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Businesses gloomy, trading activity weakens in September quarter, suggesting lower growth in second half of 2012, NZIER says; OCR on hold 'for some time'

Business
Businesses gloomy, trading activity weakens in September quarter, suggesting lower growth in second half of 2012, NZIER says; OCR on hold 'for some time'
9th Oct 12, 10:13am by Alex Tarrant

Businesses grew more gloomy about the economic outlook in the September quarter as trading activity weakened, the latest NZIER Quarterly Survey of Business Opinion (QSBO) shows.

That pointed to economic activity slowing in the September 2012 quarter, and reinforced the view that the Official Cash Rate would stay on hold "for some time." NZIER has previously picked a first possible upward move in the OCR in 2014, but also warns a cut between now and then is in the picture.

"Businesses remain gloomy (-5% from -1%, seasonally adjusted). The trading activity indicator for the September quarter dropped (-7% from 0%, seasonally adjusted). This suggests annual GDP growth will slow from a solid 2.6% in the June 2012 quarter towards 1.5% in the second half of 2012," NZIER principal economist Shamubeel Eaqub said.

“The recovery remains disappointing. Auckland is growing, but the post-quake surge in Canterbury is moderating and activity elsewhere is slowing," he said.

“The labour market is softening. Canterbury hiring had been surging for the rebuild, but stalled in the last quarter. Hiring elsewhere has edged lower over the past six months."

Inflation well-contained

Capacity pressures were elevated in Canterbury, mainly in the building sector.

"But there is excess capacity elsewhere. Price increases are modest and the outlook for inflation is muted," Eaqub said.

"Firms are struggling to raise prices in a slow recovery. Margins and profits remain under pressure. Investment intentions, while positive, are low compared to what we normally see in a recovery phase," he said.

RBNZ to hold interest rates steady

"The RBNZ will keep interest rates on hold for some time. The QSBO shows patchy economic growth and subdued inflation," Eaqub said.

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2 Comments

by  prosperopink  |  9th Oct 12, 11:56am 1349737013

"If interest income as a percentage  of total personal income had remained at its 2008 level, the total would now be over $1.5 trillion. It is this $550 billion annual delta that the Fed has directly, though its policies, taken away from US consumers in terms of purchasing power."

And there are those who still wonder why the US( NZ?) consumer is withering away,

I know that had interest rates remained at 2007 levels our disposable income would have been high enough to have a good spend up. Instead we are contracting our spending, seriously growing our vegetables, making do, buying and selling our unwanted stuff on trade me and elsewhere. I have just bought $50 worth of cosmetics(including postage) from a UK site that would have conservatively cost me $150 here.  

You can't help noticing how quiet the shops are. If you squeeze the consumer too hard there is no juice left!

 

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by  starfish1  |  10th Oct 12, 11:38am 1349822334

The British are fortunate that they have more control over their exchange rate than there European counter parts so quantitative easing is most likely if they need to manipulate the currrency to be more competitive. British pound will remain low against the Kiwi until sustained growth in the UK is made apparent and this is some way off.  I think what central governments are trying to do is what they did in the 1930's depression years, they eventually inflated everything to bring down the debt.  The problem this time is the quantitive easing so far has had no effect on employment or improved economy.  In the USA they are printing money out of thin air. The Fed should be disciplined and congress should be advising him not to buy debt and stop rigging the rates and prevent bankers from getting free money to play with.It should be a free market where the market decides the rates and not manipulation as we are seeing today. So far we have seen that the rich have got richer and the poor have got poorer.  Three risks that NZ should have contingency for in 2013:- 

1. Surprise shock in oil prices- Middle East tension;

2. Fiscal Cliff in Jan 2013 - Most likely an agreement will be made of some kind, hidding the problem and pushing things further into the future, regardless will push the USA back into recession;

3. A country to pull out of the Euro

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