What happened Wednesday

A review of things you need to know before you go home Wednesday; some TD changes, car sales boom, ed industry grows, petrol prices flat, mesh claims go to court, factories go up-market, swaps slip, NZD rises

7th Jun 17, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
Nothing to report today.

DEPOSIT RATE CHANGES
Something we missed noting yesterday - SBS Bank has a 7 month TD special at 3.70%, a special that will end on June 19, 2017. TSB Bank has cut their one year TD by -5 bps to 3.60%.

WE LOVE OUR CARS
We purchased 14,439 used imported cars in May, the highest number ever for a May, and the fourth highest month ever (March is the usual high point). This parallels the very strong new car sales we have already reported on for last month. New car sales (new plus used imports) have been 262,757 over the past twelve months. That is a very large fleet expansion. (But don't forget, about 110,000 'light vehicles, ie cars mainly, "leave the fleet" (ie scrapped or exported) each year.)

PETROL PRICES A BONUS
It is not really 'news' as such, but worth noting anyway. Discounted petrol prices are averaging $1.85/litre which is now their lowest of the year. This data is MBIE national averages, so there will actually be lower prices in many places. Higher energy prices are not adding to the inflation impulse. But today's prices are actually the same as we were paying exactly nine years ago. Given that our 2017 vehicle fleet is noticeably more fuel efficient, that is why the volume of fuel sold is falling, even though the number of vehicles and the total kms travelled are rising.

STEEL MESH ISSUE UPDATE
Steel & Tube has been charged by the Commerce Commission for misleading claims for its imported steel mesh products. 29 charges have been filed against the company for making false and misleading representations about their steel mesh product known as SE62. The charges were filed by the Commission in the Auckland District Court under the Fair Trading Act 1986. They relate to conduct between 1 March 2012 and 6 April 2016.

WHY EDUCATION IS A SIGNIFICANT INDUSTRY
There were 131,600 international students enrolled in New Zealand in 2016 according to data released today. That is an increase of 7,245 (+6%) over the previous year. The economic value to New Zealand is $4.5 bln per year, making it our fourth largest export industry. It supports 33,000 local jobs, or 1.3% of the workforce. ESL schools had 19% of the enrolled students, universities had 21%, polytechs had 14% and high schools had 12%. Interestingly, the Indian market saw a -3% decline to 28,154 students as it undergoes a rebalancing from volume to value.

SAME VOLUME, HIGHER PRICES
Our manufacturers aren't actually making much more (volumes were up just +0.2%, year on year in March) but they are getting higher prices for what they do manufacture. Sales revenues were up +6.2% in the same period. And while that is spectacularly true in meat and dairy, it is also true in almost all other sectors.

SIX TIMES INFLATION
Manufacturers aren't the only enterprises able to raise prices. Local authorities saw their rates and "regulatory income" (that is, fines and fees) rise by a very healthy +6.1% year-on-year in the March quarter. Way ahead of inflation.

CUZZIES BREAK RECORD
The Aussie economy grew by +0.3% in the March quarter, relieving fears it might have shrunk. The AUD rose on the news. But the data shows the pace of growth slowed in the March quarter. Through the year, GDP grew +1.7%. Growth was recorded across their economy with 17 out of 20 industries growing during the quarter. There was strong growth in the service industries including Finance and Insurance Services, Wholesale Trade, and Health Care and Social Assistance. Agriculture, Forestry and Fishing decreased after strong growth in the previous two quarters. But Manufacturing decreased for the tenth time in eleven quarters. Even though it was weak, that makes the 'no recession' period the longest of any country, ever, in the modern era.

SBS PARTNERS WITH FINTECH FOR DIGITAL BANKING PLATFORM
SBS Bank says it has partnered with fintech company Sandstone Technology in the development of a new "anytime, anywhere" digital banking platform. The plans include an online sales channel supporting the origination and fulfilment of SBS customer/member applications for accounts and investments.

WHOLESALE RATES SLIP AGAIN
Local swaps curve have fallen another -1 bp for terms to five years, and -2 bps for longer terms, adding to yesterday's slippage. The 90 day bank bill rate added +1 bp and is now at 1.95%.

NZ DOLLAR RISES EXCEPT AGAINST THE AUD
NZD is up again from this time yesterday at 71.8 USc. But it is not only against the USD that we are rising. On the crosses we slipped against the Aussie after their GDP result was released and are at 95.2 AUc, and we are at 63.8 euro cents. The TWI-5 is now at 75.8.

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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8 Comments

by Stephen Hulme | 7th Jun 17, 4:47pm 1496810834

High up in a New York City skyscraper, China’s biggest bank is playing in the shadows of American finance.

The prize for Industrial & Commercial Bank of China Ltd. isn’t stocks, bonds or currencies. It’s the grease in the wheels of all those markets: repurchase agreements.

By exploiting a loophole in rules intended to keep U.S. banks from getting “too big to fail,” the state-owned ICBC has become a go-to dealer in repos in just a few short years, alongside longtime powerhouses like Goldman Sachs Group Inc. The short-term loans allow investors to borrow money by lending securities , serving a vital role in day-to-day trading on Wall Street. [my emphasis to highlight the process of financing position] Read more

by Cowpat | 7th Jun 17, 4:53pm 1496811224

Auckland rentals have jumped over the 4000 mark on Trade Me .Alternative to not selling . Some quotes from Irish property market . www. Quotesfromthebubble.Blogspot.com

by Yankiwi | 7th Jun 17, 7:58pm 1496822327

The surplus of rental properties a decade ago at the start of the prior property slump, was a boon to renters. In a time of high interest, I rented properties for an annual payment of about 3% of the property worth. This was only possible because some people decided to rent out their properties while the market recovered...

This surplus of rentals further depresses the returns on rental properties, and will put further pressure on negatively geared speculators. If the downturn is just a little blip with a quick recovery, no worries. If the inventory continues to increase (both rentals along with properties for sale), then the capital gains speculators may be looking at some difficult decisions in the near future.

by Stephen Hulme | 7th Jun 17, 5:25pm 1496813155

RE:Aussie GDP:

“A lot of the rise in consumption was because households further reduced their saving rate,” said Paul Dales at Capital Economics Ltd. “They can’t do that indefinitely, so we suspect that slow income growth will soon result in more modest consumption growth.”

“Today’s data are consistent with monetary policy remaining on hold,” said Riki Polygenis at National Australia Bank Ltd. “The RBA will look through the volatility in GDP, however mixed labor market outcomes and weak wages and inflation data will prevent any hike.”

Other Details

- Biggest detractor from quarterly growth was exports, which cut 0.4 percentage point
- Household consumption was driven by rises in rent and other dwelling services and electricity, gas and fuel
- Savings ratio fell to lowest since September 2008
- Largest rise in mining inventories since first quarter of 2012
Read more

Maybe we can introduce them to ANZ's prescriptive cures?

by Icemaestro | 7th Jun 17, 8:23pm 1496823808

As someone who has done renovation work in those years with steel mesh, not to mention the massive number of building projects that would have occurred around the country during this time - is there anything people should be doing about this? IE contacting builders, finding out what mesh was used, and if finding out that this particular grade was used - who is contacted?

by two otherguys | 7th Jun 17, 8:48pm 1496825304

If Steel and Tube are found guilty they should be required to publish the names of all customers who were sold the mesh - then watch the uproar as builders and construction companies seek compensation and any company who seeks compensation should then publish who and what jobs they used the mesh on

by sharetrader | 7th Jun 17, 8:41pm 1496824891

This companies truckometer broken, the more they move the less they make
https://www.nbr.co.nz/article/fliway-cuts-earnings-guidance-capacity-co…
elsewhere consolidation happening in the trucking industry, could this be a sign of the times
New Plymouth-based Transport Investments Ltd completed its acquisition of NZL yesterday
https://www.nbr.co.nz/article/ken-harris-sells-nzl-recycle-capital-cont…

by Donald Ellis | 7th Jun 17, 9:35pm 1496828105

David,

stop baiting the anti-council crowd.

When you adjust for population growth, nominal rates income went up 3.05% in the 14/15 year and 4.04% in the 15/16 year. It will be another three months before we know how the 16/17 year went. Once you apply the CPI deflator or, even better, the Civil Construction Price Index deflator to these numbers they don't look quite as alarming.

Regulatory income is largely linked to development and building. I note that that series is highly volatile as you would expect. There is nothing to read into short term numbers for this category.