NZ: Business outlook getting too strong for the RBNZ to credibly downplay - BNZ

Craig Ebert, Senior Economist at BNZ, suggests that the New Zealand’s business outlook is getting too strong for the Reserve Bank to credibly downplay.

Key Quotes

“This afternoon’s ANZ survey is the latest case in point. Its net confidence measure jumped to +27.9 in September, from +15.5. Its own-activity expectations strengthened to +42.4, from +33.7. We’ve seasonally adjusted these to get results of around +44 on confidence and +47 regards activity. That puts them further above their long-term averages. Sure, agriculture was part of the move northward in September (unsurprisingly, given the recent rebound in dairy prices). However, there has been much more to the gains than that.

We think the activity indicators are further evidence of why the RBNZ should not want to ease any further. But the Bank is obviously putting a lot of weight on near-term CPI inflation and its potential impact of inflation expectations. And today’s business survey news on these is nothing to get in the way. So we should probably stick with our November rate cut call for the meantime. However, we should also point out that the broader case for further easing is getting even murkier.”