The full pdf version of the Weekly Overview is contained here.
NZ Data Still Not Strong
Thursday March 29th 2012
Data released this week show an economy still not picking up. Exports have fallen 0.6% in the three months to February, jobs growth has slowed to 0.3% from 0.5% three months earlier, and capital goods imports have declined 7%. These are not the numbers one would expect to see if businesses had been acting on their generally good levels of sentiment, investment, and employment intentions in recent months.
Short term NZ growth prospects remain poor, monetary policy is likely on hold until early next year, but the NZD remains well supported by reasonable commodity prices, and once monetary policy tightening starts history tells us which way the NZD will go.
This morning we learnt that during the December quarter the NZ economy grew by only 0.3% and not the 0.6% which the markets had been expecting. Growth for the whole year was only 1.4%. This mediocre result is in line with the downbeat interpretation I have been taking of NZ’s economic performance – especially when one considers that growth was boosted last year by the Rugby World Cup and the terms of trade being near a four decade high.
This week we have learnt that consumers cut their spending in February but employers strongly raised their on-line job advertising. The NZ dollar lost another cent against a resurgent greenback, but wholesale interest rates have risen to their highest levels since November as growth expectations have risen offshore and pushed up US bond yields in particular. We’ve also received data showing dwelling sales 27% ahead of a year ago and further strength in farm sales. But consumer confidence has weakened and during the December quarter manufacturing output fell 0.7% if one strips out milk and meat processing.
This week we released the results of our monthly BNZ Confidence Survey and BNZ-REINZ Residential Market Survey. The former showed a rise in sentiment to a six month high of a net 27% optimistic. The latter showed further evidence of investors starting to follow the wave of first home buyers entering the market with Auckland leading the housing market forward. Good results basically. (more…)
There has been practically nothing new learnt about the state of the NZ economy over the past week, the NZ dollar has not done much, and wholesale interest rates have crept up only slightly. So if you have anything better to do then do it as this week’s tiny issue will not set the world alight.
The Kiwi dollar has eased (probably temporarily) against the greenback this week following the Minister of Finance’s warning today that the government’s accounts may not return to surplus in 2014/15. That is hardly earth-shattering news given global growth risks, but it provided an excuse for NZD selling after buying on the back of yesterday’s much better than expected retail trade numbers, and buying against the British Pound and Euro following ratings changes and warnings from Moodys.
This week we have released results from our two monthly surveys. The Confidence Survey shows sentiment up marginally to a net 13% positive about the economy over the coming year from just 3% in December – a positive result but hardly stellar. But in addition all eight of the main measures in our BNZ-REINZ Residential Market Survey moved up quite firmly this month. More and more first home buyers are entering the market and investors appear to be stepping up to the plate as well. Agents now perceive sellers to have greater power than buyers and price perceptions have shifted further upward.
Fresh data have again been thin on the ground with respect to the state of the NZ economy this week. We have in hand information showing debt growth remains practically zero, a fall in job numbers occurred late last year, there is little apparent underlying growth for the moment in building consents, but some good growth is happening in export receipts. The Kiwi dollar over the week has risen above US83 cents as investors around the planet have become a tad less nervous about Europe. Yet at the same time wholesale swap rates have fallen to new lows because of a recent string of weaker than expected data in the United States.
We have not learnt much new about the NZ economy this week apart from a small rise in consumer sentiment, fall in job advertising, cut in Treasury’s fiscal projections, and completely expected retention of the 2.5% official cash rate at this morning’s review by the Reserve Bank. The Kiwi dollar has however risen firmly against most currencies including the greenback against which it now sits just below 82 cents.
Over the year the chances are that NZ growth will be disappointing in light of the continuing risk of implosion in Europe, oil price shock from building tensions involving Iran, delaying of Christchurch rebuilding because of continuing earthquakes, and absence of a generalised consumer spending surge due to reduced labour market strength and worries offshore.
Nevertheless, with still firm export prices though with declines more likely than rises, good long term prospects supplying food and fibre, and portfolio divestment away from Europe, the Kiwi dollar is likely to have a firm tone all year.