New survey finds nearly a third of firms expect to make job layoffs, while the Government announces fewer people on redundancy support package
ANZ warns of economic blowback still to come
Activity indicators in the latest ANZ Business Outlook survey fell slightly from their early-July preliminary reading, but they are still up on June. A net 9 percent of firms expect weaker activity for their own businesses, well up on June’s -26 percent but “the improvement has stalled,” according to ANZ economist Sharon Zollner. She noted that 7 percent of firms had been downbeat at the preliminary reading.
Headline business confidence was at -32 percent, slightly lower than the preliminary read of -30 percent but better than June’s -34 percent, while 31 percent of firms surveyed say they intend to lay off staff. Zollner warned that while NZ is currently in a “relative sweet spot” a “blow [back] is coming.”
ANZ said it is largely a given that the border will remain closed for the rest of the year and that fact, in and of itself, would result in a “big hole” in economic activity, centred on tourism and the foreign education sector.
Income support package take-up lower than expected
The income support package set up to give workers who have been made redundant access to immediate cash while they try to find new employment isn’t being taken up as quickly as expected according to Prime Minister Jacinda Ardern. Speaking to the Wellington Chamber of Commerce yesterday, Ardern said the Covid-19 income relief payment, which effectively replaces the wage subsidy for those workers who find themselves out of a job, provides a level of income without having to go through the process of applying for the Jobseeker benefit.
Ministry of Social Development figures show there were 18,592 people claiming the payment as at July 17. The weekly payment is available to those who have lost their job because of the pandemic between March 1 and Oct. 30, running for 12 weeks. When the policy was announced in May, it was estimated as many as 230,000 people could receive the payment at a cost of $1.2 billion based on Treasury forecasts at the time.
Ministry of Social Development figures last week showed the pace of new jobless benefit claims slowed in the week through July 19, with about 1,300 more people on the Jobseeker or Covid income relief payment, compared to a weekly average of 4,000 new claims in the previous four weeks. Treasury forecasts unemployment to peak at 9.8 percent in the September quarter, up from the 4.2 percent level in the March quarter before the pandemic started taking its toll.
Mainfreight says Australian business bouncing back
Mainfreight delivered an upbeat report card to shareholders at its AGM yesterday saying the turnaround in the performance of its Australian division had helped the company achieve a strong result, given the impact of the coronavirus pandemic. The Australian performance underpinned an 8 percent lift in group revenue to $1.19 billion in the year ended March, and a 20 percent increase in pre-tax profit to $53.2 million. Few shareholders might have believed such an outcome was possible four months ago when Mainfreight shares had plunged more than 40 percent to below $25.
CEO Don Braid said Mainfreight’s NZ business reported a 1 percent increase in revenue to $268.6 million, although pre-tax profit fell 8 percent to $16.7 million as the April lockdown led to a sharp fall in activity. European revenue increased 1 percent while trading in the US was slow, and Mainfreight said it expects the Americas will take longer to recover from the pandemic. Revenue slipped 3 percent to US$167.7 million.
Mainfreight shares closed at $43.60 up 2.8 percent and edging back ever closer to its record high of $43.99 in January.
E-road expects limited growth in the next 12 months
Transport tech services company E-road expects to maintain continued unit growth across all its markets, albeit at a lower rate than in FY20 and previously anticipated for FY21. Updating shareholders at its AGM yesterday, E-road said total contracted units at the end of June were 118,814, of which 82,304 were in NZ, 34,258 in North America and 2,252 in Australia. The number of contracted units represents a six-year compound annual growth rate of 42 percent, mainly as a result of NZ expansion into current customer fleets and the addition of new North American customers.
In the year to March, E-road reported a 73 percent rise in pre-tax, interest and depreciation earnings to $27.1 million, and a 32 percent lift in revenue to $81.2 million. The company said it had launched its new E-road day logbook supporting drivers via their mobile phones. E-road shares closed unchanged at $3.40.
US officially in recession as Q2 GDP plummets
The US economy contracted at a 32.9 percent annual rate from April through June, its worst drop on record, and its first recession in 11 years.
The recession has put an end to the longest economic expansion in US history and wiped out five years of economic gains in just a few months. The contraction was largely in line with forecasts.
More than 20 million Americans lost their jobs during the quarter as businesses closed and most of the country were required to stay at home. It was the biggest drop in jobs since record-keeping began more than 80 years ago. While the labour market has been rebounding since states began to reopen, the US is still down nearly 15 million jobs since February. Next week’s July jobs report is expected to show another 2.3 million jobs added. That would bring the unemployment rate down to 10.3 percent — still higher than during the worst period of the financial crisis.
Tech CEOs’ grilling achieves little
It was billed as a Congressional showstopper but in the end the appearance of the four most powerful CEOs on the planet, dubbed the ‘Titans of Tech’ largely failed to live up to the billing.
Tim Cook (Apple), Mark Zuckerberg (Facebook), Jeff Bezos (Amazon), and Sundar Pichai (Alphabet/Google) were hit with tough questions and documents that raised concerns about their competitive tactics during a marathon hearing on Capitol Hill in Washington, but equally the four conceded little ground.
Jeff Bezos acknowledged Amazon might have improperly used third-party seller data to inform its own product decisions — a key concern over the company’s approach to competition. Apple CEO Tim Cook got off fairly lightly. Despite some early questions about whether Apple favours certain developers on its App Store, the big issue about its guidelines for developers, which has been a major source of complaint among critics was largely ignored. Facebook CEO Mark Zuckerberg was confronted about internal company emails he sent in 2012 about buying Instagram. They revealed Facebook viewed Instagram as a threat and, rather than compete with it, his company bought it. In response, Zuckerberg did not deny he viewed Instagram as a threat but pointed out that the deal was approved by the Federal Trade Commission at the time. Google CEO Sundar Pichai, was accused of bias with its Gmail product, but he responded this was not the case.
For over a year, top lawmakers in Congress have been investigating the four tech giants to determine whether the companies have abused their power and dominance in the online market. The ultimate impact of the hearing will depend on what steps Congress takes or recommends on the antitrust concerns they have been seeking to address.
Huawei surpasses Samsung in smartphone production for the first time
In a result few could have imagined even a year ago, China’s Huawei Technologies has passed South Korea’s Samsung Electronics to become the world’s leading supplier of smartphones, according to new data from research company Canalys. It said Huawei shipped 55.8 million devices in the second quarter, down 5 percent year-over-year, while Samsung shipped 53.7 million, 30 percent less than the prior year due to disruptions caused by the coronavirus pandemic.
The achievement was largely due to Huawei’s domination of the Chinese market, where 70 percent of its smartphones are sold. Huawei’s China sales rose 8 percent in the second quarter, though its overseas shipments dropped 27 percent. Analysts said Huawei had taken full advantage of the Chinese economic recovery to reignite its smartphone business. Samsung has a very small presence in China, with less than 1 percent market share and has seen its core markets, such as Brazil, India, the United States and Europe, ravaged by outbreaks and subsequent lockdowns.
Royal Dutch Shell profit plunges
Oil giant Royal Dutch Shell has reported a sharp drop in net profit for the three months to the end of June, following an unprecedented period of energy market turmoil and significantly weaker oil and gas prices. The Anglo-Dutch company reported adjusted earnings of $638 million for the second quarter of 2020. That compared with net profit of $3.5 billion over the same period a year earlier and $2.9 billion in the first three months of 2020.
Net income attributable to shareholders on a current cost of supplies (CCS) basis – which is used as a proxy for net profit – came in at a loss of US$18.4 billion for the second quarter. This followed an impairment charge of US$16.8 billion post-tax over the same period, given the oil major now anticipates significantly lower oil and gas prices over the next 30 years.
In a note to shareholders Shell said it expected Brent crude futures to average US$35 a barrel in 2020, down from a previous forecast of US$60 for the international benchmark. The company also lowered its Brent price forecast to US$40 in 2021 and US$50 in 2022, having previously said it expected prices to average US$60 for each year. The relatively gloomy outlook for commodity prices through to 2050 followed the firm’s decision to cut its dividend to shareholders for the first time since World War II in the first quarter of the year.
US consumers receive unsolicited seeds in the mail
Consumers across the US have been warned about mysterious, unsolicited packages of seeds that have been turning up in mailboxes across the nation in recent weeks.
The packages appear to come from China, according to the US Department of Agriculture. Photos show packages marked with labelling from China Post, which operates the official postal service of China. China’s foreign ministry confirmed the address labels had been forged and that China Post had asked UPS to send the packages to China for investigation.
It’s not exactly clear who is behind the packages or what their intent is, but one theory doing the rounds is that they are part of a “brushing scam” — when third-party sellers send people items they didn’t order and then write glowing product reviews on their behalf.