I make some more observations regarding London in the front section and the third url link below. Many thanks to those who responded in my monthly confidence survey. It shows sentiment is slowly improving out there which leaves one happy with a forecast of growth slowly picking up in the NZ economy and the labour market eventually tightening and producing some pretty severe skills shortages.
This week the main piece of news has been the cut of 0.25% in interest rates across the ditch which has pushed the NZD to a 13 month high against the Aussie dollar. It is very unlikely that their rate cut will be followed by one in NZ and in this week’s WO I explain yet again why that is the case – a rising housing market. We have received more data this week showing tightness in housing supply in New Zealand and in particular in Auckland.
I’m offshore at the moment so this week’s Overview is shorter than usual. Suffice to say though that I see nothing which alters my view on our economy. The construction sector is picking up due to the rebuilding of Christchurch and catch-up construction in Auckland. The trade balance is deteriorating due to this construction and reasonable retail spending growth boosting imports while exports are constrained by the high NZD. This situation will eventually lead to a probable additional credit rating cut within five years.
This morning the Reserve Bank surprised no-one by leaving their cash rate unchanged at 2.5%. And regular readers of the Weekly Overview should also not have been surprised at them shifting out the projected date for raising the cash rate from mid-2013 to the end of the year. The next change will be into 2014.
This is the first Thursday of the month so we are running our confidence survey. If you have a minute feel free to click on the link here and let me know whether you reckon the NZ economy will be in better or worse shape in a year’s time. Many thanks.
Internationally the week has been all about waiting to see what the Federal Reserve Board Chairman will say this Friday night in the United States, then after that the outcome of numerous meetings in Europe during September. So FX rates have barely changed in the past week and interest rates have stayed well within their recent ranges.
There have been few new developments locally or offshore this week but with politicians in Europe returning from holidays we could easily see again very soon some market fluctuations as hopes about Europe wax and wane.