Sharechat Logo

NZ firms trim inflation forecasts, see jobless above 6% for 2 years

Tuesday 27th November 2012

Text too small?

New Zealand financial institutions are picking a slower pace of price increases in the coming year and aren't betting on the unemployment rate dropping below 6 percent for two years, according to a Reserve Bank's survey.

Respondents in the central bank's survey of expectations sliced 20 basis points from their one-year median forecast for the consumer price index to 1.77 percent, below governor Graeme Wheeler's long-term aim under the policy target agreement, and the two-year ahead median expectation at 2.3 percent, down by the same amount.

Respondents are picking CPI to rise 0.3 percent and 0.5 percent in the December and March quarters, implying annual inflation of 1.5 percent and 1.4 percent respectively.

"Monetary conditions are currently perceived as being easy, and are expected to remain easy over the forecast horizon," the survey said.

The subdued inflation outlook comes after third-quarter CPI figures showed consumer prices rose at an annual pace of 0.8 percent, falling short of the central bank's target band of between 1 percent and 3 percent.

Last month, governor Wheeler said he was keeping close tabs on inflation in his debut monetary policy statement, and would monitor indicators such as pricing intentions and inflation expectations data closely over coming months.

Respondents were gloomier about the labour market in coming year, with one-year ahead expectations for unemployment rising to 6.8 percent from 6.3 percent in the September survey, and the two-year forward horizon increasing to 6.3 percent from 5.9 percent.

Earnings growth expectations were pared by 10 basis points to 2.4 percent and 2.7 percent for the one-year and two-year outlooks respectively.

Government figures showed the jobless rate unexpectedly rose to a 13-year high 7.3 percent in the September quarter with a flat labour market in Auckland and falling full-time payrolls. Economists have been sceptical of the latest reading, which has surprised them with three quarterly increases in the headline unemployment figure.

Firms trimmed 0.1 of a percentage point from their one-year forecast for annual gross domestic product growth to 2.1 percent and held two-year expectations at 2.3 percent.

The 90-day bank bill rate is expected to be 2.7 percent by the end of the year, rising to 2.8 percent by September 2013. The bill recently traded at 2.66 percent.

Firms predict the yield on the 10-year government bond will be 3.8 percent by September next year. The yield was recently at 3.54 percent.

The New Zealand dollar is expected to be 81 US cents by the end of March, falling to 80 cents by September, and is predicted to be 80 Australian cents by the end of September next year. The currency recently traded at 82.24 US cents and 78.44 Australian cents.

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report