BNZ Weekly Overview 31 March, 2011

Welcome to the March 31 issue of the BNZ Weekly Overview.

This week we received the monthly merchandise trade data and they show that in seasonally adjusted terms exports have grown 3.5% over the past three months which is three times average quarterly growth. But at the same time, even after removing an extra $500m of aircrafts, imports grew 6.6% therefore net exports are acting as a drag on economic growth. In fact as a proportion of exports the trade balance has deteriorated to 1.7% in the year to February from 3.2% three months ago.

When we add in the absence of any data showing improving household spending, weak credit demand, a 4% seasonally adjusted fall in capital goods imports, shrinking tourism, and a recession-hit house construction sector it seems clear that this year has started where 2010 finished – exceptionally weak.

In fact for construction the outlook is ugly for a large part of 2011. In February the value of consents issued for non-residential buildings was down 19% from a year ago and for dwelling consents the monthly seasonally adjusted fall was almost 10% and annual consent numbers look to be headed near the four decade low reached in 2009. This is very trying for house builders. Roll on 2012 many will be thinking – but the risk is that by then many will have crossed the ditch to earn more from employers displaying strong demand across there.

In the FX section we have added an area devoted to the British pound because the most common currency enquiry we have received for a decade now concerns the NZD/GBP exchange rate. As for the NZD this week it has climbed back to near US 76 cents as global risk tolerance has improved – which is quite surprising considering what is happening in the Middle East. Wholesale interest rates have crept marginally higher.

At www.tonyalexander.co.nz this week we have added the third paper in our series looking at what is lacking in our economy. Look under the “What We Lack” tab. You will also find my latest newspaper column along with a quick two pager on prospects for the economy and another two page document presented at this week’s Sustainable Future Institute Workshop at Te Papa. There is also a quick look at whether plumbers may be better off in monetary terms in Queenstown, Auckland, or Perth. The answer is fairly obvious but we put some numbers in to show it.

See the weekly overview here http://img.scoop.co.nz/media/pdfs/1104/WOMch31.pdf

ENDS

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