VIEW: ASB Expects Continued Weak Consumption & Rates On Hold

ASB notes the continued strength in migration, but that increased population growth is not yet helping consumption growth or the retail sector. It says though that the RBNZ will continue to watch migration closely to see if it is boosting demand and thus inflation pressures. ASB continues to expect rates to stay on hold until easing begins in early 2025.

• “Combined, net permanent and long-term (PLT) inflows have hit yet another record high. … The composition of immigrants remains on the ‘young’ side as well, with 67% of arrivals over the year aged between 18 and 44 years old.”
• “We expect the pace of strong net inflows to moderate. … A prolonged strong pace of net inflows could have implications for the NZ economic and interest rate outlook.”
• “Our research suggests that the current migration mix is actually helping to temper inflationary pressure. Nonetheless, the RBNZ needs to be wary over the risks posed by extremely strong net immigration persisting.”
• “Today’s October card spending data suggest that strong population growth is simply slowing the decline in private spending, rather than boosting it.”
• “It’s becoming increasingly clear that households are pulling back on spending in the face of prolonged cost of living pressures. More recently, the easing in the labour market and less rosy employment outlook is likely to be adding to consumer caution.”