Tony Alexander

Economic Commentaries

Offshore and NZ Looking Worse

Thursday November 10th 2011

My main message over the past few months has been that growth in the NZ economy has as good as stalled and that the offshore situation risks getting a lot lot worse bringing extra weakness for us next year and offsetting some of our big positives expected to kick in “At Some Stage”. Nothing that has happened this week dissuades me from this view. To whit..

In Europe hopes of avoiding a full blown crisis were high (again) for a few days following changes in the Greek political scene which increase the chances of change implementation. But yields on Italian bonds have blown out yet again, the Greeks are struggling to in fact form a replacement government, so it still remains a 50:50 call whether a Lehmans collapse type environment will be avoided. It also looks like the Eurozone has already slipped back into recession. Basically nothing positive with regard to commodity prices, tourist flows, confidence etc. Chinese growth indicators have also fallen.

On the data front for NZ this week we have seen positive Auckland real estate data and a 0.9% rise in card spending over October distorted upward by people staying in hotels and buying souvenir clothing during the RWC. Underlying spending is actually very weak with falling car registrations and spending on durable goods. We have also seen another fall in sentiment now into net pessimistic territory in our monthly BNZ Confidence Survey and NZ’s manufacturing sector may have slipped back into recession.

With the global growth outlook getting worse and worse it is unsurprising that wholesale interest rates have edged lower again this week. There is just no chance the RBNZ will be raising interest rates for a long time given what is happening. And reflecting the growth and deepening bank funding market risks the NZD has been sold back down to near US 77.5 cents.

This week I’ve travelled from London to Osaka in Japan for the annual meeting of the Japan NZ Business Council at which the focus was on the usual trade and investment links of which there many, plus the respective disastrous earthquakes. It is good to get a reminder that while the Chinese market is attracting the attention of our bulk primary product exporters, Japan’s market of 128 million high income people offers huge opportunities for NZ businesses. Anyone interested in trading with Japan can start by contacting and perhaps joining the JNZBC at   www.jnzbc.com    or contact NZ Trade and Enterprise who have strong representation in Japan.

Having said that, I’ve typed this intro up while sitting in a truly huge room at the China National Convention Centre in Beijing – on the Olympic Games site – waiting to give a presentation on the global and Asia-Pacific outlook with an emphasis on implications for forestry trade. 

In Europe hopes of avoiding a full blown crisis were high (again) for a few days following changes in the Greek political scene which increase the chances of change implementation. But yields on Italian bonds have blown out yet again, the Greeks are struggling to in fact form a replacement government, so it still remains a 50:50 call whether a Lehmans collapse type environment will be avoided. It also looks like the Eurozone has already slipped back into recession. Basically nothing positive with regard to commodity prices, tourist flows, confidence etc. Chinese growth indicators have also fallen.

 

On the data front for NZ this week we have seen positive Auckland real estate data and a 0.9% rise in card spending over October distorted upward by people staying in hotels and buying souvenir clothing during the RWC. Underlying spending is actually very weak with falling car registrations and spending on durable goods. We have also seen another fall in sentiment now into net pessimistic territory in our monthly BNZ Confidence Survey and NZ’s manufacturing sector may have slipped back into recession.

 

With the global growth outlook getting worse and worse it is unsurprising that wholesale interest rates have edged lower again this week. There is just no chance the RBNZ will be raising interest rates for a long time given what is happening. And reflecting the growth and deepening bank funding market risks the NZD has been sold back down to near US 77.5 cents.

 

This week I’ve travelled from London to Osaka in Japan for the annual meeting of the Japan NZ Business Council at which the focus was on the usual trade and investment links of which there many, plus the respective disastrous earthquakes. It is good to get a reminder that while the Chinese market is attracting the attention of our bulk primary product exporters, Japan’s market of 128 million high income people offers huge opportunities for NZ businesses. Anyone interested in trading with Japan can start by contacting and perhaps joining the JNZBC at   www.jnzbc.com    or contact NZ Trade and Enterprise who have strong representation in Japan.

 

Having said that, I’ve typed this intro up while sitting in a truly huge room at the China National Convention Centre in Beijing – on the Olympic Games site – waiting to give a presentation on the global and Asia-Pacific outlook with an emphasis on implications for forestry trade.