Business outlook and jobs key
With the Reserve Bank’s (RBNZ) upcoming OCR decision, all eyes are on key economic indicators, including business confidence surveys and employment data.
According to ASB chief economist Nick Tuffley (pictured above), the Quarterly Survey of Business Opinion (QSBO) and monthly job updates will provide essential insights.
The ANZ Business Opinion survey for September, out Monday, is expected to show more realistic moderation in economic optimism after an unusually high August reading.
Employment data signals rising job cuts
Employment data is increasingly crucial, with recent headlines pointing to job cuts amidst the economic slowdown.
“Employment is getting a bit worse in the short term before getting better,” Tuffley said.
The Monthly Employment Indicators have shown weaker job growth throughout 2024, suggesting potential softness in the upcoming Household Labour Force Survey for Q3.
A weak labour market could influence the RBNZ to accelerate the pace of rate cuts.
RBNZ faces tough decisions on rate cuts
Tuffley explained that although inflation is close to target and RBNZ is likely comfortable with its current stance, “the OCR is still a very long way from a more neutral level.”
With financial markets pricing in a high probability of 50bp cuts in the coming months, RBNZ must weigh risks carefully.
Tuffley and his team will release their RBNZ preview later this week, outlining the key factors influencing future OCR adjustments.
Global trends impacting New Zealand’s economy
Tuffley highlighted developments in other key economies that could affect New Zealand’s outlook.
The Reserve Bank of Australia (RBA) remains cautious, with the possibility of a rate cut by December, while China is providing monetary stimulus to meet its 5% growth target.
Meanwhile, US data, including the ISM survey and non-farm payrolls, will offer clues about the Federal Reserve's rate decisions and their potential impact on global markets, ASB reported.
Read the ASB economic weekly report in full here.
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