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
Only the Police Credit Union changed rates today, trimming their fixed rates. All rates are here.
TERM DEPOSIT/SAVINGS RATE CHANGES
The Police Credit Union also trimmed their TD offers. All rates less than 1 year are here, for 1-5 years, they are here.
BRACE FOR AN EVEN TOUGHER LABOUR MARKET
Today’s lower filled jobs figures for June and the downward revisions to April and May bolsters the case our labour market is weakening fast. The Q2-2024 labour market data is due Wednesday, August 7, and while those are likely to be weak they are only the start of the realignment.
THE BLAME GAME
Because they have borrowed too much, many farmers are looking for others to blame. The latest Fed Farmers sentiment survey is an outlet for the perceived grievance. They are not blaming consumers for not paying enough, nor the level of debt they have taken on board. Instead they blame "the banks" because they are worried about their borrowers weakening financial position. It is hard to tell whether this is 'real sentiment' or just an easy outlet.
SEASONAL PRICE RISES
We are seeing rising schedule prices from most meat processors. But interest from the markets remain quiet as most buyers are aware that there is currently very little stock being processed locally. Bobby veal production starts next week, 90% of the upcoming production has been forward sold. Beef pricing in the US remains strong as their domestic slaughter remains lower than expected. In the past four weeks the cow and bull slaughter in the US was down almost 100,000 head compared to the same 4 week last year. Bull price offers are rising here and are now up +10% from the same week a year ago. For steer, recent rises put them now up +6% on the same basis. But for lamb they are now down -2% on that basis despite a recent rise. The biggest increases are from South Island processors.
SHIP FAILURE
It is not only the Cook Strait ferries. Fletcher Building's Northland cement is facing higher costs because the ship it leases has a major mechanical issue, laying it up at Northport awaiting repair. The additional costs for Portland-supplied cement (Golden Bay brand) will hit the FBU results by up to $30 mln for the additional costs of distribution by alternate means (barge, rail and road). FBU can't seem to catch a break at present.
"CHALLENGING"
Comvita downgraded its earnings guidance on weak prospects in China, and the spreading impacts on other Asian markets. They say sales will be down -$7 mln on the prior guidance, but profits will vanish. EBIT could be down -$11 mln they say.
WATCH THE WEATHER
A large area of low pressure is bringing severe weather this week. MetService is forecasting rain, snow, and strong winds and a raft of Watches and Warnings are in place for a wide swathe of the country.
SETTING & KEEPING THE PACE
Auckland Council has updated its Economic Monitor to 2024, showing the City's workforce has significantly diversified since 2019, with growing numbers of Asian, Māori and Pacific peoples and fewer European workers. It also shows the Auckland’s economy grew +10% from 2019 to 2023, matching the national average. This was despite enduring longer and more frequent lockdowns compared to the rest of New Zealand during the pandemic period. The average Aucklander earned $81,400 in 2023, which is +14.8% greater than the average across the rest of the country. Earnings growth has kept pace with inflation since 2019. In 2023, the region’s economy grew faster than the rest of the country, generating $143 bln in GDP.
INTERVENTION CAPACITY LITTLE-CHANGED
RBNZ intervention capacity bounced back in June from May, now at NZ$20.9 bln. But to be fair most of this was probably due just to NZD shifts. By any measure NZ$20 bln would be inadequate to defend the NZD for any length of time.
SWAP RATES ON HOLD
Wholesale swap rates are probably little-changed-to-soft. Our chart below will record the final positions. The 90 day bank bill rate is down -2 bps at 5.46% and a new 115 day low. The Australian 10 year bond yield is down -1 bp from this morning to 4.30%. The China 10 year bond rate is down -2 bps at 2.18% in an extended easing. The NZ Government 10 year bond rate is up +1 bp at 4.41% and the earlier RBNZ fix was at 4.37% and down -6 bps from Friday. The UST 10yr yield is down -2 bps at 4.18%. Their 2yr is now at 4.36%, so that curve is still inverted by -19 bps.
EQUITIES MOSTLY REBOUND
The NZX50 is down a marginal -0.1% in late trade. The ASX200 is up +0.8% in afternoon trade. Tokyo has opened its Monday trade up a very strong +2.0%. Hong Kong is up +1.2% at its open. Shanghai is down -0.1%. Singapore is up +0.7%. Futures trading suggests Wall Street will open tomorrow with the S&P500 up about +1.1%.
OIL FIRMER
The oil price is up +50 USc to just under US$76.50/bbl in the US, and now at US$80.50/bbl for the international Brent price.
CARBON PRICE INCHES LOWER
Today the carbon price fell again, but only slightly, now $50.10/NZU and down from $50.25/NZU at this time Friday.
GOLD FIRM
In early Asian trade, gold is up a minor +US$6 from this morning at US$2392/oz.
NZD HOLDS
The Kiwi dollar is holding from this morning's open, now back at 59 USc and up +15 bps. Against the Aussie we are holding at 89.9 AUc. Against the euro we are fractionally firmer at 54.3 euro cents. This all means the TWI-5 is now just on 68 and little-changed.
BITCOIN RISES
The bitcoin price is up +2.6% from this morning's open, now at US$69,512. Volatility of the past 24 hours has been moderate at just on +/- 2.0%.
USE OF AI
No articles on this news service are produced with AI. Occasionally we use AI to derive images. They are always identified in the attribution.
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36 Comments
"our labour market is weakening fast." Maybe. But as the Aussie seem to realise:
The chairman of the prudential regulator said the weak economic outlook means “now is not the time to wind back the clock on financial safety” in response to banks’ complaints that APRA’s constraints are restricting their ability to lend."
https://www.afr.com/companies/financial-services/apra-chairman-i-won-t-…
Wholesale interest rates 'collapse' - here's what that means for borrowers
https://www.rnz.co.nz/news/business/523492/wholesale-interest-rates-col…
Some good housing news worth sharing - a brilliant initiative by a successful and generous Dunedin businessman to help aspiring first home buyers in Dunedin who are working and saving into their own homes (not premium).
yep that's a stainable solution.... charity to become a home owner
we will look back and laugh in a few years time about how houses got so expensive in a south pacific country, miserable winters (but not cold enough for many ski fields), with such high living costs, such high tax.....
its pay it back or write it off time
Comvita downgraded its earnings guidance on weak prospects in China, and the spreading impacts on other Asian markets.
The Aussies were celebrating about market access for their honey into the Vietnam market. Not sure why. Vietnam has a huge honey industry and realistically an exporter themselves.
https://minister.agriculture.gov.au/Watt/media-releases/sweet-negotiati…
“We wanted Comvita’s staff to feel inspired through a strong connection to nature and to challenge the traditional notion of an office. While it was a commercial office project, we took a hospitality design approach and introduced materials and tones inspired by nature and, in particular, the warmth of honey.”
Sounds like Adrian Orr and his monetary framework inspired by Māori deities.
David, did you just say that unemployment heading up to 5% to 6% is the 'start of the realignment'? We're not talking about getting our wheels balanced here - we are talking about purposefully driving 50,000 to 100,000 people out of work to 'tame inflation' that is demonstrably not driven by wages. There is nothing normal or balanced about having 400,000 people wanting work (or more work). What kind of society would do that on purpose?
The data is very clear that during this inflationary period, prices have led wages not the other way round. Real wages have gone backwards for two years. We are seeing a bit of higher wage feedback through service prices now, but it's minimal and the typical last gasp of an imported price-shock driven inflationary episode. An episode that has shifted the price level globally. Worth noting that higher debt servicing costs are weighing more heavily on prices than wages!
My view is that higher interest rates are incredibly effective at collapsing consumer demand and killing jobs in a country with high levels of private debt, but those higher rates have achieved next to nothing in terms of suppressing inflation other than some currency protection. Why?
Our final consumption is about $300bn. We import about a third of that ($100bn). So, what happens when the price of the stuff that we import goes up by about 25% in 12 months? Yep, we pay about 8% more to buy the stuff we need. What happens when import prices calm down? Same as in the rest of the world; our CPI baskets calm down over the following 12 months or so. Just about every country in the world is experiencing the same glide path - some have barely touched their interest rates at all.
What we are doing in NZ is reckless self-destruction - egged on by people who seem programmed to seek solutions that punish working people.
That reckless self-destruction has been caused by decades of punishing working people by forcing them to pay ever-increasing prices, unrelated to their productivity, to put a roof over their heads. If the time to rectify that is not now, then when? (Answer: We've had several opportunities to do that, 2008, 2012 and even 2021 being the most recent, and what have we done? Nothing. And like any addict, the drug will surely kill us.)
Exactly. The government has the fiscal space to make sure NZers don't starve, can stay warm, and can shelter themselves. And we should use it in the case of a downturn. But trying to prop up employment as an end in itself is a terrible idea, the current employment structure in our economy is a big part of what led to this situation.
Things will have to get worse before they have the chance of getting better. That is, sadly, the end outcome of decades of malinvestment (in both people and infrastructure), ignoring maintenance costs, and not pursuing real reforms to create broader-based and more fair prosperity across social classes and income groups.
Some degree of wealth redistribution will almost certainly have to be a part of this as well.
> There is nothing normal or balanced about having 400,000 people wanting work (or more work).
This is literally how capitalism works. The problem is that in previous times of recession when there have been 100k people out of work we've said "this is not normal, we have to act to keep them employed."
Then in the next recession it becomes "We have 200k people potentially out of work, this is not normal. We have to keep them employed."
Then in the next downturn it turns into "we have 300k people potentially out of work, this is not normal. We have to keep them employed."
We are just at the end of the road now. The longer malinvestment occurs for due to bad policy, the bigger the pullback. Look at the unemployment rate when the USSR collapsed as one example. Now we aren't going to see anything like that here (hopefully) but at a certain point the rubber meets the road.
If we need to the govt should take action to make sure people don't starve, don't freeze to death, have shelter, etc. But the govt should NOT guarantee employment as a goal in and of itself, that is just a classic recipe for malinvestment to continue.
When the foundations are rotten there is no choice but to eventually do a full rebuild. It just has to be done. You're type of thinking in this area favours the short-term feel-good over the long-term good. NZ has had quite enough of that and once last rodeo would be a mistake and just lead to this exact conversation again in a few years time except now with an even bigger problem.
Warnings are in place for a large swathe of the country
https://grammarist.com/usage/swath-swathe/
/pedant
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