble the markets in.... just like CRE its about yield

get off the bid in case you get hit in a flash crash

by solardb | 14th May 24, 8:41am 1715632891

Just reinforces its all about tax free capital gains. Always has been .

by tis i | 13th May 24, 7:56pm 1715587000

I’d suggest most rentals were bought more than a few years ago. You’d be mad to become a landlord now but if you’d bought that property 10 years ago you’re laughing all the way to the bank.

by Jonny.Foe | 13th May 24, 10:34pm 1715596485

I agree, anyone who became a landlord in the last few years must be getting hammered. BUT (and it's a big but), landlords in aggregate have 75% equity - $90bn of loans against $360bn of property value. There are plenty that are doing very, very well indeed.

by meh | 14th May 24, 12:02am 1715601768

This was all known and predicted. The signs and cracks were showing in the early 2000's here in NZ and more obviously with the GFC.

And what did we do? We refused to listen, refused to see and doubled down on the same thing.

by IT GUY | 13th May 24, 7:16pm 1715584612

Agree, craft brewing will be hammered

by interesting1234 | 14th May 24, 7:27am 1715628479

A sad day, as there are some great brews out there and some passionate brewers with tasty ideas.

by HouseMouse | 13th May 24, 7:53pm 1715586825

As usual, Maccy B offering more than most NZ journalists and economyths on the dire straits of our economy:

https://www.macrobusiness.com.au/2024/05/reserve-bank-must-cut-interest…

by ChrisOfNoFame | 14th May 24, 11:48am 1715644139

A whole different story from non-bank economists, ay !?!

by CeeJ | 13th May 24, 10:49pm 1715597367

I heard that farmers in India get subsidised loans. I wonder if interest rates that are 1-2% lower in NZ for agriculture would make sense. It would mean agriculture, a much harder and higher commitment industry to get into than most, would be a little easier. But not so much that it is work mortgaging properties to put the money in the bank.

by kamo | 20th May 24, 9:15pm 1716196558

We are in Melbourne. The police are going on strike. Nurses want more Money. Everyday they talk about the cost of living crises. The narrative is the same as nz just a different country.