What happened Friday

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 RATE CHANGES
Only the Police Credit Union changed rates, with fixed rates lower. Ditto Heretaunga Building Society

TERM DEPOSIT RATE CHANGES
The Police Credit Union raised most term deposit rates at the same time. Heretaunga B/S did too.

TAX BREAK, IN PERPUTUITY
Housing Minister Woods has announced that new and existing build-to-rent flats will to be exempt from interest deductibility changes in perpetuity if they offer 10-year tenancies.

NO RESPITE !
The RBNZ’s survey of household inflation expectations (H1) shows them remaining as high in Q3 as they were in Q2. The one year expectation by households is 7.0% (median) just like their perception of current inflation. Perceptions of house price inflation vanished in Q2 for a year-ahead assessment and they have stayed at 0% in Q3 – but not gone negative. This data is collected from a household survey by the research provider, Research NZ, on behalf of the Reserve Bank. Inflation perceptions are different to actual inflation. Read this.

NO RESPITE II
The rising cost of fruit and vegetables is driving food prices higher. They were up +10% in the year to July, and overall food items, prices are up +7.4%. That is high by historical standards, but these high levels have been around for every month of 2022 now. Other than fruit and vegetables, grocery prices were up +7.5% in the year, meat, chicken and fish were up +7.7%. Eating out meals were up +6.6%.

SOME RESPITE
Statistics NZ’s rental price monitoring shows that rents haven’t changed much over the last four months. In Auckland and Wellington rents are down -2% for properties that have come to market. For all properties, they are up less than -1%. For Auckland that trend has been going on for a much longer time with rents up only +1.0% over the past year. It seems that not only are FHBs ‘winning’ with falling lower quartile house prices, but renters are getting relief as well.

VIGILENCE REQUIRED
ANZ is reminding customers stay vigilant and watch out for texts and emails asking people to click a link and make a payment or download an attachment as phishing scams circulate. The bank said customers were receiving a variety of text messages and emails claiming to be from the IRD and NZTA. The messages include a link to receive a tax refund, a cost of living payment or to renew a vehicle license registration. The links lead to a fake website where people were asked to enter information including internet banking log in details, credit card details, driver license and other personal details. If you get such a text or email of this kind don’t click on any links and delete the message immediately.

NOT WORRIED
The RBNZ household expectations survey covered other perceptions (H2). These are new questions with the Q3 data only the third time it has been published. That shows hardly any household thinks they won’t make either a mortgage or rent payment in the next year. They also don’t think their earnings will change much, and few currently thing they will lose their job in the next month (all ‘median’ score). More than half say they will be able to pick up a new job in the next 3 months if they did lose their job.

TOP END OF A LOW FORECAST
Fonterra has today provided an update to its earnings guidance for the 2022 financial year that ended on 31 July 2022, indicating that it will be towards the top end of its current guidance of 25 to 35 cents per share. Full financial results will be released on Thursday, September 22, 2022. The final milk payout result will also be released then.

IN THE DUMPS
Credit scorer Equifax has said overall consumer credit demand reduced by -24% in June from year ago levels, which included mortgage demand falling by -37% and unsecured credit demand was down -18%. 

OFF THE CANVAS?
Factory activity picked up in July according to the BNZ-BusinessNZ PMI. But analysts are mainly seeing opaqueness rather than any real progress. BNZ observed: “The details don’t offer much clarity either. In a word: noisy. That is perhaps understandable judging by respondent comments, where there still seems to be a stop-start tone to business amid reports of disruption from labour shortages, illness and absenteeism, freight and logistics issues including for raw material supplies, along with intermittent new orders.”

JOINTLY FIGHTING FMD RISKS
The Trans-Tasman agriculture ministers announced tighter coordinated border biosecurity arrangements today is a beef-up effort to keep the Indonesian foot & mouth disease outbreak from entering either country.

IAG NZ ANNUAL MARGIN & LOSS RATIO RISE
Insurance Australia Group (IAG), says its NZ unit posted a 7% increase in annual gross written premiums, up from +2.8% the previous year. The increase was mainly attributed to premium rate increases across all the key portfolios, plus volume growth in the commercial property and commercial motor portfolios. IAG NZ, including State, NZI, AMI and Lumley, also had strong retention rates, with these improving on prior year levels across all key commercial lines portfolios, IAG says. The underlying NZ margin increased to 16.8% from 16.4%, with this attributed to ongoing disciplined cost management, including the introduction of automation, and increased rating to address higher input costs from inflationary pressures. IAG NZ did, however, incur a slightly higher underlying loss ratio of 54.5% versus 53.6%. To deal with the increasing severity and frequency of extreme weather events, IAG says it has put in place its biggest perils allowance to date, lifting this 19% to A$909 million for 2023. IAG didn’t actually reveal what its NZ unit made in profit.

BACK TO THE FUTURE
House prices have now fallen back to the same level they were at in May last year. More than a year’s worth of capital gains have evaporated, the REINZ House Price Index shows

THE NEW ECONOMIC REALITY
NZ Post is reporting that online spending was down -4% in Q2-2022 from the same quarter a year ago, and totaled $1.6 bln in that 90 day period. They say although shoppers are spending about the same online each time they buy but they are now buying with less frequency. “This first half year result was driven by strong spend numbers in January and, to a slightly lesser degree, February. In more recent months, we’ve seen monthly online spend numbers at lower levels than the equivalent month a year earlier – April 2% down, May 0% down and June 10% down,” they report.

SWAP RATES RISE
Wholesale swap rates are probably much higher again today in a steepening curve and following the global tide (H/T NS.). The 90 day bank bill rate rose +4 bps to 3.27%. That means from the last OCR rise on July 14, it has now risen a further +27 bps, taking the 2022 rise to +230 bps. The OCR has risen +175 bps in that time.  The Australian 10 year bond yield is now at 3.43% and up another +10 bps from this time yesterday. The China 10 year bond rate is at 2.75% and unchanged. The NZ Government 10 year bond rate is now at 3.52%, up +8 bps from this time yesterday, and now just above the earlier RBNZ fix for this bond which was up +12 bps at 3.51%. The UST 10 year is now at 2.88% and up +9 bps from this time yesterday.

EQUITIES FLAT-LINE
Wall Street gave up earlier gains today to end with the S&P500 unchanged. That puts it up +1.5% for the week so far. Tokyo has opened its Friday session up a very strong +2.4% and heading for a weekly gain of +2.0% for the week. Hong Kong is flat and heading for an unchanged week. Shanghai is also flat on the day, but heading for a +2% weekly gain. The ASX200 is down -0.7% today and may struggle to hold any weekly gain. The NZX50 is down a minor -0.1% and heading for an equally minor +0.2% weekly rise.

GOLD HOLDS
In early Asian trade, gold is up +US$2 from this time yesterday, now at US$1,787/oz.

NZD FIRMER
The Kiwi dollar is up another +½c of it to now be at 64.4 USc. Against the AUD we are firmer at 90.7 AUc. Against the euro we are up at 62.4 euro cents. That means our TWI-5 is now up at to 72.5.

BITCOIN UP & VOLATILE
Bitcoin is down -1.5% from this time yesterday to US$23,946. Volatility over the past 24 hours has been moderate at just over +/- 2.3%.

This soil moisture chart is animated here.

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