NEW ZEALAND: Westpac On NZIER

The local bank weighs in on the NZIER print, noting that confidence is rising but near term activity remains soft. Inflation is expected to be back within the RBNZ's target band for Q3. See below for more details. 

WESTPAC: "Today’s update on business conditions from the NZIER shows a recovery in confidence back to pre-pandemic averages. That’s consistent with comments we’ve heard from businesses that they are starting to feel a bit more optimistic about the outlook for the economy now that the RBNZ’s easing cycle is in train. However, of greater importance, the survey points to continued softness in economic activity through the middle part of the year. Firms reported a continued drop in trading activity over the past three months (the gauge of domestic trading activity fell to -30.8 from -27.1 - it’s lowest levels since the lockdown in 2020).

On the inflation front, the number of businesses who have been raising prices has fallen sharply, dropping to 4% in September from 18% in June. Similarly, few businesses expect to raise prices over the coming months. That’s consistent with our expectation that the upcoming September quarter Consumer Price Index (out 16 October) will show inflation comfortably back inside the RBNZ’s target band for the first time since 2021."