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  1. #1
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    May 2004
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    Default ASB Business Weekly Economic Report 18 May 2009

    Monday, 18 May 2009

    Car-less days

    Retail spending in first quarter of the year was very weak. The dollar value of sales fell 1.5% from Q4, with ex-automotive sales up a marginal 0.3%. However, retail volumes (i.e. sales adjusted for prices) were much weaker than expected, down 2.9%.

    Essentially we spent less money than in 2008 Q4, but it bought even less. The drag on the economy from weak retailing nudged our Q1 GDP forecast down to -0.9% for the quarter.

    The retail story has been increasingly revealing itself in recent months. Anything discretionary, housing related or exposed to tourism saw volumes contract sharply.

    However, cutbacks continue to be most savage for car purchases: sales volumes fell 11% over the quarter and have fallen steadily for 2 years now. Weakness in the car industry is a global phenomenon: vehicles usually are the biggest purchase households make outside of a house and are often bought with finance. That gives cars a double-whammy amidst a credit crisis and the current environment of uncertainty. In NZ’s case, the dramatic plunge in the exchange rate against the yen and greater competition for used cars in the Japanese market (including Japanese owners hanging onto their cars for longer) has started to put some upward pressure on the cost of freshly-sourced cars.

    The main domestic news this week will be tourism and migration flows. Clear trends are emerging in response to the global crisis. On the migration front there is a noticeable drop in departures to Australia, the main driver of higher net migration inflows, as NZers become increasingly aware that job prospects across the ditch have deteriorated noticeably as Australia also feels the pinch.

    Departures to the UK have also started to slow, though not as dramatically. Tourism arrivals from hard-hit Asian countries such as Japan and South Korea are weakening considerably. In contrast, arrivals from the US and UK are softening at a much slower pace, though the slowdown in arrivals from these countries is likely to be more prolonged. The bright spot for tourism is that Australian visitor arrivals have to date held up well, though Australians don’t tend to stay as long and loosen their wallets as much as Northern Hemisphere visitors who have much further to come.

    In the US key highlights will be housing starts and permits – slight lifts on both fronts are expected as US housing figures bounce around their lows. Japanese Q1 GDP is expected to have shrunk 4.3%, slightly faster than it did in Q4, though that may mark the worst quarter for the economy there. The BoE and Fed will be releasing minutes of their recent meetings and the Bank of Japan’s announcement is on Friday.
    Patience is a virtue.


 

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