BNZ Research

Our research team offers expert commentary on economics, foreign exchange, fixed interest and credit, to help inform your organisation’s risk analysis and decision making. 

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Publications available

Financial Markets Wrap

A Strong Start to 2017 for the NZD

Jason K. Wong -
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- USD unwinds its late-2016 strength as Trump hogs the limelight
- NZD outperforms, rising on all the major crosses
- Little change to NZ and US rates

NZD hit in December

Jason Wong -
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- Increased Fed-hike expectations lead to mid-month NZD slump…
- …despite stronger fundamentals for NZD, including firmer NZ rate hike expectations
- NZ bonds underperform

Mixed NZD Fortunes in November

Jason Wong -
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Bond market sell-off continues on rising inflation risk...Surprise Trump victory helps support US equities and USD...NZD/USD a touch weaker, but stronger on most of the crosses

Markets Today

BNZ Markets Today

Doug Steel -
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Markets cruised into the end of last week with relatively little fanfare. Equity markets and oil prices rose slightly, while US yields edged a touch lower.

BNZ Markets Today

Jason K. Wong -
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In a reversal of recent trends a mild risk-off sentiment has developed, with lower equities and lower bond yields. The risk off tone sees JPY at the top of the leaderboard, the commodity currencies near the bottom, and the USD facing some downward pressure.

BNZ Markets Today

Jason K. Wong -
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The global reflation trade continued on the release of strong US CPI and retail sales data – higher equities, a stronger USD and higher Treasury yields – but the move hasn’t been entirely sustained. The USD ran into some significant selling pressure and is now lower for the day, while, US equities and yields are off their peaks.

NZ Markets Today

Jason K. Wong -
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There’s been a whole heap of economic data released in the past 24 hours along with Fed Chair Yellen’s important semi-annual testimony to lawmakers.

BNZ Markets Today

Jason K. Wong -
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The trading week has got off to a sleepy start, with no major economic releases and Trump out of the spotlight.

BNZ Markets Today

Jason K. Wong -
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Forget the economic data, Trump is back in the spotlight and everyone is watching his every tweet and move.

BNZ Markets Today

Jason Wong -
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With President Trump back in the headlines, markets have been brought back to life after some dull trading sessions earlier this week.

BNZ Markets Today

Jason K. Wong -
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The theme of the past 24 hours is the USD attempting to make some recovery on a day where Trump is out of the spotlight. The USD major currency TWI is up 0.4%.

BNZ Markets Today

Jason K. Wong -
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As locals return after the long weekend, they'll see the NZD is slightly stronger across the board from Friday's local close except against the yen.

BNZ Markets Today

Matthew K. Wong -
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The USD continues its weak run, a dovish BoE sees GBP weaker, and strong trade data has boosted the AUD.

BNZ Markets Today

Jason K. Wong -
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Economic data releases have been a key driver of currencies over the past 24 hours, with NZ labour market data driving the NZD lower, and strong releases driving the USD and GBP higher.

BNZ Markets Today

Doug Steel -
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It has been something of a risk off night in markets, although not universally evident in currency markets.

BNZ Markets Today

Doug Steel -
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USD strength has dominated currency markets overnight, rising against all major currencies. Equity markets are consolidating yesterday’s gains.

BNZ Markets Today

Doug Steel -
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Markets are in a buoyant mood, with equities leading the charge. Bond yields are higher, gold has fallen. It’s risk on. Our global risk appetite index sits at a very healthy 77% – it’s highest since September 2014.

BNZ Markets Today

Jason K. Wong -
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The NZD continues 2017 on a strong footing, reaching a fresh high amidst a day in which the USD has been fairly flat.

BNZ Markets Today

Jason Wong -
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Since yesterday's report the USD has strengthened, supported by Fed Chair Yellen's speech and a run of good data, while the EUR and JPY have softened.

BNZ Markets Today

Jason Wong -
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The USD has recovered some of the losses made post Trump's comments on the “high dollar”. It's been a fairly steady recovery, with a gain of about 0.6% on a major currency TWI basis.

BNZ Markets Today

Jason Wong -
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There has been a lot of news flow over the past 24 hours and the net result is a weaker USD across the board and a much stronger GBP. The USD major currency TWI is down over 1% and it’s been a steady path lower.

BNZ Markets Today

Jason Wong -
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With the US Martin Luther King holiday and no notable data releases very little happened overnight, with all the action being in the NZ time zone. A slight risk-off tone developed as GBP came under significant downward pressure at the NZ open.

BNZ Markets Today

Jason Wong -
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On Friday the USD continued to lose ground, as it has done so far this year, with various USD indices down 0.2-0.3% for the day.

BNZ Markets Today

Kymberly Martin -
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The USD has weakened against almost every major and emerging market over the past 24-hours. The exception is perhaps the GBP, which at best, now trades at a similar level to yesterday morning. The NZD/USD has pushed up to 0.7140.

BNZ Markets Today

Kymberly Martin -
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Currencies traded steady paths overnight, until a flurry of activity in the early hours of this morning. As the USD has subsequently fallen, the AUD and NZD have pushed higher.

BNZ Markets Today

Kymberly Martin -
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The NZD/USD has rebounded a bit from its late-December lows. However, on Friday night, like most of its peers, it succumbed to post-payrolls, USD strength. The JPY was the weakest performer on Friday night.

BNZ Markets Today

Jason Wong -
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There was plenty of US data to digest last night but the result was little change in market pricing in thin market conditions. US and European equities are down slightly, US Treasury yields are little changed, and currency movements against the USD are all within +/-0.5%, with the USD major currency TWI itself flat for the day.

BNZ Markets Today

Jason Wong -
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In quiet, holiday-mode trading with little data there is little news to report and financial market movements have been modest, including for currencies.

BNZ Markets Today

Jason Wong -
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It was a quiet night for financial markets as liquidity dries up ahead of the holiday period. The USD is slightly weaker, led by a 1% recovery in the yen. This report pre-dates Fed Chair Yellen's speech at 7:30am where she is expected to talk about the US labour market. Following last week's press conference and previous speeches, any fresh insights are likely to be limited.

BNZ Markets Today

Kymberley Martin -
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Trading was fairly orderly as the market awaits the US FOMC meeting at 8am (NZT). Most major currencies have gained a bit on the USD.

BNZ Markets Today

Kymberley Martin -
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Most major currencies trade not far from where they did yesterday morning as the market awaits the US FOMC meeting early tomorrow morning. The NZD/USD currently sits just above 0.7200.

BNZ Markets Today

Kymberly Martin -
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The USD rose further on Friday night, along with US yields. Most of its peers suffered, though the JPY was the weakest performer. The NZD/USD traded a little lower to end the week below 0.7140.

BNZ Markets Today

Doug Steel -
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It’s been quite a week for the NZ dollar, briefly below 0.7080 on Monday as news of Key’s resignation broke to yesterday’s flirt with 0.7220 influenced by commentary from Governor Wheeler and Treasury updates.

BNZ Markets Today

Jason Wong -
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The USD is slightly weaker across the board on a fairly quiet news day. GBP is the worst performer, retreating after its strong run of late. GBP is down 0.6% to around 1.26. UK industrial production fell by 1.3% mom, much weaker than the 0.2% increase expected.

BNZ Markets Today

Kymberly Martin -
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Most currencies have traded reasonably tight ranges over the past 24-hours. After a burst of volatility yesterday afternoon, the NZD/USD now trades at 0.7120.

BNZ Markets Today

Kymberly Martin -
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The USD opened higher on the week, but has subsequently declined. European currencies have outperformed. The JPY has been the weakest performer.

BNZ Markets Today

Jason Wong -
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The key focus on Friday was the US employment report, which made for a quiet trading period ahead of its release. It ended up being a mixed report, with employment growth in line with expectations, but the unemployment rate dropped by a chunky 0.3% to a 9-year low of 4.6%. Just as surprising was much weaker wage inflation, with average hourly earnings down 0.1% m/m.

BNZ Markets Today

Kymberly Martin -
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The USD ran out of steam overnight. The ‘oil-linked’ CAD and NOK have continued their outperformance. The NZD has been amongst the weaker performers over the past 24-hours.

BNZ Markets Today

Kymberly Martin -
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The USD strengthened against all its peers, with the JPY the greatest casualty. The NZD/USD has declined to 0.7070 over the early hours of this morning.

BNZ Markets Today

Kymberly Martin -
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Over the past 24-hours the USD has traded sideways. The GBP/USD and NZD/USD have been the strongest performers while the JPY has declined.

BNZ Markets Today

Kymberly Martin -
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Most currencies pushed higher against the USD last evening, before succumbing to a rebound in the USD in the early hours of this morning. Overall, the CAD and JPY have been the strongest currencies since the start of the week while the GBP has been the weakest.

BNZ Markets Today

Kymberly Martin -
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The NZD and AUD were the strongest performers on Friday, while the CAD was the weakest. European currencies generally made modest gains against the USD.

BNZ Markets Today

Jason Wong -
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With the US holiday, markets were quieter than usual and currency movements were modest. The USD is fairly flat, after its further push higher the previous day.

BNZ Markets Today

Jason Wong -
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After a breather earlier this week, the USD has pushed up again rising by 0.5% on the various indices we monitor. While you'll see reports of the USD reaching decade-plus highs, those indices reflect a high weighting given to the euro. Our real-time major currency TWI is still trading below the mid-January high, but it is now less than 1% below that peak.

BNZ Markets Today

Jason Wong -
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With little newsflow, currency movements have been modest, with the USD fairly flat following yesterday's modest fall.

Rural Wrap

Rural Wrap

Doug Steel -
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- Are lamb numbers lower than previous estimates?
- Fewer sheep vs higher lambing percentage
- Slaughter lagging last year
- Milk production lower, as expected
- A drag to consider for near term GDP

Recently released estimates of livestock numbers by Statistics New Zealand (SNZ) in partnership with the Ministry for Primary Industries made for some interesting reading.

More Or Less Meat

Doug Steel -
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There has been much going on in the sheep and beef markets that will continue to have influence through the 2016/17 season and beyond. We take a brief look at some influences on these key markets and consider what it might mean for volumes and prices for the season as a whole. Meanwhile, further gains in international dairy prices keep upward pressure on milk price forecasts. Among many developments internationally, keep watching the US Fed (that is set to lift interest rates this month), rising long term interest rates (as markets reassess the medium term inflation outlook), a jump in oil prices (as OPEC makes a deal), China, European politics, and the implications of Trump as US President.

Currency Research

Global Economic Backdrop Supports NZD

Jason K. Wong -
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- The closer we look at the global economic backdrop, the easier it is to explain NZD strength over the past year. Global economic momentum is upward, commodity prices are rising and our risk appetite index has reached a 2½ year high. NZD and AUD are ranked the top major currencies over 12 months, 6 months and year-to-date as a result.

- The question is how much further upside is there in these driving forces? Our projections suggest a flatter commodity price outlook over the rest of the year and risk appetite coming off the boil, leading to an eventual weaker NZD profile. If we’re wrong and global economic momentum continues to surprise on the upside then last year’s high of just under USD 0.75 would be threatened.

NZD Corporate FX Update

Jason K. Wong -
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- Our short term fair value NZD/USD estimate continues to drift higher on the back of improving risk appetite and higher commodity prices and now sits above USD 0.74. A dovish RBNZ and consolidation in the USD has seen current spot dip below USD 0.72. We think a USD 0.70-0.74 trading range will be in force over the next few months.

- With the USD expected to return to an upward trend on the back of Fed hikes and Trump’s tax reform package, a more meaningful downward bias is expected to develop for NZD/USD and our year-end target remains at USD 0.67.

Flat-to-Up View Remains

Jason K. Wong -
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NZD/AUD remains locked in a trading range. Since mid-May last year the cross has spent almost the entire time trading sideways in an AUD 0.93-0.97 range.

NZD 2017 Roadmap

Jason Wong -
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- The NZD has shown signs of recovering early in the New Year and it still looks over-sold on our short term model, which has seen fair value lift to USD0.74. We are positive on the Kiwi over the short-term but headwinds are expected to ultimately emerge through the year.

- Political risk will be a core theme for currencies this year, with a new government in the US, elections across the key euro-area nations, Brexit risks for the UK, China’s 5-yearly leadership congress, and NZ’s own general election later in the year.

- US monetary policy is out-of-sync with the world, with a tightening cycle underway. The RBNZ could well be the next key central bank out of the blocks later this year, while tightening prospects remain more distant than that for other major central banks. This dynamic is currently positive for NZD on the non-USD crosses, although as expectations evolve it won’t remain that way all year.

- Domestic currency drivers are positive for the NZD, although not as positive as last year, with growth momentum expected to fade as the year progresses and the terms of trade close to peaking.

As the New Year gets underway and we think about the year ahead we remain constructive about the NZD. Last year the USD was a strong currency and most currencies weakened against it, but NZD/USD eked out a 1½% gain. The NZD appreciated by 4½% on a TWI basis after rising on 13 of the 17 crosses that make up the index.

NZD Corporate FX Update

Jason Wong -
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We begin the year with a positive view for the NZD, given it was oversold at the end of last year.

Corporate FX Strategy

Jason Wong -
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Two key themes underpin our currency forecasts – broadly-based USD strength ahead of a significant tightening in US monetary policy and relative NZD strength reflecting positive domestic forces. The net result is that we project a weaker NZD/USD, but possible further strength for other NZD crosses.

NZD vs. Long-Term Fair Value Estimated

Jason Wong -
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In this report we provide updated long-term fair value estimates for the NZD based on our purchasing power parity (PPP) model. Our PPP estimates are based on CPI ex GST indices and we run a 15-year moving average filter.

How Much Higher For The USD?

Jason Wong -
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A strong USD theme has pervaded our FX projections all year, largely based on our outlook for US monetary policy. That view hasn’t always been comfortable as the Fed has consistently back-tracked from “promised” rate hikes, as the US economy chugged along and the inflation target remained elusive.

Interest Rate Strategy

O Come All Ye Faithful

Kymberley Martin -
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Overall, 2016 was another solid year of Kauri issuance. However, after a strong start, issuance petered out in the latter part of the year, with only one recent issue since early-August. Still, as issuance has outpaced maturities over the past 18 months, total outstanding Kauris have increased from NZD23b to NZD28b, according to RBNZ data.

Outlook for Borrowers: Deconstructing Rates

Kymberley Martin -
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We spend a lot of time discussing the Official Cash Rate (OCR) and related wholesale term interest rates. But they are essentially only the bottom building block used for constructing a borrower’s interest rate.

Economy Watch

New Business Boost

Doug Steel -
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New Zealand’s services sector experienced ongoing expansion during January to start 2017 on a very positive note, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

Holiday Mode

BNZ - BusinessNZ -
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Activity in New Zealand’s manufacturing sector saw January experience a dip in expansion, according to the BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for January was 51.6 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 2.6 points lower than December, and the lowest level of expansion since January 2015. However, the sector has remained in expansion in almost all months since October 2012.

Retailer Caution Required

Stephen Toplis -
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- Retail sales growth is softening
- Softer housing markets will impact
- As will higher interest rates
- Canterbury under-performance highlighted
- Something in it for financial market doves?

It’s time for retailers to become more cautious. Don’t get us wrong, we are unequivocally optimistic that retail sales will continue to grow for the foreseeable future. But, for those in the sector making business decisions for the way ahead, we are equally dogmatic that the peak in growth is now a thing of the past.

New Zealand At A Glance

Stephen Toplis -
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Please note that this edition of New Zealand At A Glance replaces the 3 February release, and includes Quarterly Forecasts and Forecasts.

New Zealand continues to create growth without inflation. As if that wasn’t good enough, it’s being accompanied by significant job expansion, rising fiscal surpluses and a
well-contained current account balance.

New Zealand At A Glance

Stephen Toplis -
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New Zealand continues to create growth without inflation. As if that wasn’t good enough, it’s being accompanied by significant job expansion, rising fiscal surpluses and a well-contained current account balance.

Labour Supply Suppresses Inflation

Stephen Toplis -
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Today's labour market data were most definitely on the dovish side of the ledger and it is entirely apt that the market has modestly marked down both the NZD and the probability of the RBNZ tightening in 2017.

Inflation Motoring Higher

Craig Ebert -
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This morning's Q4 CPI exhibited a firmer tone. And this was not just its headline outcome, but, more so, in its underlying rate of inflation.

Solid End to Services Year

BNZ - BusinessNZ -
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New Zealand’s services sector experienced further expansion during December to round out a solid year of activity, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

Consistent Expansion

BNZ - Business NZ -
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Activity in New Zealand’s manufacturing sector saw December expansion at the same level as November, according to the BNZ - BusinessNZ Performance of Manufacturing Index (PMI).The seasonally adjusted PMI for December was 54.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining).

Robust QSBO Most Interesting for its Inflation Flickers

Craig Ebert -
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- Post-Key QSBO hardy to quakes as well
- And with some inflation flickers now
- Building sector still leading the charge
- QSBO at major odds with record low OCR
- Housing slower in sales but prices resilient
According to this morning’s Quarterly Survey of Business Opinion (QSBO), the NZ economy continues to barrel on rather well, thanks very much. Taking the recent earthquakes, and the change of Prime Minister, into account, respondents remain upbeat, overall. And there are signs now that resource pressures are finally translating into some inflation. While this is consistent with our view of the economy it questions the wisdom of the Official Cash Rate being at a historical low.

Good News Portends Rate Rises

Stephen Toplis -
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- NZ growth peaking
- But capacity-constrained slowdown portends higher inflation
- 2.0% CPI inflation here we come
- Rate hikes to start in 2017?
- External imbalances okay for now

The last set of official data for the year provide yet further confirmation that New Zealand is doing exceptionally well against a difficult international backdrop. Not only can we reaffirm that GDP growth is both solid and above trend but, and even with dairy sector returns underwhelming, it appears not to be putting undue pressure on the current account deficit.

Easing into Xmas

BNZ - BusinessNZ -
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New Zealand’s manufacturing sector experienced a slight softening of expansion during November, according to the BNZ - BusinessNZ Performance of Manufacturing Index (PMI) for November.

Outlook for Borrowers: Deconstructing Rates

Kymberley Martin -
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We spend a lot of time discussing the Official Cash Rate (OCR) and related wholesale term interest rates. But they are essentially only the bottom building block used for constructing a borrower’s interest rate.

Boringly Brilliant

Stephen Toplis -
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Today’s Half Year Economic and Fiscal Update (HYEFU) yet again showcased the enviable fiscal position that New Zealand has attained. Few governments in the world will be spending their time losing sleep over what to do with burgeoning surpluses. Yet this is where New Zealand’s Minister of Finance (soon to be Prime Minister), Bill English, finds himself. Much of this is due to astute fiscal management, the rest to an economy whose population-driven strength continues to surprise.

Onwards and Upwards for Milk

Doug Steel -
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Dairy prices continue to push higher, on tightening global milk supply. We lift our 2016/17 milk price forecast to $6.40 per kilogram of milksolids. There remains a wide error bound around milk price forecasts. Our forecast includes a view of ongoing firm pricing near term, with some retreat into season end as the current intense global milk supply squeeze starts to abate.

Terms Turning On Trade

Doug Steel -
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For all the talk of inflation turning the corner in NZ there was absolutely no sign of it in today’s terms of trade statistics. The terms of trade itself fell 1.8% which was lower than both our and market expectations. But a lot of this we put down to timing. We expect the terms of trade to lift strongly over coming quarters to be nudging record levels during 2017. Today’s trade volumes, on balance, do not alter our +0.8% Q3 GDP estimate or the downside risks around it.

NZ Business Still Going Four It

Craig Ebert -
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Net confidence might have dipped to +20.5 in November, from +24.5 the month before. But all the real-activity indicators in today’s ANZ business survey were about as strong as they’ve been. Own-activity-expectations, for example, held at +37.6, from +38.4. This level tends to suggest annual GDP growth with a three in front of it, as well, while itching for a four.

Fit For Consumption

Craig Ebert -
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The speech delivered by RBNZ Deputy Governor, Geoff Bascand, earlier this week proved very interesting. Not in respect to near-term monetary policy, so much. But the address did make it clear that the consumer sector is very much on the RBNZ radar from a big-picture perspective.

Big Plane, Smaller Deficit

Doug Steel -
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NZ’s October trade deficit of $846m was a bit smaller than expectations, despite big aircraft imports. This means the underlying deficit narrowed than much more than the headline figures indicate. The annual deficit increasingly looks like it has passed its peak. Export values rose 2% y/y and stronger growth looks likely in 2017. We remain a bit puzzled by the lack of material expansion in core capital goods imports, while further acceleration in consumer goods imports is consistent with many indicators pointing to stronger household spending.

Strategist

BNZ Strategist

Craig Ebert/Doug Steel -
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While New Zealand’s economic growth might be peaking it’s still solid enough to be reinforcing a lift in inflation. There have been spots of softness in some of the monthly data, including housing and construction. But, in general, the economic indicators appear robust, still.

BNZ Strategist

Stephen Toplis -
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New Zealand continues to create growth without inflation. As if that wasn’t good enough, it’s being accompanied by significant job expansion, rising fiscal surpluses and a well-contained current account balance.

BNZ Strategist

BNZ Research -
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We begin 2017 with a sustained positive view on the NZ economy. We forecast 3.1% GDP growth this year (after an estimated 3.3% last year) and 2.5% for 2018. The “slowdown” involves resource constraints coming to the fore, as much as anything else.

BNZ Strategist

BNZ Research -
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Economic Outlook - Today’s Half Year Economic and Fiscal Update yet again showcased the enviable fiscal position that New Zealand has attained – on the back of astute fiscal management and a swiftly growing economy.

BNZ Strategist

BNZ Research -
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Economic Outlook - We remain upbeat about the NZ economy. The impacts of the recent earthquakes are becoming better known (including for Wellington buildings). There will be transportation issues in the South Island’s north-east and tourism numbers will bear watching. However, we still see little cause to alter our macro-economic forecasts. And so they remain relatively stout – entailing real GDP growth of 3.4% for calendar 2016 and 3.2% with respect to 2017. Implicit to this are private consumption forecasts of 3.5% and 2.6% respectively. It’s an area to watch, in the context of household savings behaviour, if the recent speech by RBNZ Deputy Governor, Geoff Bascand, is any guide. Seismic disruption to Statistics NZ has cast doubt on getting its data on time and in full. However, the next heavyweight local report is Q3 GDP, not scheduled until 15 December. Ahead of this note the 30 November RBNZ FSR and ANZ business survey as well as the government’s HYEFU due 8 December (possibly later).

Markets Outlook

Robust Growth, Rebounding Inflation

Craig Ebert -
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- Stellar PSI (59.5) offsets slow PMI (51.6)
- Q4 producer prices affirm rebounding inflation
- On commodities as well as construction pressure
- Dairy prices probably down a bit at Wednesday’s auction
- Tax revenue growth running around 10% y/y
- Joyce speaking (again) Tuesday noon

This week’s NZ data are largely aft of us already, with this morning’s release of the Performance of Services Index (PSI) and Business Price Indexes. They highlighted robust expansion in activity, and rebounding inflation, respectively.

What Consumption Slowdown?

Craig Ebert -
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Real household consumption accelerated sharply, to an annual pace of 5.4% in the Q3 2016 GDP accounts, roughly matching the gain in retail volumes.

The Reserve Bank looks to be still scratching its head over this. Indeed, so seemingly unsure of consumption’s force, the Bank had, as one of its scenarios in last week’s Monetary Policy Statement, a downside scenario devoted to it. Yet there are palpable risks, in our view, that, far from slowing by more than the Bank already assumes, consumption growth doesn’t moderate at all.

RBNZ Petrified

Stephen Toplis -
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The chances of the RBNZ moving the cash rate when delivering its February 9 MPS is as close to zero as you will ever get. The key point of focus, therefore, is what the Bank’s guidance will be on its future OCR track.

Wages Contained As Unemployment Falls

Stephen Toplis -
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- Net migration growth moderating
- But still satiating labour market demands
- Unemployment rate nearing its lows
- Wage inflation remains in hiding
- Tourist boon continues

One of the key foci of the current expansionary period has been the performance of the labour market, in particular its ability to furnish the necessary inputs to keep the expansion going while doing so in such a fashion that inflationary pressures stemming from rapid growth in labour utilization is capped.

Celebrating Higher Fuel Prices

Craig Ebert -
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If it wasn’t for higher fuel prices in Q4, one would have to reduce their CPI estimate by 0.4%.

Pressure's Building

Craig Ebert, Kymberly Martin, Jason Wong -
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As we resume our musings about the way ahead, there have at least been no curve balls since we left off just before Xmas.

Jolly Well Working Through

Craig Ebert -
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Well, so much for winding down ahead of the holidays. There is a cumulated fourteen local items to chop through this week. For Thursday’s GDP report we are looking for a quarterly expansion of 0.9%, for annual growth of 3.7%. This is in line with market expectations, and those of the RBNZ (November MPS). That’s the technical picture, anyway. Our gut feel is that there’s potential for Q3 GDP growth to get to 1.0% or even more.

Awaiting Direction, From the Election

Craig Ebert -
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We continue to be wary of some correction in the housing market data, primarily in prices. However, we haven’t seen anything obvious, to date. The other thing that continues to occupy our minds is the performance of Q3 GDP. Our nervousness was piqued by what transpired on Australia’s GDP last week, including the late run of partial data that informed it. New Zealand has its own run of partials this week.

Let's Get Fiscal, Physical

BNZ Research -
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As we go to print, we've just learned from the RBNZ about an on-the-record speech Governor Wheeler will deliver this Thursday, 10:00am. Entitled "Some Thoughts on New Zealand's Economic Expansion" it seems more than coincidence that it's scheduled just hours before a government Half-Year Economic and Fiscal Update (HYEFU) that will outline scope for fiscal stimulus. It wasn't so long ago that the RBNZ seemed happy with the idea of fiscal expansion, in order to take pressure off the central bank to do all the work (with OCR easing). But now the tables would appear to be turning.

Big Wednesday Then Some Q3 GDP Indicators

BNZ Research -
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The first NZ report of the week is one from the Reserve Bank, namely its six-monthly Financial Stability Report (FSR). This is due Wednesday morning (9:00am). This will no doubt devote a fair bit of discussion to the very latest LVR changes, in the context of housing market performance. In this regard it’s worth recalling the November Monetary Policy Statement assumed inflation in the housing market would stay high for a wee while yet, before dissipating further out. Yet there is anecdote it could be slowing already, at least in Auckland.