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TD: NZ: Migration, Credit Cards And Consumer Confidence - 21 October 2010

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Fuseworks Media
Fuseworks Media
TD: NZ: Migration, Credit Cards And Consumer Confidence - 21 October 2010

TD Securities

NZ Migration, credit cards and consumer confidence

Permanent net immigration inflows increased to 1,070 in September (880 in August).

This series looks to have bottomed for now, when a few months back it seemed headed for negative territory. New Zealand's small population (4.2m) and large number of citizens living offshore (~1m) means its economy is more sensitive to permanent migration flows than most other developed economies.

Migration flows also show a pretty good correlation with relative economic performance of New Zealand vs the rest of the world, Australia and the UK in particular. When the global recovery was on track, migration gains were quickly declining. Now that the global economic recovery has stalled, New Zealanders are putting off that working holiday or returning home.

Credit card spending increased 0.9%/mth in September (0.6% in August).

This is the best performance in three months so bodes a little better for September retail sales (which is broader because it captures cash transactions) due 15 November. However, the relationship between credit card and retail sales is rather weak, so don't put much store in it. Retail sales growth has zig-zagged all year. The most accurate forecasting tool has been to take the prior reading and change number sign (our models are much more complex of course).

Consumer confidence eased to 113.6 in October (116.4 in September).

This is the worst reading since August 2009. Interestingly, though, except for "is now a good time to buy a major household item?", all the secondary questions they asked showed improving responses rather than declining.

The 'positive' to take from this report is that the forward-looking questions all display optimism. Family finances a year ahead improved to 31 from 28 (best since May); and economy a year ahead and 5 years ahead improved to 10 from 5 and 44 from 43 respectively. So while New Zealand's economic recovery won't happen overnight, it will happen.

Markets not interested in second tier data

This raft of second tier data did not elicit a response in currency or fixed income markets.

The major influences on the NZD today were US Treasury Secretary Tim Geithner's (misinterpreted) comments that sent the currency down; and China data that sent it back up. The NZD weakened over the day in Asia against both the USD and AUD, despite receiving a boost from Chinese activity and inflation data that was no worse or better than expected. Since London walked in the NZD has traded higher from $US0.7481 to $0.7512.

The focus is next week's OCR review

Nothing today will have much bearing on the RBNZ's deliberations on October 28. The Governor is widely expected to leave the cash rate unchanged (at 3%) and refer to the fragility of the local economy and the uncertainly surrounding the near-term outlook for New Zealand and the world economy more broadly.

To really make an impact the RBNZ may choose to drop its tightening bias altogether. With the interest rate sector of the economy (consumer spending and housing activity) near comatose, the prospect of higher cash rates is clearly off the agenda for several more months.

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