Yovich & Co. Weekly Update - 25 March 2013
Mar 25, 2013 | Commentary
This Week's Themes
• After touching 4,400 on the 15th of March, the NZ market has taken a breather, with the concerns in Cyprus giving investors a reminder that Europe is still working through banking instability concerns.
• The market fell despite strong GDP figures showing that the NZ economy grew 1.5% in the 4th quarter of 2012. The annual rate of 3% is the highest since 2008.
• The Aussie market continued its slide with leadership concerns in the Labour led government compounding on the negative sentiment generated from the Cyprus situation.
• U.S. markets shrugged off the concerns in Cyrus to finish the week close to unchanged.
• The Kiwi was up as a result of the strong economic and GDP figures released during the week.
New Zealand GDP – 4th Quarter Growth:
The December 2012 quarter GDP numbers were released indicating an increase in economic activity of 1.5% since the previous quarter, significantly above market expectations of around a 0.9% and the Reserve Bank of New Zealand's (RBNZ) forecasts of 0.8%. The rise in production GDP was broad based, with a gain in 15 of the 16 industries surveyed.
From a sector perspective the following sectors were standouts:
• Agricultural, forestry & fishing (+2.6% Quarter on Quarter)
• Retail trade and accommodation (+2.3% Quarter on Quarter)
On an expenditure basis, positive growth was supported by a rise in:
• Consumption (+1.5% Quarter on Quarter)
• Exports (+0.9% Quarter on Quarter)
• Investment activity (+2.2% Quarter on Quarter).
In terms of the annual rate of growth for the December 2012 quarter, activity increased by 3.0% over the past year, up from the revised 1.9% rise recorded over the September 2012 quarter. The sharp increase in the rate of annual growth in part reflected the recent volatility in GDP data, which showed a soft patch in the rate of growth over mid-2012. On the whole, while positive, the growth remained broadly consistent with expectations and is likely to have a relatively muted impact on the market given the recent variability in GDP data and a focus on the negative impact of the current drought conditions. We do not expect any significant implications to the RBNZ's assessment of the domestic economy from this data and retain expectations that the RBNZ will wait until the March 2014 quarter at the earliest before raising the OCR by 25bps to 2.75%.
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