Data Flash (New Zealand)
KEY GLOBAL DEVELOPMENTS AND FINANCIAL MARKETS
The US data printed generally on the stronger side of expectations during December, though it would be an overstatement
to say the data showed strength. Rather, the numbers pointed to Q4 being the likely bottom of the slowdown. The NAPM
rose to 44.5 from 39.8 the previous month because of the strength in production and new orders, though prices paid
continued to soften. Similarly, the last weekly jobless claims figure for the year was `only' 393k - the third
consecutive week that claims stayed below 400k. The improvement in some of the numbers, and the fact that interest rates
are already low, prompted the Fed to only cut by 25bps at its December meeting. Still, the Fed remains very much focused
on the downside risks. Capacity use continues to fall (down to 74.7 in November from 75 in October), which points both
to an absence of inflationary pressures and little reason for firms to increase their investment. Elsewhere, the
Japanese data continued to be terrible - the Tankan declined again in December and the unemployment rate hit a new
record high of 5.5% - but the European data were mixed. For instance, the headline PMI for Euroland rose to 43.6 in
November from 42.9 in October - the first increase after 18 consecutive months of decline. There was also a surprise
increase in French consumer confidence in November. But just to show that Europe is not out of the woods yet, German
orders and production for October were weaker than expected - as were retail sales. French IP also dropped sharply in
Markets finished the month with bond yields higher and the Yen much weaker (with the seemingly tacit approval of the
policy authorities on both sides of the Pacific). For a while it looked like the Euro was in the first stage of a major
move higher, but weakness into the close left it pretty much unchanged for the month. Equity markets were generally
stronger, though they struggled after the gains in the first week of the month as investors began to question the degree
of earnings optimism built into prices.
KEY NEW ZEALAND DATA AND EVENTS
The key local data releases and events were:
ANZ Commodity Prices (Nov) - 2 Dec: The foreign currency price of New Zealand's commodity exports fell 4.0% mom to be
8.5% off its May high. A 10% mom decline in dairy prices was a key factor (influenced by an increase in EU subsidies).
Further falls are expected over coming months. The actual and projected decline in commodity prices has been a key
factor underpinning the RBNZ's willingness to loosen its policy stance.
Motor Vehicle Registrations (Nov) - 4 Dec: Total registrations rose 5.1% mom. New vehicle registrations surged 9.8% mom
to be 19.8% higher than a year earlier. Used car registrations rose 4.2% mom to be up 38% yoy. The strength in the
housing and automotive sectors is indicative of robust consumer confidence. Building Work Done (Q3) - 4 Dec: Real
building work done rose 4.6% qoq, led by a 7.4% qoq rise in the non-residential sector. Residential construction rose
Retail Trade (Oct) - 10 Dec: Total sales fell 0.1% mom and have shown little growth since the surge in H1 2000.
Excluding auto sales and services, sales fell 0.3% mom. ANZ Job Ads (Nov) - 10 Dec: The number of job advertisements
plummeted 8.0% mom in November - the fourth consecutive monthly decline - to a level consistent with zero net job
Quarterly Manufacturing Survey (Q3) - 11 Dec: Nominal sales rose 4.8% qoq. Given a 3.5% rise in prices, real sales grew
by 1.3% qoq. Around 60% of the growth in sales occurred in the meat and dairy sectors. Ex-primary production declined by
1% qoq, reflecting the impact of the electricity crisis on the metals industry in particular.
Overseas Trade Indexes (Q3) - 12 Dec: Export prices fell 0.6% qoq while import prices fell 1.7% qoq, the latter
influenced by lower prices for petrol and petroleum products and both influenced by a stronger NZD. The more recent
sharp fall in commodity prices will begin to be reflected in the Q4 result.
Food Price Index (Nov) - 13 Dec: The FPI rose 0.1% mom to be 6.7% higher than a year earlier.
December Consensus Forecasts (Dec) - 17 Dec: Growth forecasts for New Zealand's 14 largest trading partners were broadly
unchanged in December, suggesting that the cycle of downgrades may have run its course. If so, this eliminates one
source of downside risk to the RBNZ's November MPS projections. Colmar Brunton Consumer Confidence (Dec) - 17 Dec:
Confidence improved from -4 to +9 in headline terms. After adjusting for seasonal effects (confidence always trends
higher during the summer months), confidence improved from -8 to -3 - a more modest improvement than suggested by an
earlier TV3 poll.
REINZ House Sales (Nov) - 18 Dec: The number of house sales rose 4.4% mom to be 35% higher than a year earlier,
confirming the upward momentum in the housing market. The median sale price rose 3.3% yoy.
Government's December Economic and Fiscal Update - 18 Dec: As expected by market, the Treasury slashed its growth
forecasts for 2002/03. The 2001/02 bond programme was boosted by a greater than expected $600m to $4.1bn, as the
Government sought to fund its partial acquisition of Air New Zealand and lower projected operating surpluses.
NBNZ Business Survey (Dec) - 19 Dec: The December survey pointed to a rise in business confidence to -2% from -18% last
month. However, once seasonal factors are taken into account, we estimate that confidence was broadly unchanged at -13%.
That said, firms remain much more upbeat about their own trading prospects. Retailers pricing intentions showed a
renewed rise from +23% to +29%.
External Migration (Nov) - 19 Dec: A net inflow of 2,850 migrants was recorded in November, similar to the previous
month. However, tourist arrivals declined a further 8.0% mom bringing the cumulative decline over the past three months
to 24%. By contrast, outbound tourism rebounded 6.8% mom, suggesting that the impact of New Zealander's staying at home
may provide less of an offset than the industry had hoped for.
Balance of Payments (Q3) - 20 Dec: A current account deficit of $1.7bn was recorded in Q3, in line with expectations.
The annual deficit declined to 3.4% of GDP. However, allowing for seasonal factors, the period of improvement in the
deficit over the past 18 months appears to have come to an end (at least in the short-term). WestpacTrust Consumer
Confidence (Q4) - 21 Dec: Confidence rose slightly from the dip reported in September, broadly consistent with the
Overseas Merchandise Trade ?(Nov) - 21 Dec: A preliminary deficit of NZD315m was reported for the month of November - a
little worse than market expectations. Exports were weaker than expected - probably reflecting a bigger impact from
declining commodity prices - while imports remained at an elevated levels, assisted by continued strong imports of motor
vehicles and a recovery in plant and machinery imports.
GDP (Q3) - 21 Dec: GDP rose by a slightly weaker than expected 0.2% qoq but was still 2.5% higher than a year earlier,
with the electricity crisis subtracting 0.4pps from growth. While weaker than expected by the RBNZ, the forecast error
seems likely to be offset by a stronger than previously factored Q4 (reflecting the bounce-back in the
electricity-impacted industries). Therefore, the result is not expected to have had a major impact on the RBNZ's
With the next RBNZ MPS meeting not scheduled until 20 March, cash and 90-day rates were essentially unchanged during the
month. However, with global data suggesting that the pace of contraction is slowing and domestic data showing an
improvement in confidence levels from post 11 September lows, the March futures contract lost a little ground as
expectations of further easing were pared back. Global influences were again the key drivers of the bond market, with
yields rising and the curve steepening, but spreads against UST's remaining little changed. The NZD made little ground
against the USD but gains against the AUD, JPY and EUR saw the trade weighted index appreciate by 2% over the month. In
contrast with global trends, the local equity market had a down month, with the NZSE40 ending 0.9% below its opening
National, the major opposition party, again lost a little ground on the Government this month. The latest Colmar-Brunton
poll, perhaps the most widely followed, showed Labour up 1pp to 45% support, National down 1pp to 41%, Alliance down 1pp
to 3%, ACT unchanged on 3%, the Greens up 1pp to 6% and NZ First up 1pp to 3%. Darren Gibbs, Senior Economist