CPI data shocks NZ market – but was not as high as many feared

New Zealand’s market bounced up into the green even as unexpected consumer price figures stoked inflation worries.

The consumer price index (CPI) lifted to an annual 7.2% in the September quarter, versus 7.3% in the prior period. It was largely driven by housing and household utilities, which went up 8.7%.

Non-tradeable inflation – which measures goods and services that do not face foreign competition, lifted 6.6% in the September quarter – the highest since the series kicked off in June 2000.

“It was a bit of a shock,” Devon Funds head of retail Greg Smith told BusinessDesk. “Not too many people saw that coming.”

He said while the vast majority of forecasts had a six in it, a seven hadn’t been considered by many and the 7.2% hike took investors by surprise.

What does it mean for the market? Well, interest rates are going to rise higher than expected, particularly when we've got these inflation pressures "bubbling away based on the domestic and foreign fronts", Smith said.

The S&P/NZX 50 Index rose 61.4 points, or 0.57%, to 10,847.34. Turnover was $111.3 million.

Smith said NZ’s market could’ve been up higher today thanks to a strong rally in the US overnight, but the strong inflation numbers had taken some of the gloss out of it.

Rural services firm PGG Wrightson told the market that its 2023 earnings would fall by about 8.3% as its rural customers grapple with inflationary pressures and dwindling on-farm sentiment. Forecast operating earnings are expected to be in the range of $62m.

Chair Joo Hai Lee said the company’s first-quarter trading was broadly in line with expectations, but there were “mixed signals” in the macroeconomic environment.

The shares were down 1.2% to $4.05.

Scott Technology’s board declared a final dividend of 4 cents per share (cps), which took the annual return to 8cps, up from 6cps in the period year – a 33% hike. The company’s shares were up 3.3% to $2.79 by the end of the day.

Plexure told the market it will be trading as TASK Holdings from today, as the software company moves to a primary Australian stock exchange (ASX) listing and foreign-exempt NZ stock market (NZX) listing. TASK shares rose 3.1% to 33 cents.

Utility pole management company ikeGPS shot up 8.3% to 91 cents after giving a trading update on its numbers for the first half of the 2023 financial year, telling the NZX that the second quarter of the 2023 financial period especially had been “strongly cash positive”.

Eftpos processor Smartpay Holdings released a trading update this morning saying ongoing investment in marketing and sales had helped accelerate customer acquisition in the second quarter of the 2023 financial period. 

More than 1,600 new transacting terminals have been added through to the end of September 2022.

The company said the strong start to the 2023 financial year set a “solid foundation” for the remainder of the financial year and its shares jumped 8% to 74.5 cents by early evening.

Westpac confirmed to the NZX today that it was in preliminary discussions with Australian fintech company Tyro Payments to acquire 100% of the company’s issued share capital. 

“There is no certainty that any transaction will result,” the company wrote.

But the bank said the acquisition would strengthen Westpac’s small business proposition and enable it to better support customers and grow its merchant base – particularly in the hospitality and healthcare sectors.

Westpac was up 2.1% to $26.60 by the end of the day.

Personal lender Harmoney rose 5.4% to 78 cents after it revealed it had another profitable quarter and grown its loan book by 4% to A$635m (NZ$708m).

ANZ Bank was up 1.4% to $28.70 and Heartland rose by 2.5% to $1.67.

Meridian Energy held its annual meeting today where chair Mark Verbiest and chief executive Neal Barclay told shareholders the energy retailer planned to start its battery storage project in Northland in 2023 and finish construction by winter 2024. 

“It’s all steam ahead,” Verbiest said. The company edged down by 0.2% to $4.50 by the end of the day.

Manawa Energy was down by 1.1% to $5.29 after it cut $20m from its earnings guidance because of a difficult financial first half and increased development spending. 

Underlying earnings were previously expected to be in the realm of $140m to $160m but the energy company said today that it expected earnings to be between $127.5m and $140m in the March 2023 year instead.

The NZ dollar was trading at 56.66 US cents at 3pm in Wellington, up from 55.58 US cents on Monday.

In a report this afternoon, BNZ said it expected the Reserve Bank to raise its cash rate by 75 basis points to 4.25% at November’s monetary policy statement.

The bank said the market was already pricing in a 75-point increase and, at the recent monetary policy review, at least two committee members had wanted a 75-point rate increase.