Traders stop bets on rate cut as NZ GDP beats estimates 21 Jun 2012
- MARKET CLOSE: NZ shares rise as Telecom sells AAPT Business
- NZ dollar holds gains after upbeat Chinese trade data Business
- EPA wrongly gave Anadarko duty to Maritime NZ: Greenpeace Business
- NZ property values rise at 9.2% annual pace in November: QV Business
- NZ Dollar Outlook: Kiwi may rise as greenback unloved/h3 Business
- Telecom sells AAPT for A$450M to TPG Telecom Business
- Bennetts Group buys assets of Jasons Travel Media Business
- Freightways buys two document shredding firms firms for $13M Business
- Utilico trims stake in Infratil to 11.8% Business
- NZ dollar rises after US employment data Business
Traders stop betting on rate cut as NZ economy grows at twice the expected pace
By Paul McBeth
June 21 (BusinessDesk) - Traders have stopped betting on a rate cut by the Reserve Bank after the New Zealand economy grew more than twice the expected pace in the first three months of the year as good weather conditions stoked agricultural production.
The market is betting the central bank will add 1 basis point to the 2.5 percent official cash rate over the next year, according to the Overnight Index Swap curve, removing the expectation of 44 basis points of cuts a fortnight ago. The turnaround comes after government figures showed the economy grew 1.1 percent in the first three months of the year, its fastest quarterly pace in five years.
"You've got to dispense any thought of a rate cut from a domestic economy perspective," said Doug Steel, economist at Bank of New Zealand.
The New Zealand dollar rose above 80 US cents for the first time in 2 ½ months, and recently traded at 79.94 cents, while swap rates climbed across the board, with the two-year swap rate up 11 basis points to 2.81 percent and the 10-year swap rate up 10 basis points to 3.84 percent.
The growth was more than twice what markets were expecting, and almost three times the Reserve Bank's forecast in its June monetary policy statement, prompting some economists to question the accuracy of the numbers. Last year's first-quarter gross domestic product figure was more than twice the market's expectation when first released, though it was subsequently revised. This year the department has removed and then added back one quarter to 2008’s deep recession.
Darren Gibbs, chief economist at Deutsche Bank, said he struggled to see how the economy grew such apace in the first quarter of this year.
"By looking at other sources of data, nothing suggests the economy is doing okay," he said. "The Reserve Bank will be more circumspect in how it interprets this."
Statistics New Zealand put much of the gain down to bigger agricultural production after the stellar growing conditions, with the agriculture, forestry and fishing sector growing 2.1 percent to $2.12 billion. Since the end of 2011, dairy prices have been falling on Fonterra Cooperative Group’s online trading platform, and the exporter recently trimmed its forecast payout to farmers as a resiliently high kiwi dollar erodes the value of overseas sales.
BNZ's Steel said those growing conditions probably won't be repeated, and there will be some impact as that effect washes through the annual numbers.
The manufacturing sector rose 1.8 percent to $4.72 billion as greater milk production stoked output of dairy products. Food, beverage and tobacco manufacturing climbed 3.2 percent.
Figures yesterday showed the current account deficit widened deficit of $2.8 billion in the quarter on weaker dairy prices and a drop off in visitors after the Rugby World Cup.
There was a $416 million build-up in inventories due to greater manufacturing and a decrease in exports.
Much of the economy's gain was in an inventory build-up, and Steel said that could also lead to an overhang in supply that could drag on future growth.
"Increases in inventory were concentrated in manufacturing, particular the food and beverage and metals industries," Steel said.
Economic activity was up 2.4 percent in the March quarter compared to the same period a year earlier. The economy grew 1.7 percent in the year ended March 31, beating the Treasury's forecast of 1.6 percent. The economy was $202 billion in current prices, Statistics NZ said.
Business investment rose 2.1 percent in the quarter, its biggest rise since December 2010, on more imports of plant and machinery and non-residential building work.
Construction activity shrank 0.1 percent to $1.47 billion as building work remains subdued ahead of the Canterbury reconstruction.
Information, media and telecommunications shrank 3 percent to $2.1 billion in the quarter, the biggest drag on the economy in the period.
Retail, trade and accommodation grew 4.5 percent to $9.59 billion in the quarter.
That came as household consumption remained muted, up 0.1 percent to $21.18 billion in the quarter.
9 Dec 2013 News
New Zealand Government Hon Simon Bridges Minister of Labour 9 December 2013 Media Statement New mining regulations app... more
9 Dec 2013 News
Patricia Grace 9 December 2013 Ancestral land taken by Public Works Act: Patricia Grace and whanau object Maori land in Waikanae,... more
9 Dec 2013 Business News
Article - BusinessDesk NZ dollar holds gains after upbeat Chinese trade, US jobs growth misses optimistic forecasts By Paul ... more
9 Dec 2013 Business News
Article - BusinessDesk Freightways buys two Australasian document shredding firms for $13 mln By Paul McBeth Dec. 9 ... more
9 Dec 2013 Entertainment
Stars of the second Hobbit movie in the trilogy have started walking the red carpet for the film's New Zealand premiere in... more
9 Dec 2013 Entertainment
Noise PR Auckland Big Day Out Widens the Festival Experience with Art Initiatives And a Live Magazine The Auckland Big Day... more
9 Dec 2013 Property
Auckland property values continue to surge ahead, up 15.2 per cent in the last year. QV has
9 Dec 2013 Migration
It has been a long wait for a clear measure of New Zealand's population. The five-yearly Census was ready to be taken in 2011 when the... more
4 Dec 2013 Migration
The typical Kiwi on Census day 2013 was aged 38, earned $28,500 a year, worked in a service job and owned his or her own... more
9 Dec 2013 Travel & Tourism
Alex Robertson sniffs out some bargains in what can be an expensive city to visit. With over 15 million visitors in 2012, London is... more
9 Dec 2013 Football
SALVADOR, Brazil (AP) The World Cup may be great for planet football, but it isn't so good for planet Earth. FIFA says the 2014... more
8 Dec 2013 Column
To some, it would appear that I’m living the dream. Professional Kiwi living in London, with a great apartment, great friends,... more
6 Dec 2013 Column
Column - Gordon Campbell Gordon Campbell on oil drilling permits, and Iris Dement by Gordon Campbell Yesterday, the ... more
9 Dec 2013 People
In less than a year, Lorde has gone from a Year 12 student at Auckland's Takapuna Grammar to a global pop star. The Kiwi's... more
9 Dec 2013 Recruitment
Those in high paid jobs are seeing their wages rise faster than others because of a lack of competition partly due to people leaving... more