Bank satisfaction continues to wane.
Last Friday, Federated Farmers released the results from its May 2021 Banking Survey. It showed a further slippage in farmer satisfaction in banking relationships, a trend evident since late 2017.
Our media release is here and the full report can be found here. The key results were:
- 62% of farmers say they’re satisfied with their bank relationship, down 4 points on November and a continuation of steady erosion in satisfaction over the past few years – it was over 80% as recently as November 2017. Meat & Wool and Arable farms are the most satisfied, ‘other industry groups’ least satisfied.
- 18% of farmers say they’ve been feeling undue pressure from their banks, down 0.5 points on November. Arable are feeling the most pressure, now ahead of dairy. Meat & Wool coming under the least pressure (excluding ‘supporters’) but theirs has ticked up.
- 24% of farmers say their lending conditions have changed over the past six months, down 3 points on November. Of those with changed conditions, 14% were tougher and 10% easier.
- 58% of farmers say communication with their bank has been good or very good, down 4 points on November. Like with overall relationship satisfaction, sentiment has been eroding steadily over recent years.
- 65% of farmers had a budget for the (just finished) 2020/21 season and 38% had a budget for the upcoming 2021/22 season. Sharemilkers were by far the most likely to have budgets. Meat & Wool and Arable the least likely.
- Average mortgage interest rate was 3.8%, down from 3.9% in November. 91% are paying mortgage interest rates of less than 5%.
- Average overdraft interest rate was 6.3%, down from 6.4% in November. 20% are paying overdraft interest rates of less than 5%.
We asked a couple of one-off questions re cheque phase-out and bank branch closures:
- Cheque phase-out – 5% use cheques and don’t have easy access to alternatives, 61% don’t use cheques but are concerned about people who don’t have easy alternatives, and 34% are not concerned.
- Bank branch closures – 71% are concerned and 27% are not concerned. Of those who say they were concerned, 5% need their local branch to carry out their business, 56% are most concerned about the impacts of bank branch closures on their local communities, and 37% are equally concerned about both (so you could say 42% of those concerned said they needed local branches to carry out their business).
The survey attracted 1,157 respondents. Many thanks to all respondents!
Busy builders.
The March quarter was a strong one for construction, especially for house building, according to Statistics NZ’s quarterly Value of Building Work Put in Place.
Total building volume rose a seasonally-adjusted 3.7% compared to the December 2020 quarter, with residential work up 4.3%, and non-residential work up 2.6%
In the March 2021 quarter building work to the value of $6.65 billion was put in place, up 13.0% compared to the March 2020 quarter.
Residential work was up 20.6% to $4.55 billion but non-residential work was down 0.6% to $2.10 billion. Within the non-residential category, farm buildings worth $75 million were completed, up 7.3% quarter-on-quarter.
For the full year to March 2021 total building work was worth $24.92 billion, down 1.1% compared to the year to March 2020. Residential work was up 3.4% to $16.56 billion and non-residential work was down 8.9% to $8.36 billion. Farm buildings worth $291 million were completed, down 11.5% for the year.
This result bodes well for next week’s March quarter GDP release.
Cost-price pressures mounting.
Business confidence was stable but cost and price pressures are on the rise, according to the preliminary results from ANZ’s June month Business Outlook Survey.
A net 0.4% expect general economic conditions to worsen over the next 12 months, down 2.2 points on the May survey’s final results (released last week). Yet, confidence in businesses’ own activity lifted 2.0 points to a net 29.1% expecting their own activity to increase.
Of greater interest was intensifying cost and price pressures. Expected costs rose another 4.3 points to a net 85.6% expecting higher costs ahead, while a net 62.8% intend to raise their prices, up 5.4 points. These were the highest readings for cost expectations and for pricing intentions since the survey began in 1992. Inflation expectations also lifted further to 2.33%.
ANZ cited shipping disruptions, rising global commodity prices, the higher minimum wage, and labour shortages as creating a ‘perfect storm’ for the supply side of the economy at the same time as demand is holding up much more than anticipated.
The big question is whether this cost-price pressure is a temporary blip that will right itself or whether it will become more imbedded. If it’s the latter the Reserve Bank would have to act, hence expectations that the OCR will start to rise from the second half of 2022.
Card spending rises.
Statistics NZ’s Electronic Card Transactions has shown a strong increase in retail spending in May.
Card spending in retail industries rose a seasonally-adjusted 1.7% in May compared to April, with all sectors rising for the first time in nearly a year. Spending on consumables (e.g., groceries) was up 1.8%, durables (e.g., furniture, electronics, etc.) up 2.4%, apparel up 5.2%, motor vehicles up 6.1%, and fuel up 2.2%.
Month-on-month card spending was even stronger for non-retail (excluding services), up 4.0%, and services, up 5.1%. These drove the total increase for card sales up to 2.3%.
Annual comparisons, comparing May 2021 with May 2020 show great volatility due to last year’s lockdown. The sectors ranged from consumables’ 1.6% decline to hospitality’s 86.0% increase. Overall retail industries’ annual increase was 18.1% and total card transactions was up 22.2%.
Increased retail spending is a good news story for the economy, but part of the increase may be due to higher prices flowing through, which if it persists would not be such good news.
Job numbers stable, earnings up.
The number of filled jobs in the March 2021 quarter rose by a seasonally-adjusted 0.2% compared with the December 2020 quarter, according to Statistics NZ’s Business Employment Data.
In the March 2021 quarter, there were 2,109,027 filled jobs. Although jobs up slightly for the quarter (when seasonally-adjusted), on an annual basis they were down 0.7% compared to the March 2020 quarter. For agriculture, forestry, and fishing industry there were 101,032 jobs, up 0.1% compared to March 2020.
Total earnings for the March 2021 quarter came to $33.80 billion, up 6.6% compared to the March 2020 quarter. For agriculture, forestry, and fishing industry total earnings were $1.27 billion, up 5.9%.
Job ads strong but uneven.
Job advertisements hit a record high in May, according to the BNZ/SEEK Employment Report.
Jobs ads in May were up 5.1% compared to April and they were up 192.6% on Covid-ravaged May 2020. On an annual basis, comparing the year to May 2021 with the year to May 2020 they were up 6.4%.
That said, not all regions and not all industries enjoyed monthly growth. Seven out of 16 regions and 16 out of 28 industries posted declines. Ads for positions in farming, animals, and conservation were, however, up 2% month-on-month.
Traffic volatile.
Volatility is the name of the game for traffic volumes, according to ANZ’s monthly Truckometer.
The indicator’s Light Traffic Index rose 2.1% in May from revised April data, while the Heavy Traffic fell 4.8%, also with revisions. Annual increases, measured as three month averages, were up 76.4% and 48.6% respectively – both off Covid-ravaged bases from the same time last year.
ANZ observed that the traffic indexes remain volatile, with global and international transport disruptions weakening the signal from the data.
NIWA Soil Moisture Data.
NIWA’s latest soil moisture maps (as at 9am Thursday 10 June) show much of Marlborough and Canterbury’s soils being wetter than usual, a legacy from the recent heavy rain and flooding. However, soils continue to be much drier than usual on the east coast of the North Island from Hawkes Bay to Wairarapa.
Exchange Rates
The NZ Dollar was down 0.6% for the week against the Trade Weighted Index, and it was down against all our key trading partners.
Source: Reserve Bank of NZ
Wholesale Interest Rates
Over the course of the week the yield for the 90 Day Bank Bill was unchanged at 0.32%. The 10 year Government Bond yield was down 6 points to 1.71%.
The Reserve Bank will next review monetary policy settings (including the OCR) on 14 July.
| This Week (10/6/21) | Last Week (3/6/21) | Last Month (10/5/21) | Last Year (10/6/20) | |
| OCR | 0.25% | 0.25% | 0.25% | 0.25% |
| 90 Day Bank Bill | 0.32% | 0.32% | 0.38% | 0.25% |
| 10 Year Government Bond | 1.71% | 1.77% | 1.73% | 0.94% |
Source: Reserve Bank of NZ