The Middle East crisis is having an impact on where people want to invest and also for the length of time they want to fix mortgages for, according to ANZ staff. Oh, and more people are thinking of getting an EV.
ANZ's economics team collates economic anecdotes from customers passed on by ANZ staff around the country. These are presented every two months.
In the latest issue of ANZecdotes, in addition to the usual collection of anecdotes, staff were asked this week for insights into the observed early impacts on customers of the Middle East situation.
In terms of global market risk, the ANZ staff report that "more investors are wanting to move their funds to lower-risk allocations".
When it comes to mortgages, "many more" borrowers are fixing rates in case of future rate increases, "with two-three year terms popular".
The ANZ staff report that in terms of confidence levels, the impact of the crisis is "along the lines of wariness so far, not panic".
"...But some businesses are reporting that the phones have stopped ringing; that decision-making amongst their customers has been further delayed on uncertainty grounds as businesses wait to get a better sense of the likely fallout."
Some merger and acquisition activity has been paused as well.
"There were multiple anecdotes reporting that demand for commercial property had seen a noticeable falloff in the last month, put down to businesses’ concern about escalating costs and the uncertain outlook, and how that may affect cash flows.
"Tariff uncertainty is also still a theme for some. Some business customers felt media talk of worst-case scenarios was unnecessarily damaging confidence; others are worrying about the availability of fuel, not just its cost."
In terms of the direct impact of fuel costs - "some customers are pondering buying an EV; others are talking about cutting back trips".
Regarding shipping, the ANZ staff report that there is concern shipping containers (particularly refrigerated) "could again become scarce" given pressure at ports and limited empty containers being backloaded to New Zealand.
"Some exporters are moving product as quickly as possible in case shipping capacity reduces. Shipping times are already increasing, delaying cashflows. Some customers will need additional working capital as a result. Other importers and exporters reported minimal impacts thus far, with their shipping lanes not impacted, but they are concerned that shipping costs will rise – particularly those who import high-volume lower-value products. Meat and dairy exports are still getting to the Middle East via the Panama Canal."
Regarding costs and pricing, the ANZ staff note that domestic freight rates have lifted and transport firms are concerned about a potential drop in demand.
"General service businesses and trades are looking to increase their site travel charge-out fees. Transport operators are charging fuel surcharges (typically 5-9%) but there is a cashflow impact in the short term before the bills are paid. It is also easier to pass costs on to low-volume customers than high-volume.
"Tyres are also likely to get more expensive but this cost isn’t as easy to charge out. Higher oil prices have already seen the price of imported plastics products rise 30% this month. Construction costs are expected to rise (transport, imported products). Some businesses have been able to expand their margins temporarily on existing stock by moving pricing with the cost of replacing it."
In the agri sector, arable farmers are "particularly vulnerable" to impacts of cost increases (fuel, fertiliser, potentially interest rates) "given already poor profitability".
"Harvest contractors have added fuel surcharges with immediate effect, increasing the costs of the maize harvest. Some farmers have been stocking up on diesel to ensure the harvest can be completed. General contracting work, fertiliser spreading and log harvesters are also adding fuel surcharges. A gravel roading contractor has raised their price 40% due to diesel pricing. The wine industry is concerned that supplies/pricing of nitrogen and carbon dioxide could be impacted, as it was after Russia invaded Ukraine."
Tourist operators are concerned about the potential impacts on both domestic and international tourism of the higher fuel costs.
"A tour bus operator is already seeing pencilled-in tours out of the UK cancel and walk away from their deposit as this was cheaper than covering the extra cost of flights (which were not yet in place)."
4 Comments
If there's a silver lining to be found in this, the fuel crisis might encourage some commuters to shift to more sustainable transport options - trains, buses, e-bikes, scooters and the like, on a permanent basis and help reduce our carbon footprint
Our ferry (Auckland) has been looking fuller the last couple of weeks. I wonder how many newcomers will continue to use it when (if?) things die down given they will see it's faster than the current drive (point to point at least)
Yes, while painful at the moment, this will bring about positive change - less gas-guzzlers, more EVs/Biking/Public transport. Speaking of positive change, voting out this coalition would also be hugely beneficial. They only seem to care about lining the fossil fuel (and tobacco) industry's pockets.
Banks are still offering good energy loans. Good idea for solar, double glazing, and energy efficient Hybrids or EVs.
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