by Nick Clark, National Manager General Policy
Farm confidence slumps
The results are out from Federated Farmers’ latest six monthly Farm Confidence Survey, undertaken in January by leading agricultural market research company Research First. Unfortunately, but not surprisingly, the results were negative, in keeping with other business and consumer confidence surveys.
- General economic conditions (current): A net 7.8% per cent of respondents consider current economic conditions to be good, a 10.1-point decline from July 2021 when 17.9% considered conditions to be good.
- General economic conditions (expectations): A net 64.0% of respondents expect general economic conditions to worsen over the next 12 months, a 25-point decline on the July 2021 survey when a next 39.0% expected them to worsen. The survey was done before Omicron’s rapid spread and before the Russian invasion of Ukraine both of which will weigh on economic growth.
- Farm profitability (current): A net 61.1% of respondents reported making a profit currently, a 5.5-point increase on the July 2021 survey when a net 55.6% reported making a profit.
- Farm profitability (expectations): A net 11.2% of respondents expect their profitability to decline over the next 12 months, a 16-point decrease on the July 2021 survey when a net 4.4% expected it to improve.
- Farm production (expectations): A net 1.8% of respondents expect their production to increase over the next 12 months, a 13.4-point decrease on the July 2021 survey when a net 15.3% expected it to increase. This is quite a drop and it was before February’s heavy rain which caused a lot of damages and loss for arable.
- Farm spending (expectations): A net 52.7% of respondents expect their spending to increase over the next 12 months, a 20-point increase on the July 2021 survey when a net 32.6% expected it to increase. This will be due to higher expected prices rather than farmers feeling confident to spend and invest. And this is before the impact of higher energy prices following the Russian invasion of Ukraine.
- Farm debt (expectations): A net 30.9% of respondents expect their debt to reduce over the next 12 months, a 1.7-point increase on the July 2021 survey when a net 29.3% expected it to reduce.
- Ability to recruit (experienced): A net 48.6% of respondents reported it has been harder to recruit skilled and motivated staff, a 0.2-point decrease on the July 2021 survey when a net 48.8% reported it has been harder. So still really, really hard to find staff.
- Greatest concerns (current): The three greatest concerns for farmers are climate change policy and ETS (chosen by 18.7% of respondents), followed by regulation and compliance costs (13.1%), and freshwater policy (9.5%). This result is unchanged from the July 2021 survey. I suspect the global economy will be right up there if the survey were done right now.
- Highest government priorities (current): The three highest priorities farmers would like the Government to address were the economy and business environment (15.0%), fiscal policy (12.1%) and regulation and compliance costs (11.7%). This compares to the July 2021 survey when the top three priorities were regulation and compliance costs (14.0%), economy and business environment (13.1%), and supporting agriculture and exporters (10.4%).
Federated Farmers thanks the 976 farmers who completed the survey.
Consumer confidence collapses
Consumer sentiment has also plunged to a record low in the latest monthly ANZ-Roy Morgan Consumer Confidence Survey.
The overall index for consumer confidence plunged 16.0 points in February 2022 to 81.7, its lowest level since the data began in 2004.
All the measures surveyed deteriorated sharply. The proportion of people who believe it is a good time to buy a major household item fell 17 points to -21. Meanwhile the proportion of those expecting good times over the next year fell 21 points to -42.
Inflation expectations were little changed at 5.6%. House price inflation expectations eased from 5.3% to 4.8%.
High inflation, rising interest rates, tighter credit conditions, and a cooling housing market are all likely to have hit consumer confidence but ANZ think Omicron is the biggest driver.
Card spending drops
Statistics NZ’s monthly Electronic Card Transactions has picked up a drop in retail spending in February as Omicron bit. It noted that “with the spread of Omicron in the community, people may have avoided travelling or eating out”.
Card spending was down a seasonally-adjusted 7.6% in February 2022 compared to January 2022. Spending was down across the board, with apparel down 14.4%, fuel down 5.9%, consumables (e.g., groceries and liquor) down 5.7%, vehicles down 4.3%, and durables (e.g., furniture, electronics, hardware, department stores, etc) down 3.0%. Services spending was down 3.6% and other non-retail non-services (e.g., medical and health care, travel and tour arrangements, postal and courier delivery) was down 5.5%. Due to difficulties in analysis Stats NZ has not been providing month-on-month seasonally-adjusted data for hospitality.
On an annual basis, comparing February 2022 with February 2021, actual card spending was up 0.9% to $5.45 billion. Hospitality (down 10.0%) and apparel (down 7.6%) were hit hard. Other categories were up. Fuel led the way, up 7.7% due to higher prices rather than more bought. Also up was spending on consumables up 3.9%, durables up 3.6%, vehicles up 3.2%, services up 1.1%, and non-retail non-services up 0.3%.
Traffic volumes higher
Better news from ANZ’s monthly Truckometer which has shown increases in both light traffic and heavy traffic in February.
The Light Traffic Index rose 4.4% in February 2022 compared to January 2022, while the Heavy Traffic Index was up 1.4%. On an annual basis, comparing February 2022 with February 2021, the Light Traffic Index was up 0.7% and the Heavy Traffic Index was up 2.6%.
ANZ observed that COVID disruptions are likely to continue to cause volatility in both traffic data and economic activity.
Job ads stay high
Job ads were stable in February but are much higher than the same month last year, according to the BNZ SEEK Employment Report.
Job ads were down 0.1% in February 2022 compared to January 2022, which was a record high. They were also up 40.0% on February 2021.
16 of 28 industries had month-on-month increases in job ads, with the farming, animals, and conservation industry up 1%.
Manufacturing bounces back
The volume of manufacturing sales jumped in the December 2021 quarter, according to Statistics NZ’s Economic Survey of Manufacturing.
In the December 2021 quarter, when adjusted for seasonal effects against the previous quarter the volume of total manufacturing sales rose 8.2%, following a 6.6% fall in the September 2021 quarter. The seasonally-adjusted value of total manufacturing sales also jumped 12.0%, following a 2.3% fall in the September 2021 quarter.
Meat and dairy product manufacturing’s seasonally-adjusted sales volumes were up 0.6% in the December quarter (after a 1.8% decline in the September quarter) while seasonally-adjusted sales values were up 4.2% (after a 3.8% rise in the September quarter).
Sales volumes are calculated by removing the effect of price changes from sales values.
Building activity recovers
The volume of building activity in New Zealand rose 8.9% in the December 2021 quarter compared with the September 2021 quarter, according to Statistics NZ’s Value of Building Work Put in Place. This followed an 8.4% Covid-induced dip in the previous quarter.
The volume of residential building was up 5.2% and non-residential building up 15.8%.
Next week
The big economic news for next week will be December quarter’s Gross Domestic Product. Expect a pretty strong bounce back from the September quarter’s 3.7% drop. The Reserve Bank has forecast a 2.3% increase but it could be stronger, with other economists expecting at least 3% growth. The current March quarter is a different story and it’s likely to dip back into negative territory on the back of Omicron. It’s a volatile time for the economy and choppiness is likely to continue through 2022.
NIWA Soil Moisture Data.
NIWA’s latest soil moisture maps (as at 9am Thursday 10 March) show soils conditions across the top half of the North Island drier than usual for this time of year, especially so in western Northland. They also continue to be significantly drier than usual in Southland and becoming drier in Westland. In contrast, soil conditions continue to be significantly wetter than usual in the lower North Island and in Nelson, Marlborough, and much of Canterbury.
Exchange Rates
The NZ Dollar was stronger again this week, up 1.0% against the Trade Weighted Index. It was up against all our major 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 up 11 points to 1.45% while the 10 year Government Bond yield was up 12 points on 2.92%.
The Reserve Bank will next review monetary policy settings (including the OCR) on 13 April 2022. Another increase is highly likely and it could be a 50 pointer.
| This Week (10/3/22) | Last Week (3/3/22) | Last Month (10/2/22) | Last Year (10/3/21) | |
| OCR | 1.00% | 1.00% | 0.75% | 0.25% |
| 90 Day Bank Bill | 1.45% | 1.34% | 1.17% | 0.33% |
| 10 Year Government Bond | 2.92% | 2.80% | 2.74% | 1.82% |
Source: Reserve Bank of NZ