Gradual pickup in economic conditions – Westpac
Fundamental Forex Analysis

Gradual pickup in economic conditions – Westpac

Satish Ranchhod, senior economist at Westpac, explains that December’s Quarterly Survey of Business Opinion indicated that economic conditions in New Zealand have been picking up, but only gradually.

Key Quotes

“December’s Quarterly Survey of Business Opinion indicated that economic conditions in New Zealand have been picking up, but only gradually. Confidence in the business sector remains low (General business confidence rose from -35 to a still subdued -26).”

“Businesses reported sluggish trading activity through the final months of 2019. However, they are more optimistic about how economic conditions will play out in the early part of 2020. The net number of businesses expecting an improvement in trading conditions over the coming months rose from 0 to +7. That’s consistent with moderate GDP growth through the March quarter.”

“While businesses have been increasing prices for their outputs, costs have been rising more rapidly. The resulting squeeze on profits is likely to continue in the new year.”

“Today’s report was a little less upbeat than other recent gauges of business activity. However, it still looks like the New Zealand economy has turned a corner and conditions are improving, though the recovery in growth may be gradual in the near term.”

“From the perspective of the RBNZ, they are looking at a picture of a gradual firming in activity and inflation that is close to 2%. That supports our expectation that the RBNZ will keep the Official Cash Rate on hold at the February policy meeting.”

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