This week’s WO is smaller than usual in light of nothing substantial happening offshore or domestically to alter the underlying trends I’ve written extensively about in recent months. To whit…
- Europe with deepening debt concerns, bouts of hope that all will be solved soon, disappointment, growth downgrades, Euro weakness with the risk of break-up and deepening recessions.
- The United States with 1.5% growth facing a major fiscal tightening early next year, housing bottomed out but jobs growth weak, consumers cutting spending, businesses reluctant to hire and invest, and again hopes of further action from the Federal Reserve which so far has not cemented in good growth.
- Asia vulnerable to European and US weakness though in China substantial capacity to keep growth artificially high at the cost of a worsening debt mountain for local governments, banks, and the large SOEs.
- Australia weak in tourism, manufacturing, retailing and housing and likely to stay that way, but mining and infrastructure well underpinned.
- NZ housing rising as investors seek yield, first home buyers catch-up on four years sitting on their hands, and the physical under-supply gets worse predominantly in Auckland.
- Weak growth prospects offshore with huge volatility risks mean little chance of an NZ monetary policy tightening for a long, long time. The NZ dollar to be battered by bouts of worries about the US and Europe that seem certain to come, yet fundamentally well underpinned by demand for our exports from emerging economies and good government and bank accounts offsetting globally appalling household balance sheet worries.
- The NZ labour market to tighten up next year as construction surges, but with mild relief (and an extra housing boost) from net migration flows turning positive and growing for 2-3 years.