Local developments largely took a back seat last week to the unfolding dramas of China’s share price plunge and Greece’s potential exit from the euro zone. While a sense of calm was starting to return by the end of the week, both situations remain fluid, and the consequences for New Zealand of a more serious turn of events are uncertain.

The China story in particular is cause for concern for New Zealand, as a major exporter of primary products to Chinese consumers. Of course, at times like this, financial prices tend to be pushed around by the need to liquidate positions, rather than any view on their fundamentals. That can sometimes lead to perverse outcomes – such as the New Zealand dollar actually finishing the week higher, reflecting the extent of short positioning in the currency in recent times. Nevertheless, it’s clear that the market views China’s woes as a poor backdrop for New Zealand’s commodity exports – dairy futures are implying another steep fall in prices at this week’s Global Dairy Trade auction.

Last week’s data continued the recent theme of slowing momentum in the New Zealand economy. The June Quarterly Survey of Business Opinion showed that a net 7% of businesses expect conditions to improve over the coming six months. That’s down from March’s 20% result, and well below the results seen over the past year.
In fact, business confidence hasn’t been this low since 2012. That theme continued throughout the survey, with businesses reporting slowing activity, reduced hiring and investment plans, and little in the way of increasing prices or margins.

The results were varied across sectors. On the positive side, the building industry appears to be powering ahead (much more so than was suggested by the monthly ANZ business survey). While building consents have flattened out in the last year, there is a significant amount of work still in the pipeline, for both the Christchurch rebuild and the rest of the country. Manufacturers were concerned about the wider outlook, but were more upbeat about their own performance. Notably, these two sectors reported that capacity utilisation was at its highest in the history of the survey going back to 1961, which stands in contrast with the evidence elsewhere of a lack of inflation pressures.

All information contained on this website is given in good faith and has been derived from sources believed to be accurate. However, the information is selective and neither Westpac nor any other company in the Westpac Group have verified the information, which may not be complete or accurate for your purposes. Those companies make no representation or warranty of any kind as to the accuracy or completeness of the information. It is general information only and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. Neither Westpac nor any other company in the Westpac Group nor any of their directors, employees and associates guarantees the security of this website, gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way including by reason of negligence for, errors in, or omissions from, the information on this website and does not accept any liability for any loss or damage, however caused, as a result of any person relying on any information on the website or being unable to access this website. This disclaimer is subject to any applicable contrary provisions of the Australian Securities and Investments Commission Act and Trade Practices Act.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stabilizes near 1.0800 as trading action turns subdued

EUR/USD stabilizes near 1.0800 as trading action turns subdued

EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.

EUR/USD News

GBP/USD extends sideways grind above 1.2600

GBP/USD extends sideways grind above 1.2600

GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.

GBP/USD News

Gold pulls away from daily highs, holds above $2,200

Gold pulls away from daily highs, holds above $2,200

Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.

Gold News

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase. 

Read more

Portfolio rebalancing and reflation trades emerge into Q2

Portfolio rebalancing and reflation trades emerge into Q2

Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.

Read more

Majors

Cryptocurrencies

Signatures