Shane Solly: Harbour Asset Management expert on the BNZ Business NZ Performance of Services Index results

The BNZ-BusinessNZ Performance of Services Index (PSI) rose 2.7 points to 48.9, up from 46.2 in March.

A reading below 50 indicates the sector - which accounts for nearly three-quarters of the economy - is contracting.

Harbour Asset Management expert Shane Solly explained further.

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Episode Transcript

Speaker 1 (00:00):
Sharing solely harbor asset management is with the SELO Shane
hey here that Hey, what happened with that sell off
in the offshore markets on Friday? Did it affect us?

Speaker 2 (00:08):
We soon, so the shoe market ran into the bond market.
Bond yields, government bond years increased. We've obviously seen oil
prices back up, and what we saw was consumer price
inflation and producer price inflation in the US above expectations.
So that's many investors have started to think about does
the US federal reserves start increasing rates and hither at

(00:29):
the start of the year, people were thinking they're going
to cut rates. Now we're thinking about how hard and
fast they're to go long term bond years. This is
the ones that sort account when we're valuing investments like shares.
The US ten year bonds up above four point six percent,
thirty year bonds above five point one and that is
increasing the hurdle we need to invest in shares. US
bonds up half a percent since the start of the

(00:52):
Middle East conflict. So yeah, US market was now on
led by tech and that's quite sensitive to these bond years.
Could be a bit of profit taking. You there's seventy
percent rally in seven weeks. Locally, our tenure bonds up
eight basis points to four point eight four and we
have quite a broad sell off in the zone market
shere Marper down one point six percent, led by Fisher

(01:13):
and Public Healthcare A two upen Airport. But there was
not a lot of green on the screen today either.
I can go what.

Speaker 1 (01:18):
About the Chinese data that we got. The economic data.

Speaker 2 (01:22):
Yeah, again, probably didn't help the market, so they're quite weak,
weaker than below expectations. Export data okay, but domestic consumption
pretty weak. There fixed acid investment, this is about investing
in capital works. That trunk quite sentiments down one point
six percent for the first four months. That was a surprise,
well below expectation. Retail sales also missed. They were only

(01:46):
up zero point two percent, and industrial production it was
slower than expected, only out four point one and so yeah,
pretty weak numbers relative to expectations. There was an interesting
statement by a spokesperson from the Chinese National Bureau Statistics
say China needs to implement more fiscal policies, a bit
more stimulus and open up the taps on monetary policy.
And me here in New Zealand, given China as a

(02:08):
big trade partner, that might be quite helpful.

Speaker 1 (02:10):
Yeah, now, what about the PSI and the PMI, because
at first blush and neither of them look that flash.

Speaker 2 (02:15):
No, and so performance of Services Index and the Performance
and Manufacturing and Index Performance of Services Index is out today.
That's about three quarters of the New Zealand economy. It's
all the services businesses. By definition, it was actually less bad.
It was a less bad data point. Today it was up.
It was at forty eight point nine, which is up
on one point seven on the previous month. It's still

(02:39):
below fifty, so it says we're still contracting, but not
as much as we were. And the bright spot was
new orders, so people buy and getting inventory, and I
think that went up to fifty one point two, so
above it's expanding. Maybe that's a bit of inventory hoarding
the heather, I'm a bit anxious about that. The good
news is last week on Friday, we had the PMI
Purchase Performance and Manufacturing Index fall to just above fifty.

(03:01):
You can bind the two. We're about forty eight point six,
so it still suggests we're a little bit of a
soft contraction in the US economy, not a big surprise
to a lot of people will be listening, and of course,
but when we blend that with the consumer price inflation
going up about three point four, it's looking a little
bit stagflationary and that creates a difficult trade off for

(03:21):
the Reserve Bank next week with their monetary policy statement.

Speaker 1 (03:24):
All Right, hey, Shane, as always, thanks very much, ma'am,
talk to you in a week, Shane, Solly, Harbor Asset Management.

Speaker 2 (03:29):
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