Markets Outlook RESEARCH - BNZ
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
RESEARCH Markets Outlook 11 April 2022 Confusion Still Reigns • RBNZ to reinforce aggressive tightening cycle • Consumer confidence is at record lows, the housing • But April’s move a line ball call as retail spending market is softening and retail spending is under pressure. crushed • QSBO this week’s key leading indicator Rates higher, sooner • PMI and next week’s PSI to provide coincident details • NZ restrictions to ease further? We have no idea what, exactly, the RBNZ will do with the cash rate on Wednesday afternoon. The debate amongst financial market participants is whether the RBNZ will hike the rate 25 or 50 basis points. There are very sound arguments for either approach. At the margin, we think the case for 25 is more compelling but we do understand why the MPC members could conclude otherwise. While the specifics of Wednesday’s Monetary Policy Review are open to debate the key messages are a given. The Reserve Bank is facing into rampant inflation and an unsustainably tight labour market so will need to progressively raise its cash rate until such time that overall monetary conditions are contractionary. For all but financial But terminal cash rate already above neutral market participants this is all you need to know. Unless it breaks tradition, a forward track will be not provided at the Monetary Policy Review. If the RBNZ was to produce an interest rate track, we would also expect it to be more aggressive than it projected back in February. The main, but not exclusive, reasons why we think the RBNZ should go 25 and not 50 are: • Uncertainty about economic outcomes is conceivably the greatest it has ever been. • Overall monetary conditions are much more restrictive than a glance at the cash rate would imply. • The mortgage curve has already moved higher at this meeting and will probably head higher still, even if the RBNZ was to do nothing at all. Mortgage rates higher come what may • Banks test borrowers’ ability to repay with rates well in excess (sometimes as much as 3.0%) of the actual lending rate. • The terminal cash rate is already priced at around 4.1% (well above anyone’s perception of neutral). In the February MPS the RBNZ said it thought neutral was 1.86% but acknowledged this was the mean of a set of estimations with a range of 0.82% to 3.09%. If the RBNZ is aggressive this week then the priced terminal cash rate could head as high as 4.5%. Would the RBNZ really want this given its view on where neutral sits? www.bnz.co.nz/research Page 1
Markets Outlook 11 April 2022
Business and consumer confidence surveys should play a In contrast, core retail sales fell 1.4% in the month to be
major role in determining the RBNZ’s decisions. In this down 9.0% nominally over the last two months. Could you
regard, it is disappointing the release of NZIER’s March have ever imagined we would be arguing about a 25 or 50
quarter QSBO was postponed from April 5 to April 12. While basis point increase in the cash rate when retail spending
still released before the Monetary Policy Review is made looks so egregious?!
public, it is sufficiently late for it to be problematic for MPC
members to fully digest its content. Given the latest readings, March quarter retail spending
looks like it will be flat, to down but maybe not so down as
We will, of course, still peruse the survey for insight on what we have penciled in for the quarter. That said, it remains
is happening within the business community but would be consistent with our expectation that GDP growth for the
surprised if it didn’t just reaffirm what we already know, March quarter will be near zero, well lower than the RBNZ’s
namely: 1.6% February MPS pick.
• Business confidence is under pressure On Thursday the Government will announce whether, or
• Costs are skyrocketing not, New Zealand will stay under its current “red traffic light
• Margins are declining setting”. There is growing hope we may move from red to
• The labour market is extremely tight orange. This would mean that restrictions on indoor
• Pricing intentions are through the roof gathering limits would be lifted and folk may not have to be
seated and served in hospitality locations. Additionally, the
The QSBO does not survey the agriculture sector directly so government’s encouragement to work from home will be
developments, both positive and negative, here will not be dropped. Such moves would certainly be a major step
in the summary numbers. forward for the arts, recreation, entertainment and
hospitality sectors and city centres should again see a lot
Unfortunately, our own Performance of Manufacturing
more foot traffic. Nonetheless, there is no guarantee such a
Index, released Thursday, will also be too late for the MPC to
move will be made, and it will likely still take some time
contemplate. All things considered, recent past PMIs have
before activity in the disaffected sectors returns to anything
been remarkably robust, with the headline index bouncing
like a previous normal.
back and forth around its average level. We have no reason
to assume the March survey will look any different. The poor With the borders progressively opening there is heightened
cousin has been the Performance of Services index which anticipation that tourism spending will pick up and some of
has been battered by Omicron and ongoing red level the labour market constraints we are experiencing will be
restrictions. We have to wait until next Tuesday to see if this eased. We fear many are thinking immediate significant
index is slowly picking up as folk become used to living with gains will be made. We are a bit more cautious. The next
Covid. step in the opening process is on Tuesday when the border
reopens to:
Services struggling
• temporary work and student visa holders who still meet
their visa requirements
• up to 5000 international students
• Australian citizens
• New Zealand permanent residents arriving from
anywhere in the world.
February tourism and migration data will also be released on
Thursday. As this is largely prior to any border relaxations
(they began midnight February 27), things will continue to
look fairly miserable. In fact, we expect the migration data to
show an increasing net outflow which, we fear, will continue
to gain momentum right through the first half of this year.
Tourism numbers will likewise remain subdued.
Our latest read on consumer spending came this morning To round the week off, on Wednesday we get March month
with the release of March Electronic Card Transactions data. partials for the Q2 CPI with the release of the latest food and
Total card spending rose a surprisingly solid 1.6% but this rental price indices. In the case of food, we are expecting
probably overstates what is happening to domestic demand prices to rise 0.3% for the month, which will deliver a 2.9%
by a significant margin. One of the big drivers for the month increase in food prices for the quarter.
was the 14.5% increase in non-retail spending which
includes, amongst other things, offshore travel bookings. We have been perplexed by how low and stable the official
measure of rental inflation has been. So stable has it been,
www.bnz.co.nz/research Page 2
Markets Outlook 11 April 2022
however, that it is difficult to forecast anything other than a overall CPI increases 1.9% in the March quarter. If we are
continuation of the trend we have been seeing. Accordingly, right that will take the annual increase in consumer prices to
we are looking for rental inflation to nudge up only slightly, 7.0%. For the record, the RBNZ’s February Monetary Policy
to 0.4% in March from 0.3% in February, delivering a 1.0% Statement assumed 1.4% for the quarter, 6.6% for the year.
increase for the quarter.
stephen_toplis@bnz.co.nz
The quarterly increases we have pencilled in for food and
rentals are key building blocks in our expectation that the
www.bnz.co.nz/research Page 3Markets Outlook 11 April 2022
Global Watch
• CPI inflation to hit 8.4% in US; 6.7% in UK Unemployment seen at 48 year low
• China CPI inflation seen lifting to 1.3%; focus on COVID
• ECB meets Thursday: any explicit QE guidance?
• BoC seen hiking 50bps this week
• AU unemployment rate seen at lowest since 1974
Australia
Australian employment data for March is the highlight in
the Easter-shortened week. NAB expect the
unemployment rate to fall one-tenth to 3.9% on the back
of a 50k monthly employment gain. NAB sees participation
ticking one-tenth higher to a new record 66.5%. If realised,
this would see the unemployment rate at its lowest level
since 1974 and cement the string of upside surprises to the
RBA’s February SoMP forecasts (which only saw the Unemployment outpacing RBA Feb forecasts
unemployment rate drifting below 4 in the third quarter).
The labour market continues to demonstrate rude health.
Labour demand indicators have remained strong. Seek job
ads rose a further 5% in March and ABS job Vacancies
(surveyed after the February employment numbers) were
up a further 7% in the 3 months to February. They are now
86% above pre-pandemic!
April’s Westpac-Melbourne Institute Consumer Confidence
on Wednesday will be closely watched for any rebound
following the 4.2% fall to 96.6 in March. The level below
100 indicates that pessimists outnumbered optimists for
the first time since September 2020. NAB sees a rebound Consumer confidence to rebound in April
as likely, given the March numbers were weighed by a
combination of flood impacts, Russia’s invasion of Ukraine
and downstream from that acute and salient inflation
concerns in the form of fuel prices. While none of those
themes have completely disappeared from the backdrop,
some stabilisation points to a rebound in the confidence
numbers for April. The March NAB Business survey is
released tomorrow.
Vacancies being created faster than filled
China
Focus will remain on Covid given lockdowns in Shanghai.
On the data front, inflation figures are published this
afternoon. Consensus is for CPI to move higher to 1.3% y/y
from 0.9% as the drag from food price declines eases,
while on the producer side, PPI is seen slowing to 8.1% y/y
from 8.8% on base effects.
www.bnz.co.nz/research Page 4Markets Outlook 11 April 2022
March credit numbers are expected during the week, the and Morgan Stanley. North of the border, the Bank of
date yet to be announced. New Yuan Loans are seen Canada meets on Thursday, with a 50bp hike fully priced.
rebounding out of the seasonally low February figure to
CNY2740bn. A PBoC decision on the 1-year MLF rate is due UK
some time from Wednesday, a 5-10bp cut from its current
2.85% likely. A busy week of data out of the UK. February reads of
Industrial Production and monthly GDP are due Monday.
US (and Canada) That’s followed by labour market data out Tuesday, and
inflation figures for March on Wednesday. Inflation likely
Tuesday’s March CPI is the data centrepiece. The market accelerated as the renewed impulse from Ukraine starts to
consensus sees no slowdown in the pace of price rises with enter the figures, before a spike higher in April when
core inflation expected to be 0.5% m/m, the same as last sharply higher energy costs can be passed through to
month, and taking the annual rate to 6.6% y/y. Headline consumers. That’s a lot for markets to chew on as the BoE
annual CPI inflation is seen lifting to 8.4% from 7.9%. balances the competing pressures of higher inflation and
macroeconomic headwinds.
There is also continued focus on the state of the consumer
given the mixed messages being sent from actual spending Eurozone
and consumer confidence. Thursday’s Retail Sales report is
expected to be choppy, control group sales expected to be The focus will be Thursday’s ECB meeting, which sees no
still soft at -0.1% m/m after Feb’s -1.2%. Thursday also sees new economic forecasts. Given continued higher than
the UoM Consumer Sentiment Survey for early March with forecast inflation, the central question is whether the ECB
the headline index expected to fall further to 59.0 from use this meeting to explicitly signal an end to (APP) QE at
59.4. Also important in the survey is 5-10yr inflation the end of June? NAB think not as it can use the
expectations given the constant reference by Fed officials intervening period to assess further. However, NAB does
of ensuring inflation expectations remain anchored. anticipate a subtle shift in guidance that opens that
possibility given a few officials wanted a quicker end to QE
The April Empire State Survey – first of the manufacturing as judged by the March meeting minutes. The French
regional surveys – is out Friday, and tipped to improve. Presidential election is now down to a two-horse race with
Numerous Fed speakers are scheduled with Brainard in latest polls showing Macron holding a small lead over
Q&A on Tuesday the one to watch. The corporate earnings National Rally’s Le Pen.
season is upon us again, starting Wednesday with JP
Morgan, followed on Thursday by Wells, Citi, Goldmans taylor.nugent@nab.com.au / doug_steel@bnz.co.nz
www.bnz.co.nz/research Page 5Markets Outlook 11 April 2022
Fixed Interest Market Reuters: BNZL, BNZM Bloomberg:BNZ
Rates continue their stampede higher, with fresh multi-year what messaging the RBNZ gives, we would expect a sizeable
highs seen in most markets. The US 10-year rate hit 2.73%, its fall in shorter-term rates in the event the RBNZ decides
highest level in three years, driving NZ swap rates 17-21bps against hiking by 50bps.
higher in illiquid trading conditions last week. Focus turns to
What would happen if the RBNZ hiked 50bps? Again, much
the RBNZ this week, with the market pricing a high chance of
will depend on the messaging. However, with so much
a 50bps OCR increase.
tightening now built in (43bps for April, 45bps for May, 42bps
After continuously flattening since the end of last year, the US for July and 39bps for August), it’s not clear that shorter-term
yield curve steepened aggressively last week as the Fed rates will rise that much further in the event of a 50bps hike.
signalled plans for “rapid” balance sheet reduction (also We think rates are overdue for a period of consolidation after
known as ‘quantitative tightening’ or ‘QT’). The minutes to what has been an exceptionally big move over recent months,
the Fed’s March meeting showed members were generally although it will likely require some stability in global rates for
supportive of a plan to allow $95b of its bond holdings to this to occur.
mature each month, roughly double the pace of the last
period of Fed balance sheet reduction between 2017 and The market now prices a 4% OCR, at face value
2019. When the Fed reduces its balance sheet, by letting its % Market pricing for the OCR
bond holdings mature, it means private sector investors need 4.50
4.25
to absorb more bond supply, all else equal, which tends to put 4.00
3.75 BNZ
some upward pressure on longer-term rates, steepening the 3.50
3.25
Market pricing
curve (by how much is still a source of debate). The US 2s10s 3.00 RBNZ February MPS*
2.75
curve ended the week back in positive territory, at +18bps, 2.50
2.25
having been as low as -8bps at the end the previous week. 2.00
1.75
The recession warning brigade have been stood down, at 1.50
1.25
least temporarily. 1.00
0.75
0.50
Other central banks are moving more hawkishly too. The RBA 0.25
belatedly removed its reference to being “patient”, clearing 0.00
2020 2021 2022 2023
the way for a rate hike in the coming months. The minutes to Source: BNZ, RBNZ. * RBNZ projections are quarterly averages.
the ECB’s last meeting suggested policymakers were growing Global rates going parabolic, NZ following
concerned about potential ‘second-round’ effects from % 5-year swap rates
inflation onto wage and price setting behaviour. Since its last 4.0
New Zealand
meeting, European inflation has surged much higher than 3.5
US
expected and markets are expecting the ECB to start lifting 3.0 Australia
rates in Q3. The Bank of Canada is expected to hike its cash 2.5
rate 50bps this week. 2.0
The increases in global rates have flowed through to the New 1.5
Zealand market with little resistance. There appears to be a 1.0
general lack of investor appetite to step in the way of current 0.5
market momentum. Nervousness ahead of this week’s RBNZ
0.0
meeting may also be limiting investor participation at present, Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22
Source: BNZ, Bloomberg
exacerbating thin market conditions.
Volatility is elevated, both in NZ and offshore
Market expectations are elevated heading into this week’s
vol Interest rate volatility measures
meeting. The market has 43bps priced for this meeting, 300
which equates to around a 75% chance of a 50bps hike. At US Treasury volatility
250 (MOVE index)
face value, market pricing of the peak in the OCR this cycle
has pushed above 4% (although this might partly reflect risk 200 1-month realised volatility,
NZ 10yr swap (rhs)
premia). Either way, it is much higher than our revised
forecasts, which see a 3% peak in the OCR early next year. 150
We upgraded our wholesale rates forecasts last week to 100
reflect higher OCR and US 10-year rate assumptions. 50
For this week’s meeting, our central view, albeit one held
0
without much conviction, is that the RBNZ will hike by ‘just’ 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
25bps. While the market reaction will always depend on Source: Bloomberg.
www.bnz.co.nz/research Page 6Markets Outlook 11 April 2022
Foreign Exchange Market Reuters pg BNZWFWDS Bloomberg pg BNZ9
Last week the NZD flew to a high of just over 0.7030, its is growth-sapping and euro-negative – is the key hurdle for
first look above 0.70 since November, before succumbing euro performance.
to broad-based USD strength and ending the week down
over 1% to just under 0.6850. NZD/AUD reached its lowest In global data, US CPI inflation data will be in the spotlight,
level in over a year of just under 0.9150, following a with the headline rate expected to shoot up to yet another
hawkish RBA policy update and ended the week down ½% multi-decade high of 8.4%, and the core rate nudging up to
to 0.9185. Against a backdrop of higher global rates, the 6.6%. While high inflation is well-anticipated, it’s a
yen remained soft, while the euro remained out of favour, reminder of how much tightening is justified by the Fed
with ongoing war in Ukraine a factor. NZD/JPY and this year and beyond.
NZD/EUR crosses were up almost ½% on the week.
Last week we affirmed our NZD projections, which show
Last week the USD was the best performing of the key the currency consolidating in the current quarter and an
majors we follow, with the DXY dollar index hitting its end-Q2 target of 0.69. We still see resistance around the
highest level in nearly a year. The USD’s higher trend has 0.70 level, even though the recovery in risk appetite and
been supported by rising US-global rate spreads as commodity price strength has seen our short-term fair
investors factor in a more aggressive tightening cycle by value model estimate push up just past 0.7150.
the Fed. The FOMC minutes of last month’s meeting
flagged that “many” members thought one or more 50bps We revised up our AUD projections, meaning a nudge
increases could be appropriate this year and would have down to our NZD/AUD profile, to now target 0.90 for later
voted for a larger than 25bps hike if not for Russia’s in the year, which is consistent with a view that sub-0.90
invasion of Ukraine. Investors also woke up to the likely levels could be traded, a level not seen since 2018.
rapidity of the Fed’s balance sheet reduction, as noted in a
hawkish speech by vice Chair-elect Brainard and in the No recent strong link between NZD and NZ-US short rates
FOMC minutes. NZ-US short rate* (rhs)
0.76 1.8
NZD/USD (lhs)
1.6
The US 10-year rate rose 32bps over the week to close at 0.74 1.4
its highest level in over three years at 2.70%, taking its gain 1.2
0.72
this year to 119bps. The US 2-year rate is up a massive 1.0
178bps so far this year, more than the 141bps increase in 0.70 0.8
NZ’s 2-year swap rate. 0.6
0.68 0.4
In the week ahead, domestically the focus will turn to the 0.66 0.2
0.0
RBNZ’s MPR on Wednesday, where most would agree it’s a *Expected tightening next 12 months, NZ-US
0.64 -0.2
lineball call between the Bank delivering either a 25bps or Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22
50bps hike to either 1.25% or 1.5%. With the market Source: BNZ, Bloomberg
already pricing in the OCR heading to 4%, it’s hard to
believe that the Bank could be any more hawkish than
implied by that. The lesson from the past nine months is Cross Rates and Model Estimates
that any NZD reaction to the MPR is unlikely to be Current Last 3-weeks range*
sustained for long, so fade any currency reaction.
NZD/USD 0.6847 0.6820 - 0.7030
Tomorrow’s QSBO should be consistent with a
NZD/AUD 0.9187 0.9150 - 0.9350
stagflationary environment, with poor levels of confidence
NZD/GBP 0.5252 0.5220 - 0.5340
and activity and extremely high inflation indicators.
NZD/EUR 0.6270 0.6190 - 0.6410
The Bank of Canada and ECB also meet this week. A 50bps NZD/JPY 84.94 81.90 - 87.00
hike from the Bank of Canada is widely anticipated. The *Indicative range over last 3 weeks, rounded figures
ECB’s policy update won’t contain any new forecasts, but
language should move in a more hawkish direction after BNZ Short-term Fair Value Models
the latest 7.5% y/y CPI print, with a likely nod to end QE by Model Est. Actual/FV
the end of June, which will then set the scene for rate
hikes beginning in the second half. Any policy tightening NZD/USD 0.7170 -5%
NZD/AUD 0.9000 2%
by the ECB this year will significantly lag that of the US Fed
and most other central banks. The war in Ukraine – which
jason.k.wong@bnz.co.nz
www.bnz.co.nz/research Page 7Markets Outlook 11 April 2022
Technicals
NZD/USD
Outlook: Trading range
ST Resistance: 0.70 (ahead of 0.72)
ST Support: 0.67 (ahead of 0.6600)
We keep resistance at 0.70, with only a brief intra-day
foray above that level last week. We pin the first support NZD/USD – Daily
Source: Bloomberg
level at 0.67.
NZD/AUD NZD/AUD – Daily
Outlook: Trading range Source: Bloomberg
ST Resistance: 0.9450 (ahead of 0.9600)
ST Support: 0.9140 (ahead of 0.9055)
A decisive break below 0.92 puts 0.9140 on the radar,
ahead of a possible move down to the 2020 low of 0.9055.
jason.k.wong@bnz.co.nz
NZ 5-year Swap Rate
Outlook: Higher
ST Resistance: 3.75
ST Support: 3.28
5y has continued higher again and moving towards 3.75
resistance. Hold short and see if 3.75 holds.
NZ 5-yr Swap – Daily
Source: Bloomberg
NZ 2-year - 5-year Swap Spread (yield curve)
Outlook: Lower
ST Resistance: 0.28
ST Support: 0.0
Continue to hold rec’d position targeting move to zero.
NZ 2yr 5yrSwap Spread – Daily
pete_mason@bnz.co.nz Source: Bloomberg
www.bnz.co.nz/research Page 8Markets Outlook 11 April 2022
Quarterly Forecasts
Forecasts as at 11 April 2022
Key Economic Forecasts
Quarterly % change unless otherwise specified Forecasts
Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
GDP (production s.a.) -0.3 1.3 2.5 -3.6 3.0 0.0 2.0 1.1 0.4 0.3
Retail trade (real s.a.) -2.0 2.5 3.0 -8.2 8.6 -1.0 1.5 1.0 0.4 0.2
Current account (ytd, % GDP) -0.8 -2.5 -3.3 -4.6 -5.8 -6.2 -7.1 -7.4 -7.3 -6.5
CPI (q/q) 0.5 0.8 1.3 2.2 1.4 1.9 1.0 1.6 0.6 0.9
Employment 0.6 0.7 1.0 1.9 0.1 0.2 0.2 0.3 0.2 0.1
Unemployment rate % 4.9 4.6 4.0 3.3 3.2 3.1 3.1 3.0 3.1 3.1
Avg hourly earnings (ann %) 4.6 4.1 4.5 3.6 4.1 4.6 5.1 5.1 4.8 4.5
Trading partner GDP (ann %) 0.8 6.8 9.8 4.2 4.1 3.8 3.9 4.7 4.0 4.0
CPI (y/y) 1.4 1.5 3.3 4.9 5.9 7.0 6.7 6.1 5.2 4.2
GDP (production s.a., y/y)) 0.3 3.2 17.9 -0.2 3.1 1.8 1.3 6.3 3.6 3.9
Interest Rates
Historical data - qtr average Government Stock Swaps US Rates Spread
Forecast data - end quarter Cash 90 Day 5 Year 10 Year 2 Year 5 Year 10 Year Libor US 10 yr NZ-US
Bank Bills 3 month Ten year
2020 Sep 0.25 0.30 0.25 0.65 0.15 0.25 0.60 0.25 0.65 0.02
Dec 0.25 0.25 0.25 0.70 0.15 0.30 0.75 0.20 0.85 -0.15
2021 Mar 0.25 0.30 0.75 1.40 0.40 0.85 1.50 0.20 1.30 0.09
Jun 0.25 0.35 1.00 1.75 0.55 1.20 1.90 0.15 1.60 0.17
Sep 0.25 0.50 1.35 1.75 1.20 1.60 1.95 0.15 1.30 0.41
Dec 0.65 0.80 2.15 2.40 2.10 2.45 2.60 0.15 1.55 0.87
2022 Mar 0.90 1.25 2.60 2.75 2.65 2.95 3.00 0.50 1.95 0.83
Forecasts
Jun 1.75 2.10 3.20 3.20 3.40 3.40 3.40 1.70 2.50 0.70
Sep 2.25 2.65 3.25 3.35 3.40 3.45 3.55 2.20 2.75 0.60
Dec 2.75 3.00 3.25 3.45 3.40 3.45 3.65 2.45 3.00 0.45
2023 Mar 3.00 3.15 3.25 3.45 3.40 3.45 3.65 2.70 3.00 0.45
Jun 3.00 3.15 3.20 3.45 3.30 3.40 3.65 2.95 3.00 0.45
Sep 3.00 3.15 3.15 3.45 3.20 3.35 3.65 3.20 3.00 0.45
Dec 3.00 3.05 3.00 3.40 3.00 3.20 3.60 3.20 3.00 0.40
Exchange Rates (End Period)
USD Forecasts NZD Forecasts
NZD/USD AUD/USD EUR/USD GBP/USD USD/JPY NZD/USD NZD/AUD NZD/EUR NZD/GBP NZD/JPY TWI-17
Current 0.68 0.74 1.09 1.30 124 0.68 0.92 0.63 0.52 85.1 73.9
Jun-22 0.69 0.76 1.11 1.32 124 0.69 0.91 0.63 0.53 86.1 74.0
Sep-22 0.70 0.78 1.13 1.33 122 0.70 0.90 0.62 0.53 85.4 74.2
Dec-22 0.72 0.80 1.15 1.35 120 0.72 0.90 0.63 0.53 86.4 75.6
Mar-23 0.72 0.80 1.17 1.37 118 0.72 0.90 0.62 0.53 85.0 75.2
Jun-23 0.72 0.79 1.18 1.40 116 0.72 0.91 0.61 0.51 83.5 75.0
Sep-23 0.72 0.78 1.22 1.40 114 0.72 0.92 0.59 0.51 82.1 74.7
Dec-23 0.71 0.77 1.23 1.41 112 0.71 0.92 0.58 0.50 79.5 73.6
Mar-24 0.70 0.76 1.25 1.41 110 0.70 0.92 0.56 0.50 77.0 72.6
Jun-24 0.70 0.76 1.26 1.41 108 0.70 0.92 0.56 0.50 75.6 72.3
Sep-24 0.69 0.75 1.25 1.42 108 0.69 0.92 0.55 0.49 74.5 71.5
TWI Weights
13.6% 17.3% 10.1% 3.2% 5.7%
Source for all tables: Statistics NZ, Bloomberg, Reuters, RBNZ, BNZ
www.bnz.co.nz/research Page 9Markets Outlook 11 April 2022
Annual Forecasts
Forecasts March Years December Years
as at 11 April 2022 Actuals Forecasts Actuals Forecasts
2020 2021 2022 2023 2024 2020 2021 2022 2023 2024
GDP - annual average % change
Private Consumption 2.5 0.4 3.1 2.6 2.0 -1.1 6.2 0.6 2.6 2.0
Government Consumption 5.8 7.5 10.4 4.5 0.9 6.8 10.2 6.8 1.0 0.6
Total Investment 2.6 -4.8 8.8 7.8 -0.4 -7.0 9.6 7.9 0.6 1.2
Stocks - ppts cont'n to growth -0.2 -0.2 0.8 -0.4 0.0 -0.8 1.6 -0.4 -0.1 0.0
GNE 2.9 0.4 6.6 3.7 1.2 -1.8 9.4 2.9 1.7 1.5
Exports 0.3 -17.8 5.4 10.7 7.1 -12.7 -3.0 6.5 11.5 4.1
Imports 1.1 -16.1 19.1 10.8 4.3 -16.1 15.7 10.3 6.8 0.4
Real Expenditure GDP 2.7 -0.2 4.0 3.3 1.7 -0.9 5.0 2.3 2.3 2.6
GDP (production) 2.2 -1.4 5.2 3.8 1.7 -2.1 5.6 3.2 2.2 2.6
GDP - annual % change (q/q) 0.4 3.2 1.8 3.9 1.8 0.3 3.1 3.6 1.4 3.0
Output Gap (ann avg, % dev) 1.4 -1.7 0.3 1.3 0.3 -1.9 0.6 1.0 0.5 0.3
Nominal Expenditure GDP - $bn 324 328 354 377 394 324 350 371 390 410
Prices and Employment - annual % change
CPI 2.5 1.5 7.0 4.2 1.7 1.4 5.9 5.2 1.7 2.2
Employment 2.5 0.2 3.2 0.8 0.6 0.6 3.7 0.9 0.4 1.7
Unemployment Rate % 4.2 4.6 3.1 3.1 3.8 4.9 3.2 3.1 3.7 3.9
Wages - ahote 3.2 4.1 4.6 4.5 2.8 2.6 4.6 4.1 4.8 2.9
Productivity (ann av %) 0.2 -1.9 2.2 2.5 1.2 -3.3 3.5 1.4 1.6 1.4
Unit Labour Costs (ann av %) 2.9 4.6 4.2 2.2 2.2 5.7 2.5 3.7 2.1 1.5
House Prices 7.8 24.1 14.6 -11.5 0.0 17.0 25.0 -9.2 -2.5 3.3
External Balance
Current Account - $bn -7.6 -8.2 -22.1 -24.5 -22.0 -2.7 -20.2 -27.0 -22.9 -19.1
Current Account - % of GDP -2.3 -2.5 -6.2 -6.5 -5.6 -0.8 -5.8 -7.3 -5.9 -4.7
Government Accounts - June Yr, % of GDP
OBEGAL (core operating balance) -7.3 -1.3 -5.7 -0.2 0.5
Net Core Crown Debt (excl NZS Fund Assets) 26.3 30.1 37.6 40.1 39.9
Bond Programme - $bn (Treasury forecasts) 29.0 45.0 20.0 18.0 18.0
Bond Programme - % of GDP 9.0 13.7 5.6 4.8 4.6
(1)
Financial Variables
NZD/USD 0.60 0.71 0.69 0.72 0.70 0.71 0.68 0.72 0.71 0.71
USD/JPY 108 109 119 118 110 104 114 120 112 112
EUR/USD 1.11 1.19 1.10 1.17 1.25 1.22 1.13 1.15 1.23 1.23
NZD/AUD 0.97 0.93 0.93 0.90 0.92 0.94 0.95 0.90 0.92 0.92
NZD/GBP 0.49 0.51 0.52 0.53 0.50 0.53 0.51 0.53 0.50 0.50
NZD/EUR 0.55 0.60 0.62 0.62 0.56 0.58 0.60 0.63 0.58 0.58
NZD/YEN 65.1 77.5 81.5 85.0 77.0 73.6 77.4 86.4 79.5 79.5
TWI 68.9 74.8 73.9 75.2 72.6 74.3 73.0 75.6 73.6 73.6
Overnight Cash Rate (end qtr) 0.25 0.25 1.00 3.00 2.75 0.25 0.75 2.75 3.00 2.00
90-day Bank Bill Rate 0.71 0.33 1.45 3.15 2.80 0.26 0.92 3.00 3.05 2.15
5-year Govt Bond 0.80 1.00 2.90 3.25 2.85 0.40 2.20 3.25 3.00 2.50
10-year Govt Bond 1.15 1.75 3.20 3.45 3.30 0.90 2.35 3.45 3.40 3.00
2-year Swap 0.65 0.50 3.00 3.40 2.75 0.28 2.22 3.40 3.00 2.25
5-year Swap 0.80 1.15 3.20 3.45 3.05 0.49 2.56 3.45 3.20 2.70
US 10-year Bonds 0.90 1.60 2.10 3.00 3.00 0.90 1.45 3.00 3.00 3.00
NZ-US 10-year Spread 0.25 0.15 1.10 0.45 0.30 0.00 0.90 0.45 0.40 0.00
(1)
Average for the last month in the quarter
Source for all tables: Statistics NZ, EcoWin, Bloomberg, Reuters, RBNZ, NZ Treasury, BNZ
www.bnz.co.nz/research Page 10Markets Outlook 11 April 2022
Key Upcoming Events
All times and dates NZT
Median Fcast Last Median Fcast Last
Monday Wednesday Continued
NZ Card Spending Total MoM Mar -7.6% JN Core Machine Orders MoM Feb -1.5% -2%
CH PPI YoY Mar 8.8% NZ RBNZ MPR, OCR Apr 1.2% 1.2% 1%
CH CPI YoY Mar 0.9% UK CPI YoY Mar 6.7% 6.2%
UK Monthly GDP (MoM) Feb 0.8% JN BOJ Kuroda Speech at the 97th Trust Companies Assembly
UK Industrial Production MoM Feb 0.7% CH Trade Balance CNY Mar 604.68b
UK Trade Balance GBP/Mn Feb -£7.15b -£16.2b Thursday
JN BOJ Governor Kuroda speaks US PPI Ex Food and Energy YoY Mar 8.4% 8.4%
CH Aggregate Financing CNY Mar 3550.0b 1190.0b CA Bank of Canada Rate Decision Apr 1% 0.5%
CH New Yuan Loans CNY Mar 2740.0b 1230.0b NZ Business NZ Manufacturing PMI Mar 53.6
Tuesday AU Employment Change Mar 30.0k 50k 77.4k
US Fed’s Evans, Bostic, Bowman, Waller speak AU Unemployment Rate Mar 3.9% 3.9% 4%
NZ NZIER QSBO, Net confidence, sa 1Q -34 NZ Govt reviews COVID traffic light settings
NZ Net Migration SA Feb -558 EC ECB Deposit Facility Rate Apr -0.5% -0.5% -0.5%
UK BRC Sales Like-For-Like YoY Mar 2.7% Friday
AU NAB Business Confidence Mar 13 Good Friday
GE CPI YoY Mar 7.3% 7.3% US Retail Sales Advance MoM Mar 0.6% 0.3%
UK ILO Unemployment Rate 3mth Feb 3.8% 3.9% US Initial Jobless Claims Apr 173k 166k
GE ZEW Survey Expectations Apr -48.5 -39.3 US Continuing Claims Apr 1500k 1523k
NZ Border opens to Australians, temp. work & student visa holders US Business Inventories Feb 1.3% 1.1%
US NFIB Small Business Optimism Mar 95 95.7 US U. of Mich. Sentiment Apr 59 59.4
Wednesday US Fed’s Mester, Harker speak
US CPI Ex Food and Energy YoY Mar 6.6% 6.4% Saturday
US Fed’s Brainard speaks US Empire Manufacturing Apr 1 -11.8
NZ Food Prices MoM Mar 0.3% 0.1% US Manufacturing Production Mar 0.5% 1.2%
US Fed’s Barkin speaks
Historical Data
Today Week Ago Month Ago Year Ago Today Week Ago Month Ago Year Ago
CASH AND BANK BILLS SWAP RATES
Call 1.00 1.00 1.00 0.25 2 years 3.61 3.41 3.01 0.46
1mth 1.38 1.34 1.05 0.26 3 years 3.70 3.51 3.16 0.63
2mth 1.53 1.51 1.27 0.29 4 years 3.70 3.52 3.20 0.84
3mth 1.68 1.67 1.49 0.32 5 years 3.70 3.52 3.22 1.07
6mth 2.21 2.19 1.98 0.33 10 years 3.69 3.49 3.28 1.85
GOVERNMENT STOCK FOREIGN EXCHANGE
04/23 2.58 2.48 2.10 0.24 NZD/USD 0.6847 0.6948 0.6746 0.7030
04/25 3.29 3.11 2.76 0.65 NZD/AUD 0.9188 0.9212 0.9385 0.9222
04/27 3.38 3.21 2.89 1.03 NZD/JPY 84.96 85.32 79.73 76.90
04/29 3.42 3.25 2.97 1.43 NZD/EUR 0.6283 0.6335 0.6166 0.5903
05/31 3.44 3.29 3.02 1.73 NZD/GBP 0.5254 0.5297 0.5189 0.5116
04/33 3.45 3.30 3.05 1.97 NZD/CAD 0.8607 0.8676 0.8651 0.8832
04/37 3.49 3.38 3.20 2.28
05/41 3.53 3.44 3.31 2.58 TWI 73.9 74.6 73.5 74.3
GLOBAL CREDIT INDICES (ITRXX)
Nth America 5Y 71 64 75 51
Europe 5Y 77 70 80 51
www.bnz.co.nz/research Page 11Markets Outlook 11 April 2022 Contact Details BNZ Research Stephen Toplis Craig Ebert Doug Steel Jason Wong Nick Smyth Head of Research Senior Economist Senior Economist Senior Markets Strategist Senior Interest Rates Strategist +64 4 474 6905 +64 4 474 6799 +64 4 474 6923 +64 4 924 7652 +64 4 924 7653 Main Offices Wellington Auckland Christchurch Level 4, Spark Central 80 Queen Street 111 Cashel Street 42-52 Willis Street Private Bag 92208 Christchurch 8011 Private Bag 39806 Auckland 1142 New Zealand Wellington Mail Centre New Zealand Toll Free: 0800 854 854 Lower Hutt 5045 Toll Free: 0800 283 269 New Zealand Toll Free: 0800 283 269 National Australia Bank Limited Ivan Colhoun Alan Oster Ray Attrill Skye Masters Global Head of Research Group Chief Economist Head of FX Strategy Head of Markets Strategy +61 2 9237 1836 +61 3 8634 2927 +61 2 9237 1848 +61 2 9295 1196 Wellington New York Foreign Exchange +800 642 222 Foreign Exchange +1 212 916 9631 Fixed Income/Derivatives +800 283 269 Fixed Income/Derivatives +1 212 916 9677 Sydney Hong Kong Foreign Exchange +61 2 9295 1100 Foreign Exchange +85 2 2526 5891 Fixed Income/Derivatives +61 2 9295 1166 Fixed Income/Derivatives +85 2 2526 5891 London Foreign Exchange +44 20 7796 3091 Fixed Income/Derivatives +44 20 7796 4761 This document has been produced by Bank of New Zealand (BNZ). BNZ is a registered bank in New Zealand and is only authorised to offer products and services to customers in New Zealand. Analyst Disclaimer: The Information accurately reflects the personal views of the author(s) about the securities, issuers and other subject matters discussed, and is based upon sources reasonably believed to be reliable and accurate. The views of the author(s) do not necessarily reflect the views of the NAB Group. No part of the compensation of the author(s) was, is, or will be, directly or indirectly, related to any specific recommendations or views expressed. Research analysts responsible for this report receive compensation based upon, among other factors, the overall profitability of the Global Markets Division of NAB. NAB maintains an effective information barrier between the research analysts and its private side operations. Private side functions are physically segregated from the research analysts and have no control over their remuneration or budget. The research functions do not report directly or indirectly to any private side function. The Research analyst might have received help from the issuer subject in the research report. New Zealand: The information in this publication is provided for general information purposes only, and is a summary based on selective information which may not be complete for your purposes. This publication does not constitute any advice or recommendation with respect to any matter discussed in it, and its contents should not be relied on or used as a basis for entering into any products described in it. Bank of New Zealand recommends recipients seek independent advice prior to acting in relation to any of the matters discussed in this publication. Any statements as to past performance do not represent future performance, and no statements as to future matters are guaranteed to be accurate or reliable. Neither Bank of New Zealand nor any person involved in this publication accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication. USA: If this document is distributed in the United States, such distribution is by nabSecurities, LLC. This document is not intended as an offer or solicitation for the purchase or sale of any securities, financial instrument or product or to provide financial services. It is not the intention of nabSecurities to create legal relations on the basis of information provided herein. www.bnz.co.nz/research Page 12
You can also read
