Economic Week - August 2

 by Nick Clark

Plumbing new depths
It hardly seemed possible to get worse but business confidence has fallen again in ANZ’s July 2019 Business Outlook Survey.
In this survey a net 44.3% of respondents expect general economic conditions to worsen over the coming year, a 6 point deterioration on June’s already dismal result.  For agricultural respondents the sentiment was particularly dire with a massive net 78.4% expecting worse conditions, a 24 point slump.
The own activity indicator also slipped, with a net 5.0% of respondents expecting their activity to increase over the coming year, down 3 points on June.  For agricultural respondents it was a 6 point fall to a net 5.4% expecting their activity to increase.
There is no doubt the economy is slowing and despite reasonably good commodity prices, record low interest rates and healthy government finances the economic outlook is murky at best.  Businesses need confidence to invest and employ so these persistently negative results are concerning.
Federated Farmers’ own take on farmer sentiment, its six-monthly Farm Confidence Survey, should be out next week.

Ag debt edges up
Agricultural debt increased by $157 million in the month of June 2019 to reach $63.6 billion, according to the Reserve Bank’s monthly Sector Lending Statistics.  This is up $1.9 billion or 3.1% compared to June 2018 and is a slowdown from the 4.0% growth for the year to May 2019.
Compared to agriculture annual rates of growth for housing (up 6.2%) and business 5.3% were stronger, but growth in personal consumer lending was weaker (up 1.2%).

Building consents up
Statistics NZ’s Building Consents Issued showed that in June 2019 2,881 residential building consents were issued, down 3.9% on May’s figure but up 3.2% on June 2018.  For the year to June 2019 34,761 consents were issued, up 5.8% on the year to June 2018.
For the year ended June 2019, the value of non-residential building consents was $7.4 billion, up 7.9% on the year ended June 2018.  Farm buildings $325 million of consents were issued, down 7.2%.

Where do your rates go?
As the Productivity Commission continues its inquiry into local government funding, Statistics NZ has launched a new on-line tool showing where rates are spent by activity for each council in 2017 and 2018.

Next week
Next week sees the release of June quarter employment data and the Reserve Bank’s OCR review.  Most expect the Reserve Bank to cut the OCR to 1.25% in recognition of the slowing economy.

NIWA Soil Moisture Data
NIWA’s latest soil moisture maps (as at 9am Thursday 1 August) continue to show most of the country to be about average for this time of the year.  The area around Oamaru and Waimate continues to be the exception.


Exchange Rates

Over the course of the week the NZ Dollar down against the Trade Weighted Index.  It was also down against all our major trading partners, except the UK Pound.

 

 

NZ Dollar versus

This Week

(1/8/19)

Last Week (25/7/19)

Last Month (1/7/19)

Last Year (1/8/18)

US Dollar

0.6553

0.6706

0.6705

0.6805

Australian Dollar

0.9567

0.9605

0.9573

0.9172

Euro

0.5930

0.6021

0.5906

0.5821

UK Pound

0.5401

0.5373

0.5281

0.5188

Japanese Yen

71.57

72.53

72.51

76.06

Chinese Renminbi

4.5552

4.6093

4.5892

4.6273

Trade Weighted Index

72.56

73.64

73.24

73.30

Source: Reserve Bank of NZ

 

Wholesale Interest Rates

Over the course of the week the 90 Day Bank Bill rate was stable but the 10 Year Government Bond Rate dropped 10 basis points. 

 

 

This Week

(25/7/19)

Last Week (18/7/19)

Last Month (25/6/19)

Last Year (25/7/18)

OCR

1.50%

1.50%

1.50%

1.75%

90 Day Bank Bill

1.48%

1.49%

1.62%

1.91%

10 Year Government Bond

1.43%

1.53%

1.60%

2.76%

Source: Reserve Bank of NZ