New Zealand Country Profile - Economy, Currency, Central Bank, New Zealand Dollar, NZD

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Introduction

New Zealand is the 60th largest economy in the world with a GDP of $92.51 billion, and a population of 4.2 million. Its economy depends on international trade, mainly with Australia, the United States and Japan. This leaves it vulnerable to growth conditions in the these economies. It's main exports include meat, dairy products, wood and forest products, fish, and wool. These exports and tourism, along with a declining manufacturing sector, do not match the imports of advanced manufactured goods required to sustain the New Zealand economy. Therefore, New Zealands has a large current account defecit.

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New Zealand's Fundamental Indicators and Chart

Monthly Data for August, 2008

Date	EST	Indicator	Actual	Forecast	Previous
8/3	6:45pm	Labor Costs q/q	0.8%	0.8%	0.7%
		For 2nd Quarter Provided by: Statistics New Zealand Official Release: Media Release Labour Cost Index y/y: 3.5%, forecast 3.6%, pr. 3.5% Avg. Hourly Earnings q/q: 2.0%, forecast 1.4%, pr. 1.1% Avg. Hourly Earnings y/y: 5.2% The Labour Cost Index increased 0.8% in the 2nd quarter, meeting expectations for the 2nd quarter. On an annual basis the LCI remained steady at a 3.5% pace, which is still the fastest pace since the series began in 1992.
8/4	11:00pm	Commodity Price Index (ANZ)	1.8%		0.0%
		For July Provided by: ANZ National Bank Commodity prices were up 1.8% in July the ANZ National Bank reported.
8/6	6:45pm	Employment Change q/q	1.2%	0.1%	-1.3%
		For 2nd Quarter (s.a.) Provided by: Statistics New Zealand Official Release: PDF From the Release: "The June 2008 quarter Household Labour Force Survey (HLFS) showed employment and unemployment numbers increasing, taking total labour force numbers to the highest level recorded since the survey began. Employment increased over the quarter by 1.2 percent, following a decrease of 1.3 percent recorded in the March 2008 quarter. Both full-time and part-time employment increased over the quarter, with parttime employment increasing at a greater rate. The number of unemployed increased over the quarter to be at the highest level since the December 2003 quarter. Over the quarter, the number of people unemployed increased at a greater rate than the number of people in the labour force. This resulted in an increase in the unemployment rate of 0.2 percentage points, to 3.9 percent."
8/6	6:45pm	Unemployment Rate	3.9%	3.8%	3.7% 3.6%
		For 2nd Quarter Provided by: Statistics New Zealand Official Release: PDF Employment Change q/q: 1.2%, forecast 0.1%, pr. -1.3% (1Q), 0.9% (4Q) See "Employment Change q/q" above for commentary.
8/13	6:33pm	Manufacturing PMI	48.8		45.3 45.7
		For July Provided by: Business NZ/Bank of New Zealand Official Release: PDF From the Release: "The Bank of New Zealand - Business NZ seasonally adjusted PMI for July (48.8) bounced back from one of it lowest results in June to record its highest value since April. However, the sector was still in decline overall, and the latest figure is the lowest recorded for a July month over the history of the survey. Three of the five seasonally adjusted main diffusion indices continued to record weakness, although all improved from the previous month. Production (50.0) showed significant improvement from the 42.9 recorded in June, as did deliveries (49.6). Finished stocks (52.1) was the only sub-index to show expansion for July, while employment (46.3) displayed a similar result to the previous month, indicating significant contraction in those employed in the manufacturing sector."
8/14	6:45pm	Retail Sales m/m	0.9%	-1.6%	-1.2%
		For June Provided by: Statistics New Zealand Official Release: Media Release From the Release: Seasonally adjusted total retail sales increased 0.9 percent ($50 million) in the June 2008 month, compared with a decrease of 1.1 percent in May 2008. The core retailing group recorded an increase of less than 0.1 percent ($1 million) in June 2008. Thirteen of the 24 retail industries recorded sales increases while 11 recorded sales decreases. The largest increases were in motor vehicle retailing, up 5.2 percent ($31 million), and automotive fuel retailing, up 2.6 percent ($16 million). The largest decrease was in department stores, down 8.7 percent ($29 million). The trends for both total retail sales and core retail sales have been flat in recent months. Both trends have risen an average of 0.4 percent per month since the beginning of the series in May 1995."
8/14	6:45pm	Core Retail Sales	0.0%	-0.8%	0.7%
8/18	4:45pm	Producer Price Index Output q/q	3.5%	2.1%	1.8%
		For 2nd Quarter Provided by: Statistics New Zealand Official Release: PDF PPI Output y/y 8.5%, largest since September 1987 quarter. Output prices surged by the largest percentage since June quarter of 1985. Electricity generation was the largest contributor, jumping 30.9%, the largest increase for this component since its records began in June 1994.The wholesale trade index up 6.0 as the second largest contributor, continues to rise due to higher prices for fuel. The 6.0% is the largest annual increase for this component since 1994 when the series began.The surge in inflation may be a deterrent on RBNZ's rate cut campaign, after cutting the Official Cash Rate from 8.25% to 8.00% in July. From the Releae: "Producers’ prices rose in the June 2008 quarter, with output prices up 3.5 percent and input prices up 5.6 percent, Statistics New Zealand said today. The rise in the outputs index is the largest quarterly rise since the June 1985 quarter, while the rise in the inputs index is the largest since the March 1980 quarter. Both indexes were mainly driven by higher prices for electricity generation and supply. The electricity generation and supply outputs index rose 30.9 percent in the latest quarter, the largest rise since the series began. Higher output prices for electricity generation were recorded, with lower lake levels pushing up spot prices. In the year to the June 2008 quarter, the electricity generation and supply index rose 41.7 percent, which is also the largest annual rise since the series began."
8/18	6:45pm	Producer Price Index Input q/q	5.6%	2.6%	2.3%
		For 2nd Quarter Provided by: Statistics New Zealand Official Release: PDF Input prices jumped up 5.6% in the June quarter, following 4 consecutive quarters of increases. This month's increase more than double the fastest pace in any of these quarters, and marked the fastest increase since the March 1990 quarter.Electricity generation was the largest contribution, rising 50.8% in the June quarter, the highest since the series for this component began in June 1994. From the Release: "Producers’ prices rose in the June 2008 quarter, with output prices up 3.5 percent and input prices up 5.6 percent, Statistics New Zealand said today. Within the inputs index, electricity generation and supply rose 50.8 percent in the latest quarter and 85.4 percent in the year to the June 2008 quarter. Both movements are the largest since the series began in the June 1994 quarter. Lower lake levels were the cause of higher costs for electricity generation this quarter."
8/20	11:00pm	Consumer Credit	3.8%		3.4% 3.3%
8/24	6:45pm	Food Price Index m/m	0.6%		1.3%
		For July Provided by: Statistics New Zealand Official Release: Media Release FPI y/y: 7.6%, pr. 6.8% The food price index rose 0.6% in July from June, mainly due to higher prices for fruit and vegetables, Statistics New Zealand says. That rate is slower than the 1.3% measured in July. The annual pace rose to 7.6%, with all 5 categories recording upward price pressure. The grocery sub group is up 11% compared to a year ago. With consumer having to pay more for groceries, they will have less discretionary spending. The economy has already slumped with the central bank cutting rates on July 23rd to 8.00% from 8.25%. From the Release: "Food prices increased 0.6 percent in the July 2008 month, Statistics New Zealand said today. The increase was mainly due to higher prices for the fruit and vegetables subgroup (up 3.6 percent), in particular lettuce (up 32.4 percent) and cucumber (up 27.9 percent). The most significant downward contributions to fruit and vegetables came from lower prices for tomatoes (down 14.6 percent) and nectarines (down 32.3 percent).Other subgroups to increase were grocery food (up 0.5 percent), restaurant meals and ready-to-eat food (up 0.6 percent), and non-alcoholic beverages (up 0.4 percent). For the year to July 2008, food prices rose 7.6 percent. All five subgroups recorded upward contributions to the annual increase, with the most significant being the grocery food subgroup (up 11.2 percent). Within this subgroup, the main contributions came from higher prices for bread (up 19.6 percent), cheddar cheese (up 59.3 percent), butter (up 89.4 percent), and fresh milk (up 10.2 percent)."
8/25	6:45pm	Trade Balance	-0.78B	-0.53B	-0.21B -0.22B
		For July Provided by: Statistics New Zealand Official Release: Media Release Official Release: PDF Exports: 3.42B, pr. 3.59B (Jun), 3.73B (May), 3.80B (Apr) Imports: 4.40B, pr. 3.81B (Jun), 3.92B (May), 4.13B (Apr) The monthly trade deficit for July showed a NZ$780 million shortfall, as imports increased to NZ$4.40 million and exports fell to NZ$3.42 million. Exports eased as dairy volumes dropped due to the recent drought. Crude oil helped the export bill but petroleum products added a big chunk to the import bill. From the Release: "Merchandise exports were valued at $3.4 billion in July 2008, up $781 million (29.6 percent) on July 2007, while merchandise imports were up $754 million (21.9 percent) to $4.2 billion over the same period, Statistics New Zealand said today. The exports trend has eased in recent months, following a period of strong growth in the second half of 2007. A fall in seasonally adjusted dairy volumes in the first two quarters of this year, due to the recent drought, has partly offset the influence on the trend of the substantial increase in crude oil exports and high world dairy prices over the past year. The imports trend has increased strongly since the middle of 2007, coinciding with a significant rise in fuel prices."
8/25	11:00pm	Inflation Expectations	3.0%		2.9%
		For 3rd Quarter (September) Provided by: Reserve Bank of New Zealand Business managers have increased expectations about inflation levels in the next few years, according to a Reserve Bank survey. Managers see inflation in the next year up 3.6%, and 3.0% in 2 years time. In the last survey managers expected CPI at 3.3% and 2.9%, respectively. Inflation in the June quarter (2Q '08) is running at 4%, up from 3.3% in the May quarter, but the Reserve Bank expects it to peak near 5% this quarter before retreating. The Bank, like many other central banks around the world, has to juggle concerns between slowing growth and high inflation. Unlike other banks, it has mainly avoided an external shock from high oil prices, though today's trade balance data wasn't encouraging. From the Release: "Consumer price index (CPI) inflation expectations for both the one and two year horizons have increased since the last survey. Average one-year-ahead Consumers Price Index (CPI) inflation expectations are now 3.6 percent, an increase of 0.3 percentage points since the June quarter survey. Two-year-ahead expectations are now 3.0 percent, compared with a previous figure of 2.9 percent. The median two-year rate is unchanged at 3.0 percent. Expectations of quarterly changes in the CPI for the next two quarters have also increased. Expectations for the September quarter CPI have risen dramatically, from 0.7 percent last quarter to 1.1 percent this quarter. An increase of 0.9 percent is expected for the December 2008 quarter. These quarterly increases are equivalent to annual rates of 4.7 percent for the year to September 2008 and 4.4 percent to December 2008."
8/26	11:00pm	Business Confidence	-20.5		-43.2
		For August Provided by: National Bank of New Zealand Official Release: Press Release Business confidence is returning to New Zealand companies that have been reducing their assessment of the economy for the past 5 surveys. The report is one of those weak but better ones that suggests a bottom is forming in confidence. July and August have seen an easing of oil prices, and that is the single key factor in play. With the fear of unmitigated inflation removed, businesses will expect better days to come. The report notes an "aura" of stabilisation, and that it should help usher in a return of economic boom. Soon, the smoke will clear for inflation, and the other hurdle will become prime concern: credit woes. New Zealand has not been hit hard, but nevertheless is feeling the liquidity problems from all the way in the US eat into companies, such as ANZ Banking Group's profits. From the Release: "Good news. Confidence is recovering. The economic patient is starting to show signs of life. A net 21 percent expect worse times over the year ahead, a welcome bounce from the net 43 percent expecting tougher times last month. The improvement is across the board — with retailers, manufacturers, agriculture, construction and the service sector feeling chirpier (or less downbeat). Optimists accounted for 25 percent of responses — the highest since May 2002, while pessimists represented 46 percent. Other aspects of the survey portray a similar message. Firms’ own activity expectations have bounced back into the black. A net 5 percent expect better times over the year ahead. But it’s still low by historical standards, so we shouldn’t get overly excited. The level remains consistent with relatively anaemic economic growth. Yet it’s encouraging to see the streak of 5 successive negative reads finally broken. Growth is still growth, and an aura of stabilisation is certainly welcome."
8/28	6:45pm	Building Approvals	4.7%		-18.8% -20.1%
		For July Provided by: Statistics New Zealand Official Release: PDF New Zealand's level of building consents increased 4.7%. The indicator is rather volatile, but the news is better than the two previous months of negative growth. From the Release: "The trend for the number of new dwellings, including apartments, has been declining since June 2007. This trend has fallen 35 percent since June 2007. 1,410 new dwellings, including apartments, were authorised. Residential building consent values totalled $491 million. Non-residential building consent values totalled $349 million."

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December
3rd, 2008

Actual

Forecast

Revised Form

5.00%

6.50%

N/A

Provided by: Reserve Bank of New Zealand
Official Release: Statement

From the Release: "Today’s decision brings the cumulative reduction in the OCR since July to 3.25 percent, and takes monetary policy to an expansionary position. Given recent developments in the global economy, the balance of risks to activity and inflation are to the downside. Thus it is appropriate to deliver this reduction quickly to support the economy and keep inflation from falling below the target band.

“Monetary policy is working together with the depreciation of the New Zealand dollar and the fiscal stimulus now in train, to provide substantial support to demand over the period ahead and to create the conditions for some rebound in growth as global conditions improve.

“To ensure the response we are seeking, we expect financial institutions to play their part in the economic adjustment process by passing on lower wholesale interest rates to their customers."

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