The full pdf version of the Weekly Overview is contained here.
Interest Rates To Stay Steady
Thursday March 8th 2012
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.
I hope everyone has had or is still having a good break. I am currently in Guangzhou checking out the scene here and in Hong Kong for New Zealand companies and will this year, as indicated in the last few Overviews for 2011, be writing about the opportunities presented by China’s two century overdue return to producing over 25% of world GDP. This week the Overview commences with a discussion on that issue but we also look at the economic data for NZ which have appeared over the past five weeks. What they tell us is essentially the message being put across here for almost all the second half of 2011. Our economy is weak and interest rate pressures minimal.
Merry Christmas everyone and Happy New Year. It would be great to be able to say that the year ends well for ourselves and the world economy and that we can look forward to good economic conditions over 2012 with our growth driven by higher business investment and exports, unemployment falling away, and commodity prices holding firm. But some recent data releases in New Zealand have been weak – retailing, manufacturing and construction. And more importantly, the situation in Europe is getting worse and spreading around the globe.
This week we have included extensive coverage of the NZ real estate market using data and feedback from our two monthly surveys along with discussion of the monthly Barfoot and Thompson data for Auckland and The Economist magazine analysis suggesting NZ house prices are over-valued 25%. We look also at some fairly weak manufacturing data released this morning (non-meat and dairy processing down 1.1%), the reasonably well entrenched downward trend in spending on cars revealed in monthly registrations data, and a 2.3% fall in construction during the September quarter.