Tony Alexander's Weekly Overview - June 21

Welcome the June 21 edition of Tony Alexander's Weekly Overview

This week fresh data on the state of the NZ economy was almost completely absent apart from this morning’s GDP numbers. They show that the economy grew by 1.1% in the March quarter and 1.7% in the year to March. However, all is not as it seems. During the quarter household spending rose 0.1% and exports fell 1.7% while house building declined 0.5% and imports soared 4.1%. What delivered the 1.1% result then? A massive rise in inventories.

Taking away the stocks surge the economy actually shrank 0.5% in the quarter and grew only 0.3% in the year to March. Therefore while it is unsurprising that the markets reacted to the result by pushing the NZD above 80 cents for a while and taking swap rates higher, the underlying picture for our economy is not robust.

In fact this week we note further evidence of falling confidence and while in Europe Greece finally has a government, Spain is on the brink of having to ask for a bailout as bond yields rise above 7%.

The world remains an extremely uncertain place – including to some degree in China which we write about in this month’s issue of Growing With China released this morning.

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