The full pdf version of the Weekly Overview is contained here.
Weekly Overview 6 July 2017
Thursday July 6th 2017
We start this week’s Overview with a look at the NZIER’s quarterly survey results, then look at how construction activity may be plateauing, give a forecast of annual dwelling sales falling to 65,000 or so come 2021 from 83,000 in the past year, and give some more thoughts on driverless cars.
In this week’s Overview we take a quick look at last week’s numbers on GDP and the current account, note the RB leaving the cash rate unchanged at 1.75% this morning but bank funding costs drifting upward, and look at when turnover and house price inflation peaked in each of the country’s regions.
This week’s Overview runs to just under 8 pages. We start by discussing National Farm Fieldays and the topic of this year’s 11.00am and 2.00pm talks to farmers in the BNZ tent – the new world of credit rationing in New Zealand. We then discuss the Reserve Bank’s recent paper seeking consultation on a debt to income ratio tool – it will probably be eventually introduced but government are unlikely to be in a hurry to do so as the immediate impact will sap growth by up to 0.5% in the Reserve Bank’s estimation.
This week we note how house building has plateaued in Auckland, failure of retailers in spite of strong growth in consumer spending, growth in big versus less big cities, and a strengthening in business plans to hire people and boost capital spending.
Data this week show housing turnover falling but household retail spending accelerating. We look at the numbers and consider implications for some property prices of an over-supply of sub-dividable sections in Auckland and the role emotion plays in housing cycles.
The Reserve Bank surprised the markets today not by leaving the cash rate unchanged at 1.75%, but failing to adopt a tightening bias (warning of rate rises) which most expected. That has caused the NZD to fall close to US68 cents but doesn’t change the risk that bank lending rates will continue to edge slowly higher while lending rules get tighter and tighter.
House building is growing in Auckland but at a very slow pace which will see the existing shortage get worse for the next few years – or decades. But outside Auckland and Canterbury a rapid supply response is occurring. That has implications for prices in locations with low (if any) population growth. The labour market remains very strong and firms which have been struggling to find staff are going to find things even tougher going forward.