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Weekly and Offshore Overviews, March 27 2008


Welcome to the March 27 2008 editions of the BNZ Weekly and Offshore Overviews.

This week in New Zealand we have seen some bad confidence numbers released backing up the view that while this Friday we may see a good growth number released for the December quarter there are very weak conditions in prospect for the remainder of this year. Unfortunately with inflationary pressures very strong scope for interest rates relief from our central bank still seems some time away.

Offshore the US sharemarket has recovered 4% over the week and some glimmers of hope regarding the banking crisis have appeared. But the fundamentals argue against any quick resolution of the sub-prime related problem and bad data released late in the week on consumer sentiment, the housing market, and business investment imply the drift in the US economy remains firmly downward for now.

In the UK the Bank of England Governor has admitted that cutting interest rates 0.5% has not actually helped borrowers because bank funding costs have been pushed up by the liquidity crisis. In Australia mortgage rates continue to creep up in the absence of any official monetary policy tightening and motor vehicle data show a 16 year low in consumer confidence is affecting spending.

In Japan growth in exports has slowed down over the past year and with a new Governor for the Bank of Japan yet to be appointed worries about economic management and growth prospects remain very strong.

Fortunately in China data continue to show firm growth although releases of fresh numbers have been few and far between over the past fortnight. In Europe business sentiment has improved in France and Germany and construction spending is rising. The decoupling theory has some support but if the US economy weakens further Europe cannot stand immune.


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