We have not learnt anything meaningfully new about the NZ economy this week and the story remains one of some upward bias to consumer spending data this year because of the Rugby World Cup and substantial distortion in data because of other factors such as earthquakes. Looking ahead prospects for NZ growth look good on the back of a coming period of strong residential building, the feed-through of spending by farmers, generalised catch-up spending by consumers on items other than TVs (already purchased for watching the rugby), and setting up of companies deserting Australia as labour costs take off.
But while in the United States the economic data have been coming in reasonably good recently, in Europe the road ahead is still heading straight toward a fiscal and financial meltdown unless something serious is one to assuage the soaring concerns of investors – the latest concern being that the Euro is going to break apart.
In our second largest export destination China (12.5% of export receipts) data show apartment prices in some cities now edging lower and the manufacturing sector possibly shrinking – even before Europe does what it might do. But the Kiwi dollar is at its lowest level against the Yuan since July last year and we have also fallen to an eight month low against the US dollar and Japanese Yen as investors flock to the safety of the greenback. Yet with the US Congressional Committee created to decide on deficit reduction measures unable to file a report the scene is set for eventually a fiscal crisis in the US – though thankfully not in the short term.