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Data Flash: Roundup Of Today's NZ Data

Data Flash (New Zealand) NZ: Roundup of today's NZ data

Key Points

A variety of data has been released today. To summarise:

The ANZ job ads series for December showed a very sharp fall - over 11% mom seasonally adjusted. However, December month data is often volatility, so it is important not to read too much into this result (a large fall in December 1997 was quickly reversed the following month, while anecdotal evidence suggests job advertising has picked up strongly since the beginning of this year).

Nominal retail sales for November fell 0.2% mom, compared with the provisional estimate of no change. The fall was driven by lower sales in the motor vehicle sales and services storetypes. Excluding these storetypes, sales were unchanged over the month.

Based on our analysis of this week's CPI result, we expect the retail trade deflator to have risen by 1.4% qoq in Q4.

On balance, we expect retail sales to rise by 0.5% mom in December. Retailers have reported mixed fortunes over the Christmas period, though some negativity may stem from unfair comparisons with the previous year's modest pre Y2K spend-up. On the other hand, we estimate that petrol prices were, on average, 8% lower than the month before, which should have boosted non-petrol consumption. Car registrations fell 5% seasonally adjusted and will act as a drag on overall sales. However, consumer confidence improved sharply during the month.

Given our expectation for December, and our estimate of the retail trade deflator, real retail volumes look likely to have fallen by 0.7% qoq in Q4. Indeed, in ordered to avert a fall in retail volumes, sales growth of close to 3% mom would be needed in December.

The final merchandise trade outcome for November was a deficit of $416m - $50m better than the provisional result. Partially offsetting revisions to the outcomes for previous months meant that the annual deficit was $30m better than the provisional result.

Excluding oil and imports of lumpy capital transport equipment, the November month trade balance was around $400m better than a year earlier - a very encouraging result. Exports values in November were 34% ahead of a year earlier (+29% for the three months to November versus a year earlier). The Government's operating balance for November was $277m ahead of the December Economic and Fiscal Update forecast. Around three-quarters of this outcome was due to higher than expected revenue, with the remainder reflecting lower than expected expenses.

Commentary Our forecast of Q4 GDP growth of 0.5% qoq assumed a modest contraction in consumption and strong growth in the export sector. Data continues to print consistent with this view.

The rapid resurgence in business and consumer confidence in recent months should see the domestic sector make a stronger contribution to growth as the year progresses. Developments in the US continue to pose a risk to the medium-term outlook, but our central view remains that the US slowdown will prove short-lived.

On that basis, and given our forecast that core inflation will remain at or above the mid-point of the RBNZ's target range, we believe that the likelihood of any near-term easing in monetary policy is minimal.

A more pronounced than expected slowdown in the US economy over coming months could see the RBNZ initiate a modest easing in May. However, our central view is that the balance of probabilities continues to favour the next move in the OCR being up, albeit not until later this year.

The improved trade balance reinforces our bullish current account view - we now expect the annual current deficit to fall from 6.4% of GDP in Q3 2000 to around 5.1% of GDP in Q4 (assisted by the removal of last year's frigate from the annual calculation), and to around 4.4% of GDP by in Q1 2001 (below the 15-year average of 5%). Thereafter, we continue to believe that a deficit of around 3% of GDP is achievable during 2002.


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