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The bad news continues to keep right on coming.
Interest Rates Bite Nervous Consumers
23/06/2004 12:17 PM The Independent
A host of indicators point to a continuing economic expansion across the country, BERL analysts say in forecasts published today.
BERL reckons GDP growth will be 3% in the year to March (the official statistics will be published on Friday), and growth will continue at rates of 2.7%, 2.9% and 3.2% over the next three years.
But Westpac economists are less bullish. According to the Westpac McDermott Miller June quarter consumer confidence survey, released this morning, consumer confidence remains at a high level but is falling.
McDermott Miller director Richard Miller says the fall in confidence is largely due to a big drop in the numbers of consumers buying major household items.
"Some consumers appear to have run out of money to spend and are feeling the bite of increased interest rates," he says. "While we expect consumers to remain optimistic in the coming quarter, retail sales have plateaued and consumer confidence may also in the months ahead."
Westpac chief economist Brendan O'Donovan says the falling dollar and rising interest rates are impacting differently on consumer perceptions in different age groups.
Confidence fell 8.1 points in the 18-29 age group while it rose 1.9 points in the 50+ age group.
"The effect of rising interest rates on people who are more likely to have mortgages and those who rely on interest for income is stark,"
O'Donovan says.
In its analysis, BER"s forecasts of GDP growth include export volume growth and strong growth in tourism, as well as on-going growth in the domestic economy through increases in construction, investment and consumption.
The labour market remains the key element in the new forecasts.
The challenge will be finding enough workers to sustain the growth rates, says BERL director Kel Sanderson.
Among the indicators underpinning BERL's buoyant outlook are retail sales turnover (now some 8.2% up on year-earlier levels), new dwelling consents (22% higher), capital imports (more than 27% higher in value terms), new car registrations (nearly 11% higher), machinery and equipment export receipts (up 10%), total merchandise exports (up 2.8% in volume terms), non-housing investment spending (up more than 11%).
There are signs, too, of the world economy picking up steam and the new-found optimism in farming is reflected in Fonterra's upwards revision of current and new season payouts.
BERL forecasts an easing in employment growth from the 60,000 increase recorded last year to around 40,000- 50,000 a year over 2005 and 2006.
This represents employment growth rates of around 2.5% a year.
Even a pessimistic view on productivity would still result in overall GDP growth remaining above 2%, BERL contends.
Financial conditions are the main sticking point in BERL's crystal ball.
The Reserve Bank is expected to flex its muscle, as inflation threatens to rise above 3% early next year.
But the steep rise in the official cash rate signalled in the bank's June monetary policy statement is described as "more hawkish than necessary," because the housing market appears to be self-correcting.
BERL sees 90-day rates peaking at about 6.6% in the March quarter next year but believes the $Kiwi is likely remain around current levels over the rest of this year followed by a mild depreciation against the major currencies over 2006 and 2007.
23/06/2004 12:17 PM The Independent
A host of indicators point to a continuing economic expansion across the country, BERL analysts say in forecasts published today.
BERL reckons GDP growth will be 3% in the year to March (the official statistics will be published on Friday), and growth will continue at rates of 2.7%, 2.9% and 3.2% over the next three years.
But Westpac economists are less bullish. According to the Westpac McDermott Miller June quarter consumer confidence survey, released this morning, consumer confidence remains at a high level but is falling.
McDermott Miller director Richard Miller says the fall in confidence is largely due to a big drop in the numbers of consumers buying major household items.
"Some consumers appear to have run out of money to spend and are feeling the bite of increased interest rates," he says. "While we expect consumers to remain optimistic in the coming quarter, retail sales have plateaued and consumer confidence may also in the months ahead."
Westpac chief economist Brendan O'Donovan says the falling dollar and rising interest rates are impacting differently on consumer perceptions in different age groups.
Confidence fell 8.1 points in the 18-29 age group while it rose 1.9 points in the 50+ age group.
"The effect of rising interest rates on people who are more likely to have mortgages and those who rely on interest for income is stark,"
O'Donovan says.
In its analysis, BER"s forecasts of GDP growth include export volume growth and strong growth in tourism, as well as on-going growth in the domestic economy through increases in construction, investment and consumption.
The labour market remains the key element in the new forecasts.
The challenge will be finding enough workers to sustain the growth rates, says BERL director Kel Sanderson.
Among the indicators underpinning BERL's buoyant outlook are retail sales turnover (now some 8.2% up on year-earlier levels), new dwelling consents (22% higher), capital imports (more than 27% higher in value terms), new car registrations (nearly 11% higher), machinery and equipment export receipts (up 10%), total merchandise exports (up 2.8% in volume terms), non-housing investment spending (up more than 11%).
There are signs, too, of the world economy picking up steam and the new-found optimism in farming is reflected in Fonterra's upwards revision of current and new season payouts.
BERL forecasts an easing in employment growth from the 60,000 increase recorded last year to around 40,000- 50,000 a year over 2005 and 2006.
This represents employment growth rates of around 2.5% a year.
Even a pessimistic view on productivity would still result in overall GDP growth remaining above 2%, BERL contends.
Financial conditions are the main sticking point in BERL's crystal ball.
The Reserve Bank is expected to flex its muscle, as inflation threatens to rise above 3% early next year.
But the steep rise in the official cash rate signalled in the bank's June monetary policy statement is described as "more hawkish than necessary," because the housing market appears to be self-correcting.
BERL sees 90-day rates peaking at about 6.6% in the March quarter next year but believes the $Kiwi is likely remain around current levels over the rest of this year followed by a mild depreciation against the major currencies over 2006 and 2007.