The key points of this week's publication include the following.
Economy Tight As A Drum
New Zealand's unemployment rate is now the second lowest in the OECD at 4.0% and problems for employers finding labour are only going to get worse with strong employment intentions, job advertising, and lengthening order books. The inflationary implications are obvious - especially as consumers appear to be reacting to the strong labour market by increasing their spending at a rapid rate - up 1.5% in the June quarter from 2.2% during the March quarter. Our BNZ.MarketView pick for July is nominal growth of another 0.8%. Floating interest rates are set to rise a lot more than people are comfortably allowing for over the coming year.
NZD Up Slightly
The US jobs data for July were weak and the resulting fall in the USD has caused the NZD to rise one cent to US 65.5 cents. But the positive factors for the NZD are very strong and in the short term there is a strong risk that the NZD heads back to 70 cents - in fact the Reserve Bank may even need this to happen to contain the worsening inflation threat.
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