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25 Feb 2014
NZ inflation expectations in line with estimates
FXStreet (Bali) - The Reserve Bank of New Zealand (RBNZ) Survey of Expectations, conducted externally by the Nielsen Company on the RBNZ’s behalf, came at a median of 2.30% in Q1 2014.
March 2014 quarter report
Both one and two-year-ahead expectations of Consumers Price Index (CPI) inflation are little moved since last quarter. The one-year series increased from 1.94 to 2.03 percent on a mean basis. The median increased from 1.90 percent to 2.00 percent.
The two-year series is effectively unchanged again, falling just 0.01 percentage points from 2.34 to 2.33 percent. The median fell from 2.40 to 2.30 percent.
Respondents are also asked what they believe quarterly CPI inflation will be for the current and next quarters. A quarterly percentage increase of 0.49 percent is expected for the March 2014 quarter (0.53 percent last survey), and 0.54 percent for the June 2014 quarter. These expected quarterly increases imply annual inflation rates of 1.7 and 2.1 percent for the years to March 2014 and June 2014 respectively.
Monetary conditions are currently perceived as being easy, however throughout the year firmer conditions are expected as the number of respondents expecting easy monetary conditions progressively reduces across the expectation horizon.
At the time the survey was completed the net percentage of respondents believing monetary conditions to be easier than neutral was 57 percent (compared to 40 percent last quarter). By June 2014 the figure moves to 28 percent. By the end of 2014, tighter than neutral monetary conditions are expected by a net 7 percent of respondents.
Respondents’ one-year-ahead expectations of real annual growth in Gross Domestic Product (GDP) continue to rise. One-year expectations increased from 3.0 percent to 3.2 percent. At the two-year horizon annual growth expectations were unchanged at 2.9 percent.
The latest Statistics New Zealand data indicates real production-based GDP increased 3.5 percent between September 2012 and September 2013 (annual percentage change).
Quarterly growth of 0.8 percent is expected for the December 2013 and March 2014 quarters.
Small increase in one-year average hourly earnings growth predicted
One-year-ahead hourly earnings growth expectations rose from 2.45 to 2.55 percent, the two-year series is unchanged.
Unemployment rate expectations fall: One and two-year expectations of the unemployment rate have fallen. The one-year expectation has dropped from 5.9 to 5.6 percent, the two-year from 5.6 to 5.4 percent. The latest official Statistics New Zealand figure is 6.0 percent for the December 2013 quarter.
Higher interest rates are expected.: The 90-day bank bill rate is expected to be 3.0 percent at the end of March 2014, which is slightly higher than the rate prevailing at the time the survey was taken. By December 2014 it is thought 90-day rates will have increased to 3.6 percent.
10-year government security yields are expected to be around 5.1 percent at the end of December 2014, implying a positive yield gap of 1.5 percent with the expected 90-day rate.
Exchange rates close to current levels are expected: A US dollar exchange rate of 0.82 is expected for the NZ dollar at the end of March 2014, and to be about two cents lower by September 2014. An Australian dollar exchange rate of 0.87 is predicted for the NZ Dollar at the end of September 2014, a little lower than where the rate was at the time the survey was completed
March 2014 quarter report
Both one and two-year-ahead expectations of Consumers Price Index (CPI) inflation are little moved since last quarter. The one-year series increased from 1.94 to 2.03 percent on a mean basis. The median increased from 1.90 percent to 2.00 percent.
The two-year series is effectively unchanged again, falling just 0.01 percentage points from 2.34 to 2.33 percent. The median fell from 2.40 to 2.30 percent.
Respondents are also asked what they believe quarterly CPI inflation will be for the current and next quarters. A quarterly percentage increase of 0.49 percent is expected for the March 2014 quarter (0.53 percent last survey), and 0.54 percent for the June 2014 quarter. These expected quarterly increases imply annual inflation rates of 1.7 and 2.1 percent for the years to March 2014 and June 2014 respectively.
Monetary conditions are currently perceived as being easy, however throughout the year firmer conditions are expected as the number of respondents expecting easy monetary conditions progressively reduces across the expectation horizon.
At the time the survey was completed the net percentage of respondents believing monetary conditions to be easier than neutral was 57 percent (compared to 40 percent last quarter). By June 2014 the figure moves to 28 percent. By the end of 2014, tighter than neutral monetary conditions are expected by a net 7 percent of respondents.
Respondents’ one-year-ahead expectations of real annual growth in Gross Domestic Product (GDP) continue to rise. One-year expectations increased from 3.0 percent to 3.2 percent. At the two-year horizon annual growth expectations were unchanged at 2.9 percent.
The latest Statistics New Zealand data indicates real production-based GDP increased 3.5 percent between September 2012 and September 2013 (annual percentage change).
Quarterly growth of 0.8 percent is expected for the December 2013 and March 2014 quarters.
Small increase in one-year average hourly earnings growth predicted
One-year-ahead hourly earnings growth expectations rose from 2.45 to 2.55 percent, the two-year series is unchanged.
Unemployment rate expectations fall: One and two-year expectations of the unemployment rate have fallen. The one-year expectation has dropped from 5.9 to 5.6 percent, the two-year from 5.6 to 5.4 percent. The latest official Statistics New Zealand figure is 6.0 percent for the December 2013 quarter.
Higher interest rates are expected.: The 90-day bank bill rate is expected to be 3.0 percent at the end of March 2014, which is slightly higher than the rate prevailing at the time the survey was taken. By December 2014 it is thought 90-day rates will have increased to 3.6 percent.
10-year government security yields are expected to be around 5.1 percent at the end of December 2014, implying a positive yield gap of 1.5 percent with the expected 90-day rate.
Exchange rates close to current levels are expected: A US dollar exchange rate of 0.82 is expected for the NZ dollar at the end of March 2014, and to be about two cents lower by September 2014. An Australian dollar exchange rate of 0.87 is predicted for the NZ Dollar at the end of September 2014, a little lower than where the rate was at the time the survey was completed