Emerging Asia Chart Book 1 EMERGING ASI A CHART BOO K 26 th Mar. 2014 Asia's consumer sector is picking up After enduring a slump for much of 2013, retail sales in Emerging Asia (ex. China) appear to have turned a corner. Growth has picked up strongly across most countries in the region in recent months. With inflation low and monetary policy likely to remain fairly accommodative across the region, the rebound has further to run. The main factor that will hold back spending in some countries is high household debt, which means that Singapore and Thailand are likely to continue to miss out on Asia's retail spending recovery. (See overview on page 2.) Korea's manufacturing PMI fell back below 50 in February, signalling contraction for the first time since September last year. In Taiwan, political protests have erupted over proposals to liberalise services trade with China. Singapore’s consumer sector continues to struggle (pages 3-5). Sluggish domestic demand remains a weak spot for India's economy. Pakistan’s currency recorded the largest gains against the US dollar in the region over the past month. Sri Lanka's economy has continued to experience rapid growth (pages 6-8). Indonesia’s February inflation fell to the lowest level since June 2013, when fuel prices were hiked. Malaysia's exports have continued to record double-digit growth rates. Manufacturing output growth in the Philippines started 2014 on a weaker note. The chances of a protracted political gridlock in Thailand have increased following the constitutional court's ruling that the general election in February was unconstitutional. Vietnam's central bank cut rates at its March meeting to boost growth (pages 9-13). Australia's GDP growth picked up in the final quarter of 2013, with net exports and private consumption as the key drivers. The Reserve Bank of New Zealand became the first central bank of a developed economy to hike its policy rate since 2011. (pages 14-15). Note: Mainland China and Hong Kong are covered in our China Chart Book Mark Williams Chief Asia Economist +44 (0)20 7811 3903 [email protected]Gareth Leather Asia Economist +44 (0)20 7811 3916 [email protected]Daniel Martin Asia Economist +65 6595 1510 [email protected]Krystal Tan Asia Economist +65 6595 5195 [email protected]Miguel Chanco Asia Economist +65 6595 1516 [email protected]
Transcript
Emerging Asia Chart Book 1
EMERGING ASIACHART BOOK 26
th M
ar. 2
014
Asia's consumer sector is picking up
After enduring a slump for much of 2013, retail sales in Emerging Asia (ex.
China) appear to have turned a corner. Growth has picked up strongly across
most countries in the region in recent months. With inflation low and monetary
policy likely to remain fairly accommodative across the region, the rebound has
further to run. The main factor that will hold back spending in some countries is
high household debt, which means that Singapore and Thailand are likely to
continue to miss out on Asia's retail spending recovery. (See overview on page
2.)
Korea's manufacturing PMI fell back below 50 in February, signalling contraction
for the first time since September last year. In Taiwan, political protests have
erupted over proposals to liberalise services trade with China. Singapore’s
consumer sector continues to struggle (pages 3-5).
Sluggish domestic demand remains a weak spot for India's economy. Pakistan’s
currency recorded the largest gains against the US dollar in the region over the
past month. Sri Lanka's economy has continued to experience rapid growth
(pages 6-8).
Indonesia’s February inflation fell to the lowest level since June 2013, when fuel
prices were hiked. Malaysia's exports have continued to record double-digit
growth rates. Manufacturing output growth in the Philippines started 2014 on a
weaker note. The chances of a protracted political gridlock in Thailand have
increased following the constitutional court's ruling that the general election in
February was unconstitutional. Vietnam's central bank cut rates at its March
meeting to boost growth (pages 9-13).
Australia's GDP growth picked up in the final quarter of 2013, with net exports
and private consumption as the key drivers. The Reserve Bank of New Zealand
became the first central bank of a developed economy to hike its policy rate
since 2011. (pages 14-15).
Note: Mainland China and Hong Kong are covered in our China Chart Book
Since the last Chart Book, Australia, New Zealand, India and Sri Lanka have reported Q4 GDP data. Growth accelerated in Australia and Sri Lanka, but slowed in New Zealand and India. On an aggregate level, GDP growth in Emerging Asia (ex. China) came in at 4.5% y/y in Q4, just slightly faster than the 4.4% recorded in Q3. Our GDP tracker suggests growth stayed fairly flat at the start of 2014 (1). While retail sales growth has been on an upward trend (2), industrial production growth has been lacklustre. What's more, the most recent set of PMIs point to a slight deterioration in the region's manufacturing conditions in February (3).
Inflation has fallen back across most of Asia, with the regional average easing to 3.6% y/y in February, from 4.0% the month before. Only in Indonesia and Pakistan does inflation remain above 5% (4). The central banks of Thailand and Vietnam cut their policy rates in March, while the Reserve Bank of New Zealand became the first central bank of a developed country to hike since 2011. All other central banks in the region have left rates on hold.
Asian currencies have been a mixed bag over the past month (5). The Pakistani rupee was the strongest performer, reflecting improving confidence in its economy. Equities generally fared better, with only Korea and Australia recording loses (6).
1. GDP and GDP Tracker (% y/y) 2. Retail Sales (3m, % y/y)
-2
0
2
4
6
8
10
12
-2
0
2
4
6
8
10
12
2001 2003 2005 2007 2009 2011 2013
CE Emerging Asia GDP Tracker (Excl. China)
Emerging Asia GDP (Excl. China)
-15
-10
-5
0
5
10
15
20
25
-15
-10
-5
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014
3. Headline PMIs 4. Consumer Prices (% y/y)
46
48
50
52
54
56
46
48
50
52
54
56
India Korea Taiwan Australia SingaporeIndonesia Vietnam
South Korea The final estimate of Korea's Q4 GDP, released today, confirmed that the economy grew by 3.7% y/y, which was a
slight downward revision from the previous estimate, but still the fastest pace of y/y growth in nearly three years
(1). However, more recent monthly data suggest the recovery may have faltered slightly in the first months of 2014.
The manufacturing PMI fell back below 50 in February (2), while industrial production fell by 3.8% y/y in January
(3). That said, the shift in the timing of Chinese New Year means we shouldn't read too much into these figures.
The biggest data surprise of the last month was a jump in the unemployment rate to 3.9% in February, from 3.2%
in January (4). However, the increase was not quite as negative as it would appear at face value. Employment
actually rose by 113,000. The unemployment rate only increased because of an sharp rise in the labour force
participation rate, to 63.0%, the highest in at least a decade. The increase in the number of job seekers could
reflect growing optimism about the recovery.
The Bank of Korea (BoK) left interest rates on hold at its March meeting for the tenth consecutive month in what was Kim Choongsoo’s final meeting as central bank governor. The handover to Lee Ju-yeol, a former deputy governor, at the end of the month is unlikely to lead to any major change in policy. With inflation very low (5) we continue to expect rates to be left at their current levels until at least the end of the year (6).
1. GDP 2. Manufacturing PMI
-5
-4
-3
-2
-1
0
1
2
3
4
5
-9
-6
-3
0
3
6
9
03 04 05 06 07 08 09 10 11 12 13
% q/q (seasonally-adjusted, RHS)
% y/y (LHS)
49
50
51
52
49
50
51
52
PMI Index Output New Orders Employment
Nov-13 Dec-13 Jan-14 Feb-14
Contraction
Expansion
3. Industrial Production 4. Employment & Unemployment
-12
-8
-4
0
4
8
12
16
-30
-20
-10
0
10
20
30
40
2009 2010 2011 2012 2013 2014
% m/m (seas. adj., RHS)
% y/y (non-seas. adj., LHS)
-300
-200
-100
0
100
200
300
2.5
3.0
3.5
4.0
4.5
5.0
5.5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Employment m/m Change (000s, RHS)
Unemployment Rate (%, LHS)
5. Consumer Prices (% y/y) 6. Interest Rates (%)
0
2
4
6
8
0
2
4
6
8
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Headline Core (exc. raw food and fuel)
Mid-point of the BoK'sinflation target range
0
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
03 04 05 06 07 08 09 10 11 12 13 14 15 16
BoK Base Rate
US Fed Funds Rate
CE Forecasts
Sources – Thomson Datastream, Markit, CE
Emerging Asia Chart Book 4
Singapore
Changes in the timing of Chinese New Year mean that monthly data on Singapore's economy tend to be volatile at the start of the year. However, the general trend appears to be positive. A dip in non-oil domestic exports in January was followed by a rebound in February (1). Similarly, the fall in industrial production in January is likely to prove to be a blip. The manufacturing PMI, at least, suggests the sector is expanding modestly (2).
Retails sales remain a weak point in the economy (3). Along with a dip in visitor arrivals, a slowdown in consumer credit growth appears to be a factor dampening consumer spending (4). The Monetary Authority of Singapore (MAS) has been eager to see credit growth slow, and has tightened lending standards in some areas, such as car and mortgage loans. The measures have helped to dampen the housing market (5).
Consumer price inflation fell to just 0.4% y/y in February (6), the lowest since January 2010, largely owing to a drop in the prices of car licences, which have been very volatile in the last couple of years. We doubt that the drop in inflation will be enough to trigger monetary loosening by the MAS at its biannual meeting next month. The central bank remains concerned about the medium-term inflation outlook, given the tight labour market. We expect it to continue targeting a “modest and gradual appreciation” of the nominal effective exchange rate.
1. Non-oil Domestic Exports 2. Manufacturing PMI
-20
-15
-10
-5
0
5
10
15
20
-45
-30
-15
0
15
30
45
2008 2009 2010 2011 2012 2013 2014
% m/m (RHS)
% y/y (LHS)
49
50
51
52
53
49
50
51
52
53
Headline Output New orders
Nov-13 Dec-13 Jan-14 Feb-14
Expanding
Contracting
3. Retail Sales 4. Bank Loans & Advances (% y/y)
-12
-9
-6
-3
0
3
6
9
12
-12
-9
-6
-3
0
3
6
9
12
2006 2007 2008 2009 2010 2011 2012 2013 2014
% 3m/3m
% 3m y/y
-20
-10
0
10
20
30
40
50
-20
-10
0
10
20
30
40
50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
TotalBusinessConsumers
5. House Prices and Rents (% y/y) 6. Consumer Prices (% y/y)
-30
-20
-10
0
10
20
30
40
50
-30
-20
-10
0
10
20
30
40
50
00 01 02 03 04 05 06 07 08 09 10 11 12 13
House Prices Rents
-2
0
2
4
6
8
10
12
-2
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Headline CPI
MAS Core CPI (exc. accomodation & private transport)
Sources – Thomson Datastream, Ministry of Finance
Emerging Asia Chart Book 5
Taiwan
Political protests have erupted over proposals to liberalise services trade with China. The deal is a successor to the Economic Co-operation Framework Agreement (ECFA) of mid-2010. The earlier deal has not delivered the benefits its backers had hoped for. Taiwan’s exporters have lost market share in China since it was signed (1).
The economy appears to have carried reasonable momentum into the start of the year. Our GDP tracker, which is compiled using monthly data on spending, production and exports, is pointing to growth of around 2.5% in Q1, down only slightly from the 2.9% expansion in the last quarter of 2013 (2). The manufacturing PMI is also still pointing to healthy expansion (3), despite a slight fall in February. Trade data have been volatile in the first two months of the year, reflecting the year-to-year shift in the timing of Chinese New Year, but the broad picture is that export growth has been very weak for two years and is showing little sign of picking up (4).
The central bank (CBC) has kept interest rates on hold at a low of just 1.875% since the middle of 2011 and there is little chance of a change at tomorrow's meeting. The CBC’s biggest concern is rapid growth in house prices, both in the capital city, Taipei, and in the rest of the country (5). But with inflation still very subdued, at 0.0% y/y in February (6), the central bank will probably opt to keep monetary policy settings unchanged until it is confident the recent upturn in the economy is well entrenched.
1. Share of China’s Imports (%, 12m sum) 2. GDP (% y/y)
5. House Prices (% y/y) 6. Consumer Prices (% y/y)
-10
-5
0
5
10
15
20
25
30
-10
-5
0
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012 2013
Nationwide
Taipei City
-4
-2
0
2
4
6
8
-4
-2
0
2
4
6
8
2006 2007 2008 2009 2010 2011 2012 2013 2014
Headline CPI exc. selected food & energy
Sources – Thomson Datastream, Markit, Capital Economics
Emerging Asia Chart Book 6
India India's economy remains weak. GDP data for the fourth quarter of 2013 showed growth dipping marginally to
4.7% y/y, from 4.8% in the third quarter. Growth remains well below the long-run average of 7% (1). Sluggish domestic demand is still a sticking point for the economy. Household spending and investment activity both faltered at the end of last year after a short-lived rebound (2).
Having said that, more timely data suggest the economy may be moving in the right direction. Industrial production returned to positive growth in January, albeit just barely, after three straight months of contraction (3). PMI surveys also point to a slight bounce in the near term (4). Meanwhile, the recovery in exports is largely intact. Apart from jewellery and oil exports, which have been constrained by curbs on gold imports and weak global oil price growth, respectively, India's exports have continued to rise strongly (5).
Moderating price pressures are also encouraging. Both measures of headline inflation have fallen sharply in recent months, with consumer price inflation dropping to a more than two-year low of 8.1% y/y in February (6). However, rate cuts are unlikely to come into the picture just yet. Headline inflation is still a touch above the 8% mark the central bank wants it to hit by January 2015, and core inflation proving difficult to tame.
1. GDP (% y/y) 2. GDP by Expenditure (% y/y)
0
2
4
6
8
10
12
0
2
4
6
8
10
12
00 02 04 06 08 10 12 14
Average Since 2000-20
-10
0
10
20
30
40
-6
-3
0
3
6
9
12
2006 2007 2008 2009 2010 2011 2012 2013 2014
Consumption (LHS)
Investment (RHS)
3. Industrial Production (% y/y) 4. Purchasing Managers' Indices
Investor sentiment toward Pakistan is improving. The Pakistani rupee has been one of the best performing currencies in the region so far this year, after a long period of depreciation against the US dollar (1). Fears that the country might be heading toward a balance of payments crisis have faded since the IMF's bail-out package was announced last year. Moreover, foreign exchange reserves are no longer in free-fall (2). Pakistan also reported its first trade surplus since 2003 in February (3). This was due to a sharp pick-up in exports, which rose by 18.1% y/y. Investor optimism has also been apparent in the stock market, which has risen strongly this month (4).
Meanwhile, the SBP decided to maintain its policy rate at 10.0% at its meeting in March, with inflation having eased in recent months. Consumer price inflation remained at 7.9% y/y in February, while core inflation fell slightly (5).
In terms of Pakistan’s security situation, the Taliban announced a month-long ceasefire at the start of March, with the hope of reviving the peace talks that broke down in February. However, this failed to stop the violence. A couple days after the ceasefire, a court in Islamabad became the scene of one of the deadliest attacks in more than five years. Although the Taliban denied responsibility, it shows how they are unable to control the many sub groups operating loosely under their command, and how the dire security situation (6) is likely to persist.
5. Consumer Prices (% y/y) 6. World Bank Political Stability and Absence of Violence/Terrorism Score (2012)
0
5
10
15
20
25
30
0
5
10
15
20
25
30
2006 2007 2008 2009 2010 2011 2012 2013 2014
Core (exc. food and energy)
Headline
-3
-2
-1
0
1
2
3
-3
-2
-1
0
1
2
3More stability
Sources – Thomson Datastream, Bloomberg, Capital Economics
Emerging Asia Chart Book 8
Sri Lanka
Sri Lanka recorded another quarter of strong growth in Q4 last year, with growth accelerating to 8.2% y/y from 7.8% the quarter before (1). Industrial output growth picked up to 10.7% y/y in Q4, up from 8.1% in Q3, led by a strong performance in the manufacturing and construction sectors. Agricultural output growth also strengthened, to 10.4% y/y, from 7.0% (2).
On the external front, export growth stayed in the double-digits, with overseas shipments rising by 23.2% y/y in January. However, a pick-up in imports led to a wider trade deficit (3). Meanwhile, the tourism sector remains a key growth engine, with tourist arrivals expanding 24.5% y/y in February (4).
With the economy in good shape, the central bank did not see the need for further monetary policy easing at its March meeting and kept rates on hold. The lending rate was last reduced in January by 50bp to 8.0%, while the deposit rate has been left on hold at 6.5% since its 50bp cut in October last year (5). Moderating price pressures suggest the central bank has scope to keep rates low. Headline inflation slowed to just 4.2% y/y in February, significantly down from its 2013 peak of 9.8%. Core inflation also remains considerably lower than in recent years (6).
Sources – Bloomberg, Thomson Datastream, Capital Economics
Emerging Asia Chart Book 9
Indonesia
Monthly data paint a mixed picture of Indonesia's economy. On one hand, the consumer sector appears to be doing well. Consumer sentiment remains strong, while retail sales growth averaged about 28% y/y in the first two months of the year (1). On the other hand, exports did not start the year well, with the latest available data showing a y/y decline in January (2). Meanwhile, the manufacturing PMI new orders component fell in February, signalling slower expansion in the sector in the months ahead (3).
Meanwhile, consumer price inflation appears to have peaked, with the February figure coming in at 7.7% y/y, the lowest since June 2013, when fuel prices were hiked (4). Against this backdrop, Bank Indonesia left interest rates on hold for the fourth straight month in March (5). Provided inflation continues to moderate, as we expect, and there are no more sudden sharp falls in the rupiah, further rate hikes look unlikely.
While the rupiah was one of the hardest-hit EM currencies during last year's summer sell-off, it held up much better during the most recent bout of market turmoil. Since the start of the year, the currency has actually appreciated by 6.9% against the US dollar (6). The equity market has also recorded impressive gains of 10.1% year-to-date.
5. Interest Rates (%) 6. Currency (Indonesian rupiah per US$)
2
3
4
5
6
7
8
9
2
3
4
5
6
7
8
9
2010 2011 2012 2013 2014 2015
BI Rate
Fasbi
CE Forecasts
9,500
10,000
10,500
11,000
11,500
12,000
12,500
9,500
10,000
10,500
11,000
11,500
12,000
12,500
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Weaker rupiah
Sources – Thomson Datastream, Bloomberg, Capital Economics
Emerging Asia Chart Book 10
Malaysia
Monthly data suggest Malaysia's economy started 2014 well. Industrial production growth picked up to 3.6% y/y in January, up from 1.7% in December (1). Exports continued to grow strongly in January, albeit at a slower pace than the month before (2).
Inflation has risen sharply in recent months, and is set to remain elevated. Headline inflation hit 3.5% y/y in February, the highest since June 2011 (3). Our simple measure of core inflation, which strips out the heavily subsidised components of the CPI basket, suggest underlying price pressures are also on the rise. Meanwhile, double-digit household loan growth rates (4) and high levels of household debt remain key medium-term risks to the economy.
The central bank (BNM) opted to keep its policy rate unchanged at 3.0% at its March meeting, but we think it will start its tightening cycle soon in order to contain inflation and financial stability risks (5). It also widened its 2014 GDP growth forecast range to 4.5-5.5% in March, from 5.0-5.5% earlier, to reflect heightened external uncertainty. On the financial markets front, the equity and currency markets have lost 0.2% and 0.8% month-to-date, respectively (6).
Sources – Thomson Datastream, Bloomberg, BNM, Capital Economics
Emerging Asia Chart Book 11
Philippines The Philippines economy appears to have got off to a weak start to 2014. Manufacturing output growth slowed
sharply in January, to 7.3% y/y from 25.1% the month before (1). Similarly, export growth moderated to 9.3% y/y in January from 15.8% (2). Remittances from overseas Filipino workers have dipped in US dollar terms, but that is usual in January. Growth remains positive in y/y terms (3).
Although consumer price inflation has crept up in recent months, largely owing to a temporary spike in food prices associated with the crop damage caused by Typhoon Haiyan, it may already have peaked. February's headline inflation came in at 4.1% y/y, down from 4.2% the month before. Core inflation has also eased, to 3.0% y/y from 3.2% (4). However, rapid credit growth, which accelerated to 16.2% y/y in January from 15.3% in January, remains a risk (5).
The central bank (BSP) has kept its policy rate low, at 3.5%, since October 2012, and we think there is only an outside chance that it will hike at its meeting this Thursday. That said, recent comments from the BSP governor suggest rate hikes could come sooner than previously expected, raising the chances of a rate hike in the months ahead. Meanwhile, the Philippines' financial markets have had a challenging month. The peso lost 1.0% against the US dollar month-to-date, while the equity market is down 1.4% (6).
Sources – Thomson Datastream, Bloomberg, Capital Economics
Emerging Asia Chart Book 12
Thailand
Thailand’s ongoing political crisis took a new turn on 21st March with the constitutional court deciding that the February general election was unconstitutional as polls were not held on the same day nationwide. Fresh elections must now be held, but without an agreement between opposing parties, a new vote is unlikely to resolve the conflict, which bodes poorly for the already-struggling economy.
Monthly data suggest first quarter growth is likely to be dismal. The unstable political climate has undermined consumer and business confidence (1). It has also deterred tourists, with arrivals falling more than 8% y/y in February (2). Meanwhile, exports have continued to struggle (3).
The Bank of Thailand (BoT) recognises the rising downside growth risks and downgraded its 2014 GDP forecast to 2.7% last week, closer to our 2.5% projection. However, both forecasts are starting to look on the high side given the growing chances of a protracted political gridlock. Given that inflation remains benign (4), we expect the policy rate – which was last cut by 25bp this month – to be kept low to support economic activity (5). We wouldn't rule out another cut, but the BoT also needs to be mindful of downward pressure on the baht (6), given the risks of a renewed sell-off in EM assets.
Sources – Thomson Datastream, Bloomberg, Capital Economics
Emerging Asia Chart Book 13
Vietnam
GDP growth picked up last year, but still remains significantly lower than before the global financial crisis (1). Growth has been affected by a severe crisis in the banking sector, which has made banks reluctant to lend. However, there are some signs of gradual improvement. The pace of credit growth has increased over the past year (2), and the State Bank of Vietnam (SBV) has stepped up efforts to clean up the banking sector, announcing a plan to auction bad-debt assets of lenders. It has high hopes of strong interest from foreign investors.
The export sector has also been performing well. Vietnam’s trade deficit contracted this month due to a pick-up in export growth to 12.0% y/y (3). Despite the volatility in emerging market currencies over the past few months, the dong peg to the US dollar has remained stable (4).
Meanwhile, consumer price inflation fell to 4.4% y/y in February, from 4.6% in January (5). The central bank has used the policy space created by falling inflation to provide more support to the economy. Interest rates were cut by 50bps at the SBV’s meeting earlier this month (6).
Sources – Thomson Datastream, Capital Economics, Markit
Emerging Asia Chart Book 14
Australia
The economy grew by a seasonally-adjusted 0.8% q/q in Q4, up from 0.6% in Q3. In y/y terms, growth picked up to 2.8% from an upwardly revised 2.4% in Q3. The breakdown of the national accounts data showed net exports and private consumption as the key growth drivers. Business investment continued to be a drag on growth, reflecting Australia's fading mining boom (1).
The government's survey of investment intentions underlines the scale of the drop in mining investment that is likely in FY 2014/15 (July-June) (2). We remain unconvinced that the non-mining economy is ready to pick up the slack. A much-hyped jump in employment in February (3) could easily be a red herring. The Australian Bureau of Statistics changes its survey pool in February each year, and it is not unusual for the shift to throw up some odd results. The manufacturing PMI continued to point toward contraction in February (4). Admittedly, the services PMI has jumped into positive territory recently, which fits with healthy retail sales (5). However, consumer confidence fell sharply last month (6) and high household debt will limit the scope for a sustained consumer boom.
The Reserve Bank of Australia (RBA) held rates unchanged earlier this month. Although cuts seem to be off the agenda for now, we still see a strong chance of the RBA loosening later in the year as the economy slows.
1. Contribution to GDP Growth (Percentage Points)
2. Capital Expenditure (A$bn)
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
GDP Pri. Cons'n
Govt. Cons'n
GFCF* - Dwel.
GFCF* - Bus.
GFCF* - Govt.
Invent. Net Exp.
Q3 Q4
0.0
0.0
0
20
40
60
80
100
120
0
20
40
60
80
100
120
91 93 95 97 99 01 03 05 07 09 11 13 15
Mining ManufacturingOther industries
Nb. 2014 and 2015 are planned capital expenditure, the rest are actual values
3. Labour Market 4. PMIs
-50
-30
-10
10
30
50
70
3.5
4.0
4.5
5.0
5.5
6.0
6.5
2007 2008 2009 2010 2011 2012 2013 2014
Change in Employment (000s m/m, seas. adj. RHS)
Unemployment Rate (%, LHS)
25
30
35
40
45
50
55
60
65
70
25
30
35
40
45
50
55
60
65
70
2007 2008 2009 2010 2011 2012 2013 2014
Manufacturing Services
Expansion
Contraction
5. Retail Sales 6. Consumer and Business Confidence
-2
0
2
4
6
8
10
-2
0
2
4
6
8
10
05 06 07 08 09 10 11 12 13 14
% m/m% 3m y/y
20
40
60
80
100
120
140
160
-40
-30
-20
-10
0
10
20
30
07 08 09 10 11 12 13 14
Business (LHS) Consumer (RHS)
Optimists outnumber pessimists
Pessimists outnumber optimists
Sources – Thomson Datastream, ABS
Emerging Asia Chart Book 15
New Zealand
GDP grew by a seasonally-adjusted 0.9% q/q in Q4, down from a revised 1.2% in the third quarter. In Q3, growth was boosted by recovery from the drought that struck North Island earlier the year. That recovery is now over, with agricultural output falling by 1.6% q/q, after a 13.3% gain in Q3. On the expenditure side, exports posted a very strong gain, which appears to have been down to the recovery in dairy output in Q3. Private consumption growth was also robust. The main drags came from weaker investment growth and a decline in public spending (1).
Confidence indicators bode well for the near term. Businesses are as upbeat as they have been since the mid-1990s (2), while buoyant consumer confidence suggests private consumption growth could rise further in the first half of 2014 (3). Immediate prospects for the construction sector are also positive, with the upward trend in building approvals continuing (4). However, there are some signs that the decision by the Reserve Bank of New Zealand (RBNZ) to tighten restrictions on loan-to-value ratios for mortgages is having a cooling effect on the housing market, with home sales down by 7.6% y/y in February (5).
At its March meeting, the RBNZ became the first central bank of a developed economy to hike its policy rate since 2011. More rate increases are likely to follow over the rest of the year, given that inflation is becoming a concern. Rate hikes are likely to help prop up the kiwi dollar, which is very strong by historic standards (6).
1. GDP (% y/y) 2. Business Confidence
-1
0
1
2
3
4
5
-1
0
1
2
3
4
5
GDP Cons'n Gov't Inv'ment Stocks Exports Imports
Q3 2013 Q4 2013
(% of GDP)-75
-50
-25
0
25
50
75
100
-75
-50
-25
0
25
50
75
100
90 92 94 96 98 00 02 04 06 08 10 12 14
Business Confidence
Activity Outlook
3. Consumer Confidence & Private Consumption 4. Construction & Building Approvals
