Welcome to the April 23 2008 editions of the BNZ Weekly and Offshore Overviews.
This week we spend the first few pages of the WO examining the retail sector. We look at why growth rates since 2001 could never be sustained, which store types tend to experience the greatest activity decline in a recession and which skate along little affected. Its basically bad news for chemists, hardware stores, takeaways, bars, car yards, sport stores, and fresh meat & produce sellers.
This Thursday morning the Reserve Bank will review their official cash rate. They’ll probably already have done so by the time you open this email! We expect no change from 8.25% and no hint of easing being imminent, but some strong comments perhaps on global growth risks and the offshore credit crunch.
Offshore it has been a generally quiet week for data releases. Across the ditch however the markets were shocked by a high inflation number released today fairly much ruling out any monetary policy easing this year. The Aussie dollar has risen above US96 cents to a 23 year high. This has dragged the NZD back up to about US80 cents but we look about set to consolidate below 84 cents against the Aussie dollar.
In the UK the Bank of England have taken moves to alleviate the liquidity squeeze but grave concerns remain about lending growth in the near future. The same applies for the United States where housing data continue to come in on the very weak side.
At least in Germany things look alright but their ability to offset weakness in less efficient Euro area economies is in doubt and growth prospects for Europe remain muted for this year. In Japan one or two positive data releases have occurred this week but sentiment remains poor and there are strong concerns about potential recession if the US recession turns out to be deeper and longer than generally thought for the moment.