What happened Friday

Economy / news

A review of things you need to know before you sign off on Friday; no retail rate changes, heavy stock overhang, productivity worse again, PMI expands modestly, inflation expectations turn up, swaps stable, NZD eases, & more

16th May 25, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today (or if you work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
No changes so far today. All rates are here.

TERM DEPOSIT/SAVINGS RATE CHANGES
There are none to report today either. All updated term deposit rates less than 1 year are here, for 1-5 years, they are here.

LOTSA STOCK
Our April Housing Market Activity Report confirms buyers have the upper hand in housing market, so vendors may have to take what they can get. The level of unsold housing stock is worryingly high heading into winter. TradeMe Properties now has 47,596 residential properties listed, realestate.co.nz now has 43,663, and OneRoof has 44,081 heading into winter.

PRODUCTIVITY WORSE AGAIN
Our poor productivity record seems to be getting worse. Productivity measures the changes in the ratio of outputs to inputs. (It is not a measure of production.) StatsNZ measures it officially only for the "measured sectors" and excludes mainly non-market industries such as public administration and safety; education and training; health care and social assistance; and arts, recreation, and other services. These are areas you can't track inputs and outputs reliably enough to measure productivity. For the "measured sector", in the year ended March 2024 labour productivity fell -0.7%, capital productivity fell -1.3% and so multifactor productivity fell -0.9%. There is one sector that raised its productivity and has done consistently over the years - the rural sector which delivered a +1.7% productivity improvement in 2024.

SIGNS OF IMPROVEMENT
The factory sector is expanding still, and slightly faster in April, according to the BNZ-BusinessNZ PMI. New orders picked up although "not in a meaningful way" but at least they are expanding now too.

NO LONGER EASING
It will no doubt concern the RBNZ that their survey of business expectations is reporting that the progress of inflation control seems to have ended, with the latest results turning higher for both the one year and two year expectations. This survey is of 41 responses from business leaders and professional forecasters. If inflation hawk Adrian Orr was still around, this would have been a notable signal. But given the Treasurer has engineered his ouster and she is not an inflation hawk (she is "a low rates guy"), it is unsure how influential this survey data will be.

ANOTHER CORPORATE BOND
Toyota Finance NZ has raised $100 mln in a five year bond. They have these funds for a cost of 4.54%.

SUPER CHEAP
Electricity prices are unusually low today. They are virtually giving it away now.

NZX DIPS FURTHER
As at 3pm, the overall NZX50 index is lower so far today, down -0.4%. That means it is up +1.8% for the past week, down -1.9% since the start of the year, and up +9.4% from this time last year. There are 33 gainers, led by Heartland, Ryman, Freightways, and The Warehouse. There are 41 decliners led by Fletcher Building, Turners, Skellerup, and Summerset. Market heavyweight F&P Healthcare is down -0.8% so far today.

HIGHER PRICES ON LOW SUPPLY
It is off-season in the livestock sector. Prime Range Meats reports rising offer prices are more due to limited supply and importer activity rather than consumer demand. Consumer spending in China remains subdued, contributing to ongoing uncertainty around pricing over the next 3 to 6 months. Lamb prices have held firm, supported by continued supply constraints. In the beef market, the shortage of available livestock is keeping processing schedules elevated.

REVIEWING LOCAL COUNCIL RATES
Are you unhappy with the rate increases your local council is applying this year? Think some sort of independent review would keep a cap on these? Well, don't move to Australia. In NSW they have the Independent Pricing and Regulatory Tribunal set up to make sure these are 'fair'. Today they handed down decisions in six cases and only knocked one back - for North Sydney, who now say they will have to go into full austerity mode. The approved increases range from +10% to +52% for 2025/26.

SERIOUS FRAUD RESULTS IN JAIL
A former public sector employee and her husband have admitted to working together to fraudulently obtain $2 mln from Oranga Tamariki, following a Serious Fraud Office investigation. Former Oranga Tamariki Property and Facilities Manager, Neha Sharma, has been sentenced to three years’ imprisonment for her offending. Her husband, Amandeep Sharma, has now also admitted his role in the offending and a sentencing hearing has been set down for 19 June. The Sharmas pleaded guilty to charges of obtaining by deception for fraudulently obtaining more than $2 million from Oranga Tamariki. The money was obtained through Mr Sharma’s company, Divine Connection, without Oranga Tamariki knowing. The husband and wife team also pleaded guilty to money laundering for transferring just under $800,000 overseas once the offending was discovered, then immediately leaving New Zealand. Police moved to restrain their New Zealand property, and in conjunction with Indian authorities, to impound the money laundered.

SWAP RATES HOLD
Wholesale swap rates may be little-changed at the short end again today. Keep an eye on our chart below which will record the final positions closer to 5pm. The 90 day bank bill rate was up +1 bp at 3.36% on Thursday. The Australian 10 year bond yield is down -9 bps at 4.51%. The China 10 year bond rate is up +1 bp at 1.69%. The NZ Government 10 year bond rate is down -7 bps at 4.65% and was down a rather sharp -14 bps to 4.56% in the earlier RBNZ fix today from yesterday. The UST 10yr yield is on 4.42%, down -12 bps.

EQUITIES MIXED
The NZX50 is down -0.5% today, but the ASX200 is up +0.6% in afternoon trade. Tokyo is down -0.3 in early Friday trade. Hong Kong has dropped -0.8% while Shanghai is down -0.5%. Singapore has opened down -0.2%. Wall Street rose again today but without a lot of conviction, with the S&P500 up +0.4% in Thursday trade.

OIL HOLDS
The oil price is essentially unchanged just on US$61.50/bbl in the US, and just on US$64.50/bbl for the international Brent price.

CARBON PRICE HOLDS
The carbon price firmed more today but only slightly, up +20c to NZ$55.70/NZU on lowish volumes. The next official carbon auction is on Wednesday, June 18, with a $68 floor price. See our daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.

GOLD FIRMS
In early Asian trade, gold is higher, up +US$58/oz from this time yesterday at US$3213/oz.

NZD EASES SLIGHTLY
The Kiwi dollar is down -20 bps from this time yesterday, now at 58.9 USc. Against the Aussie we are up +10 bps at 91.8 AUc. Against the euro we are down -20 bps at 52.6 euro cents. This all means the TWI-5 is now at 67.5 and down -10 bps.

BITCOIN IN A YOYO RISE
The bitcoin price is at US$104,252 and up +1.1% from this time yesterday. Volatility has been modest at +/- 1.3%.

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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36 Comments

by Kate | 16th May 25, 4:11pm 1747368670

And this if not mentioned elsewhere: Walmart earnings call

https://www.msn.com/en-us/money/savingandinvesting/walmart-mattel-and-o…

by kiwikidsnz | 16th May 25, 5:35pm 1747373706

...& this,

https://www.rnz.co.nz/news/world/561234/unitedhealth-one-of-america-s-b…

by Foxglove. | 16th May 25, 5:17pm 1747372647

Vegetables? All of that massive expanse of arable land yet the USA has to import vegetables? Well can understand that with regard to potatoes at least. When we lived there couldn’t find, including the best of Oregon’s, any spud that wasn’t self mashing.

by AN Other | 16th May 25, 5:30pm 1747373456

All the arable land is probably being used for the production of corn to be harvested asap and turned into corn syrup.

by Jonny.Foe | 16th May 25, 5:17pm 1747372647

There is one sector that raised its productivity and has done consistently over the years - the rural sector which delivered a +1.7% productivity improvement in 2024

Productivity is calculated by dividing operating profit (operating income - operating expenditure) and dividing it by the hours worked (for labour) and capital inputs (for capital). Multifactor is an unholy combination of labour and capital.

In 2024, hospo labour productivity dropped by 10% apparently. Did all the hospo workers get lazy and less productive? Nope, if anything they worked harder, because when times are tough, managers go for skeletal staffing rosters. So, what happened? Operating profits were lower because times were tough and people didn't have as much money to spend. Operating profits are the numerator for productivity. Do the math, as they say.

When you look back over the last 50 years of productivity data, you can see that productivity rises and falls with the economic cycle (because profits do). There are some lovely data stories too. For example, between the late 1980s and the mid 2000s, productivity in the utilities sector nearly doubled. Woohoo - go privatisation! All that happened of course was that the newly for-profit companies started to make a larger operating profit AND they laid off loads of workers (fewer hours worked) as they put maintenance on hold. By last year, productivity in the utilities sector was back at 1991 levels. What a ride...

Anyway, I make the point because the reason the rural sector delivered a productivity improvement in 2024 was because fertiliser, plastic, and fuel costs fell back a bit and debt servicing costs stopped going up (input costs lowered). Export prices also lifted. Voila, higher productivity. Great job everyone.

by kiwikidsnz | 16th May 25, 5:26pm 1747373185

Reposting this in case you missed it:

by Independent_Observer | 10th Mar 25, 6:01pm

Interesting chart from Hussman - wages from incomes vs corporate profits (adjusted relative to GDP).

Like the housing market, something appeared to break in the 1990s where massive $$ flowed into asset prices or corporate profits in comparison to remuneration to workers.

https://x.com/hussmanjp/status/1898780388316909754?s=46&t=MUwQeKa7MkEJ7…

by Jonny.Foe | 16th May 25, 6:04pm 1747375457

Yes, that was when the world went mad and liberalised finance. The net flow of freshly printed bank money flowing into the economy enabled companies to increase the surplus (profit) they could collect. When credit slowed, Govts stepped in with deficit spending to keep the surplus up.

Profit increases rely on one or more of the following:

People spending their savings.
Money moving around the economy more quickly (higher propensity to spend).
Govt deficit spending more.
Banks lending more (net).
Lower current account deficits (i.e. reducing offshore savings).

By the way, profits after tax in NZ vary between 15% of GDP (now) and 20% at the twin peaks (2006 and 2022). Obviously, both of those peaks were during bank lending bonanzas. In fact, corporate profits in our housing ponzi economy track net bank lending like a heat guided missile.

by tis i | 16th May 25, 6:18pm 1747376298

Good to have you back.

by powerdownkiwi | 16th May 25, 7:38pm 1747381116

Indeed it is - one of the smarter hereabouts.

What will you do if he predicts recession? Ask for his removal?

by Norm | 16th May 25, 8:17pm 1747383430

Why do you say the that? Not the smarter hereabouts comment...

by powerdownkiwi | 16th May 25, 8:44pm 1747385076

He had a wee dig a few days back - reminded me of my grandkids putting their hands over their ears...

by Foxglove. | 16th May 25, 9:16pm 1747386983

Grandkids + school + winter = bio bombs!

by Norm | 16th May 25, 10:01pm 1747389710

You seem really entitled. Not a nice trait.

by Pa1nter | 17th May 25, 6:52am 1747421534

Now now, you run the risk of attacking the messenger. Even if they're repeatedly self-aggrandizing, the message makes them exempt from critique. Sorta like a get out of jail free card.

by tis i | 17th May 25, 7:36am 1747424176

I didn’t ask for anyone’s removal.

by kiwikidsnz | 16th May 25, 6:47pm 1747378075

While I posted the link to illustrate the decreasing share of gains received by workers over recent decades, which is certainly a real concern: that doesn't mean that I agree with everything you say.

For eg. your macroeconomic monetary theory list completely ignores microeconomic business efficiency gains at the margin due to innovation (internal & external), technology, continuous improvement, product mix, sourcing....

There's many reasons why businesses contInually strive to make productivity & profit gains irrespective of wider govt & economic background noise.

by Jonny.Foe | 16th May 25, 7:21pm 1747380104

I spent a good chunk of my career finding efficiencies and increasing productivity at a firm level. Of course that's a thing.

My point was that at a macro level, companies can only increase profits if more money is available to gather up. As companies increase labour efficiency, for example, they make extra profits, which drives extra income to rentiers (offshore and onshore). This eventually leads to economic slowdown as fewer working people get paid, so less is spent etc. That US chart you shared shows that dynamic over the last 50 years. But nothing much crashed, why? Because bank credit and Govt deficit spending pumped in the cash to keep the businesses businessing and the consumers consuming.

If you look at the 1950s and 1960s in NZ, both private and public debt were falling, while productivity and GDP was increasing. The policy and tax settings were keeping money moving around the domestic economy, and productivity in its true sense was increasing (noting the massive increase in fossil fuel and fertiliser use of course).

by powerdownkiwi | 16th May 25, 7:52pm 1747381970

Productivity is a physics thing - sorely overlooked by economists. It is essentlally an energy-efficiency ratio, and as such was always going to come up against the 2nd Law of Thermodynamics. My understanding is that globally, 'productivity' increases went from near 4% in the late 40s, to not much more than 1%, last time I looked. That is as I would have expected - and a lot of the current 'gains' have collateral implications in complexity (lack of resilience) and maintenance.

Smith referenced labour BEFORE we tapped into fossil energy (a barrel of oil contains about 10 year's human labour - make that 4.5 years with conversion losses). This means that labour is mere noise - try pushing your car home if that is hard to grasp. Pity economics still references his posit...

You have a mind which might like this: https://en.wikipedia.org/wiki/Wealth,_Virtual_Wealth_and_Debt

No slug - Nobel Prizewinner in a real science (chemistry) and a clear thinker.

by profile | 16th May 25, 6:44pm 1747377876

6. Getting your sheep to produce more meat per head. Boiling profit increases down to one or more of five points - what a simplistic world you live in!

by profile | 16th May 25, 6:02pm 1747375356

When you look back over the last 50 years of productivity data, you can see that productivity rises and falls with the economic cycle (because profits do). Yeah, nah. Sheep numbers have tumbled from 70 million to 23 million but red meat exports have remained relatively similar. Exported 390,000 tonnes in 1990 with 58 million sheep, exported 390,000 tonnes for 23/24 season with 23 million sheep.

Kiwi farmers have become much more productive. It is not because the price of inputs "fell back a bit".

https://figure.nz/chart/7CtUsuBUwZrjf0Yy-ZNSKWrKn5WonEHBB

https://figure.nz/chart/79J0yb1fd8RRMq2e

by Jonny.Foe | 16th May 25, 6:11pm 1747375873

Hmm. I wasn't setting a comprehension test! To explain... I was commenting on productivity at the macro level - it goes up when the economy runs hotter and comes down when the economy runs cooler. Why? Because it's a measure of profits divided by hours worked and capital inputs.

My comment on agriculture was about the increase in the last year or so - as per the quote I gave from the article. For example, labour productivity in the agricultural sector increased by 21% between 2022 and 2024. Clearly that was not due to farmers eating their weetabix, buying bigger tractors, and feeding their sheep growth an amazing new growth hormone - it was because their costs reduced and some export prices increased.

by profile | 16th May 25, 6:49pm 1747378164

Comprehension test? Jump right back down off your high horse. There is one sector that raised its productivity and has done consistently over the years - sounds about right to me - with the per head productivity numbers to back it up. Your explaining seems to miss this productivity gain per head.

by Foxglove. | 16th May 25, 7:26pm 1747380385

Once the vote catching madness of Muldoon’s SMPs had been discarded the sheep meat industry set about repositioning itself both drastically and efficiently by what was known as further processing which eventuated in an excellent chilled lamb product that serviced Asia, Nth America and most importantly Europe in their usual off season. Alongside that lamb carcass weights went from an average of about 14.3kg to 17.5kg and produced a greatly leaner yield. Be that as it may the industry has continued to decline with major processors such as Alliance and Silver Fern Farms (formerly PPCS) struggling to return an annual profit. To put a simplistic lens on the industry, processing plants continue to close and new ones are not being commissioned. It is an unfortunate situation as the product is excellent but the small unit and labour intensive cost of processing is overbearing in relation to what it actually takes to the market(s.)

by Jonny.Foe | 16th May 25, 7:45pm 1747381510

OK, OK. For clarity, I was referring to the statement and figures about the last year - the year when productivity increased because of falling global costs and RBNZ finally taking their foot off the neck of farmers. If you want to see how measured productivity has changed in our agriculture sector over time, there's a graph here. Average increase over the last 46 years is around 2% per year. If you look at the last 10 years, the retail sector and ICT and Communications have been our profit-making, sorry, productivity champions.

by powerdownkiwi | 16th May 25, 8:47pm 1747385263

2% growth doubles in 35 years. Quadruples in 70. And farming is nothing if not a Bounded System.

Good luck with that.

Some kind of 'flation here they come...

by Jonny.Foe | 16th May 25, 9:18pm 1747387112

As I am sure you know, the productivity gains in agriculture have come mainly from destroying ecosystems in other countries to extract base ingredients for fertiliser, piling vast quantities of said fertiliser into our ecosystem (destroying our freshwater, aka ecocide) and burning ever more fossil fuels to process primary products into low-value food ingredients and drive machinery that has replaced some labour. We have got away with it because we disharge the resultant pollutants to the rivers, sea and air without penalty.

by Yvil | 16th May 25, 9:28pm 1747387696

It's good to have you back JFoe. Out of curiosity, why did you not keep your original account but created a new one ?

by Jonny.Foe | 16th May 25, 9:38pm 1747388305

just thought i'd share my first name with old friends! it's the same account.

by powerdownkiwi | 16th May 25, 9:44pm 1747388672

Agreed

See if you can get to the Attenborough film Ocean.

The rape of the sea-bed has t be seen to be believed - they got a camera at the leading edge of a scallop trawl - pristine ecosystem to WW1 no-man's-land in seconds. And not just runs, grids. Attenborough plays the Overton game - 'it's bad, but if...'. Gives the game away though '3 billion depend on the sea for food' then a while later 'we have to preserve 30% of the ocean, particularly coastal'. Doesn't link. But obviously knows...

As a species we're in trouble. But don't worry, GDP will - oops...

by Pa1nter | 16th May 25, 11:35pm 1747395335

As a species we're in trouble

As a species we are performing true to form; essentially the same as any other animal in terms of inherent desires, with an ever increasing pool of information to put into play chasing that desire.

The chances of us getting smarter and deploying self restraint before we meet a sticky end, fairly slim. Yet here we are, still struggling with the concept.

by Hans Brink | 16th May 25, 10:13pm 1747390390

Agree, as I have said many times our economy is based on nutrients dug out of the ground on the other side of the World. NZ soils are rich in carbon but poor in nutrients. Our Agri systems can not survive without the import of NPKS.

by profile | 16th May 25, 10:26pm 1747391160

What nonsense. Learn about Nobel prize winner Borlaug and plant breeding. Agricultural productivity gain isn't about more fertiliser and more land.

"From 1948 to 2017, TFP increased at an annual rate of 1.47%,” the USDA’s Economic Research Service noted in a July 2021 publication. “This growth was made possible by a surge in total output at a growth rate of 1.53% per year while holding total inputs nearly constant.”

by Jonny.Foe | 17th May 25, 12:12am 1747397559

I think you often respond to the point you wish your opponent had made.

by profile | 17th May 25, 8:31am 1747427467

I don't think you have a clue where the productivity gains in agriculture have come mainly from and when called out on it go down the condescension route.

by Let me be Frank | 17th May 25, 10:11am 1747433505

You may wish to add immigrant labour to that list....many may recall the cries of being unable to fill farm positions with locals at (seemingly, until examined closely) reasonable remuneration.

by Let me be Frank | 17th May 25, 10:06am 1747433208

"All that happened of course was that the newly for-profit companies started to make a larger operating profit AND they laid off loads of workers (fewer hours worked) as they put maintenance on hold. By last year, productivity in the utilities sector was back at 1991 levels. What a ride..."

And it appears the same strategy is being applied again....effectively a reduction in the cost of labour per unit of output.