Tuesday, December 23, 2008

Fourth Quarter Negative Growth? Ummm, Yes

Well it seems New Zealand is in for a fourth consecutive quarter of negative growth in GDP, at least according to early trading on our new recession stock. Our RECESSION.DEC08 contract launched at 70 cents about 15 minutes ago, and has just shot past 90.

Earlier today, Statistics NZ announced growth of -0.4% in production-based GDP and -0.7% growth in expenditure-based GDP in the September quarter.

It is hard to find any good news for the New Zealand economy anywhere in today's numbers, and based on that 90 cents, its hard to see any good news coming soon.

Merry Christmas!


Anonymous said...

I have to say that the iPredict team, in my opinion, have missed a fantastic opportunity to run a high-publicity/volatility stock.

It was suggested a week or so ago in a response to a blog on the GM Bailout contract that a contract should be launched on whether Fiji would expell NZ's High Commissioner. The news reports on this (and the indications out of the Fijian administration) were all over the show, and have just culminated in an expulsion.

What a pity traders didn't have the opportunity to be involved in predicting this event.

Anonymous said...

Those people looking for the RBNZ to cut 100bps or more in January might want to take a look at the latest mortgage approvals data on the RBNZ's website (http://www.rbnz.govt.nz/statistics/monfin/c16/data.html) with the latest week's data due out today at 3pm.

Lt.Gorman said...

"Market pricing suggests a 75-basis-point cut to official interest rates at the end of January, though ASB Bank and Citigroup are already picking a 100-point cut."


legs said...

that isn't much comfort...as I recall both Citi and ASB were wrong in their predictions for the December meeting.

Anonymous said...

Today's data shows that mortgage approvals have been higher than the same week a year earlier for two weeks in a row (you need to look at the historical data on the website). Considering November house sales were 45% below year earlier levels that suggests quite a turnaround. Probably worth keeping an eye on given the Reserve Bank's obsession with housing!

Lt.Gorman said...

ASB made the point that it was an arbitrary number. Given the eventual target is 3.5% to 4.0% its almost neither here nor there whether they cut 100bps in Dec and 100 in Jan, or 150 in Dec and 50 in Jan. etc etc. I guess the RBNZ showed they were going to front load the cuts in Dec.

Regarding the housing approvals, will have to keep an eye on that. The new emphasis for the RBNZ is on growth, with NZ barely half way into this recession. China's GDP is dropping alot faster than expected, consequently Australia's mining exports are slumping - two of our biggest trading partners. Causing our CAD to increase as exports decline. Its pretty safe to say we are in for a bit more rough weather - still yet to see the expected rise in unemployment.

Housing approval increase could be somewhat of a red herring, due largely to the big OCR cut, keep in mind the figures include approvals from people switching banks. The number of approvals is larger than the number of homes sold.

Mike K said...

Is the GM Bailout finished with or not??? Viz:
George W, Bush's personal bailout of General Motors and Chrysler is designed solely to postpone their bankruptcy and mass job layoffs until after the holidays. Otherwise, the $17.4 billion will probably be used by the companies to underwrite the extensive legal work required for the moment they must declare bankruptcy -- when Mr. Obama is in the White House. Meanwhile, the President-elect has ramped up his job-creation target overnight from two to three million, and some observers are catching a whiff of Soviet-style economic engineering ("...we pretend to work and they pretend to pay us....").

legs said...

Re RBNZ it ain't going to be 100bps or more on 29 January ...it might not even be as much as 50bps...

Retailers in the money

The gloomy economic outlook and not-so-gloomy weather failed to put a downer on the Boxing Day retail rush.

New Zealand's largest Eftpos company, Paymark, processed $96 million worth of transactions on Friday, a record amount for December 26, and 8 per cent up on last year.

The total number of transactions - 1.69m - was up 9.3 per cent.

"You'd hardly believe there was a recession on," said Paymark's Paul Whiston.

Unsurprisingly the biggest increases were in the metropolitan areas.

Wellington recorded a 15 per cent increase and Auckland was up more than 10 per cent - but many rural areas were "very flat indeed", Whiston said.

Some retailers were caught by surprise when shoppers turned out for Boxing Day sales in bumper numbers.

Newmarket Business Association general manager Cameron Brewer said some stores found themselves "overwhelmed with customers and simply understaffed and ill-prepared".

"It's a huge but welcome surprise," he said.

Retailers throughout the country reported a brisk trade yesterday with queues forming outside malls before the doors were opened and car parks filled to overflowing.

There was a new record for Christmas Eve too, with $216m of sales reported by Paymark.

But Whiston said the overall figures for December have been low, showing that shoppers weren't entirely oblivious to the credit crunch. Turnover for the month to date was up 6 per cent in volume and 2.8 per cent in value, with previous December recording increases of about 8 per cent.


Anonymous said...

Agree...I quite like the 25bps and 'other' contracts at current prices on the basis that the RB will cut by 25bps or not at all this time, especially if the CPI number in mid January again shows non-tradeable inflation failing to fall. Becomes evemmore compelling if the mortgage data and retailer anecdotes take on a less grim tone than what we have been used to seeing in recent months, as seems to be the case.

KingKarl said...

Just because there is one or two big days spending, doesn't mean that the economy is picking up or inflation is getting out of control. You have to look at the whole picture.

I think you'll find that because of tighter household finances, they were holding out on their spending before christmas. The reason so much was spent on boxing day is because people are bargain hunting and are trying to make their money go as far as possible.

Don't forget there have been several factory closures and job cuts recently, with many more to come in 2009. Investment is still very low and the RBNZ will want to stimulate this somewhat.

The RB governor will want to be proactive with his cuts, rather than reactive. If he waits until thousands more New Zealanders lose their jobs and the economy falls deeper and deeper into a recession before cutting the OCR, the economic climate could become far worse than predicted.

A bit of inflation is a whole lot better than a whole lot of recession.

Anonymous said...

If we assume that the RBNZ cuts by the 50bps that most economists seem to expect then that takes the OCR down to the Asian crisis low. Combine that with a much lower exchange rate, one of the biggest fiscal stimulus packages seen in any OECD country and the benefits of lower petrol prices (lower again today) then I think you have to be a bit more optimistic about how things might look later in 2009. And of course the RBNZ has to look beyond 2009 when setting policy. I think we will see a 50 point cut in late January. But I think the RBNZ will be wary of doing more than that. After all,spending too much encouraged by too low interest rates was what got NZ (and many other countries) into this mess.

KingKarl said...

Thats a good point.

We are supposed to be in the biggest financial crisis since the depression however.

I really don't think we've seen the worst of it yet. Too many overseas factors will put a halt on growth in 2009.

Dibbo said...

There is little doubt that the worst still lies ahead in terms of the fall out from the global financial crisis. But no amount of domestic monetary policy easing will change that. What the central bank has to weigh up is whether the huge monetary and fiscal stimulus being implemented in most major economies will be sufficient to turn things around later in 2009(potentially more than presently seems likely). I think they will err on the side of doing slightly more easing rather than less but I think the triple digit easings are now most likely behind us. I'm picking a 75bps easing for 29 January but the risk is that it is "just" 50bps.

Luke H said...

Let's have a stock, perhaps a bundle, predicting a range of outcomes for Fonterra's milk solids payout to be announced shortly.

Luke H said...

Another stock suggestion: Jeanette Fitzsimons to retire

Smartypants said...

Hi there,

It is 1 am on New years day and I notice there are 7 active traders. I am at work, what's everyone else's excuse ?
Here's another little tip, don't trade drunk.
Happy new years to one and all.

Anonymous said...

i think some people just leave their internet browsers on. either that, or prediction market traders have no lifes. At all.

Lt.Gorman said...

I use my iphone to check ipredict surreptitiously during social occasions.

Speaking of which, ipredict needs a mobile version of the site, or a trader app.

Carl said...

New stocks please - I've got cash to burn

Anonymous said...

Seems that the Ipredict OCR market is finally corecting back to what is factored in the financial markets today i.e. 75bp being the most likely outcome based on mkt pricing although the majority of economists still think it will end up being a 50bp cut.

Lt.Gorman said...

is there a supporting link for the "majority of economists pick a 50bps cut"?


Anonymous said...

Formatting is a bit skew whiff but here is the current Reuters survey
RBNZ official cash rate: Jan 29, 9 a.m. (2000 GMT)
JAN MOVE RISK (pct) MAR 31 JUN 30 SEP 30
bps -25 -50 -75 -100
ANZ-Natnl (-50) 0 60 20 20 4.00 3.50 3.50
ASB Bank (-100) 0 15 35 50 3.50 3.50 3.50
BNZ (-50) 15 50 25 10 4.25 4.00 4.00
Barclays (-50) 10 60 10 20 4.00 3.50 3.50
Citi (-100) 0 30 0 70 4.00 4.00 4.00
Deutsche (-75) 10 35 45 10 3.75 3.50 3.50
FNZ Capital (-50) 20 50 20 10 4.50 4.00 4.00
4CAST (-75) 10 30 35 25 3.75 3.25 3.00
GS JBWere (-75) 0 25 60 15 3.75 3.50 3.50
ICAP (-50) 0 40 30 30 4.50 4.50 4.50
Infometrics (-50) 10 75 10 5 4.00 4.00 4.00
JP Morgan (-50) 10 45 25 20 4.00 3.50 3.25
Macquarie* (-50) 0 40 25 25 4.00 3.50 3.50
RBCCM (-75) 0 30 55 15 3.75 3.00 3.00
TD Secs (-75) 0 20 55 25 3.25 2.75 2.75
UBS NZ (-50) 5 60 20 15 4.50 4.50 4.50
Westpac** (-50) 10 40 10 25 4.00 4.00 4.00

Anonymous said...

have i missed something about the QV, the bottom has fall'n out the christchurch qv 2day.

Legs said...

The QV data is not due out until next week I think but the price action has been suspicious over last couple of days (after doing nothing for ages)...I suspect that has seen some stopping out. Draw your own conclusion. Interestingly Auckland has moved nowhere near as far so there is a certain 10% gain to be had by arbitrage (I'm out of cash).

Lt.Gorman said...

I'm tempted to back CHCH for the draw.

QV is data is averaged with the previous 3months so i'm not expecting anyone to leap ahead too much. Its going to be a close one.

What are others picking?

Legs said...

Like you I thought it was a coin toss...the fact that it has not traded this way is curious...especially over the past couple of days...which makes me hesitant to take a punt even at these levels.

Lt.Gorman said...

wonder if someone at qv already has the results

Anonymous said...

I Think a ChCh, Auck draw is looking pretty good at the moment. Its a draw going in to December @ -7.4.
Get on the ChCh, I have.

JM said...

CHCH looking good at these prices... Esp looking back at Christchurch's previous instability against Auckland... I'm not picking a draw, I'm picking Auckland prices to be more stable and Chch to have the biggest drop.

Anonymous said...

Judging by Jocko's run up the table over the past two days I'd say he/she has had a strong "view" on those QVNZ numbers....

Anonymous said...

Some light at the end of the tunnel?

15:25 12Jan2009 DJN-DJ Auckland Property Prices Fall In 2008; Rate Cuts Help Market

DJ Auckland Property Prices Fall In 2008; Rate Cuts Help Market

WELLINGTON (Dow Jones)--Property prices fell less than 5% in Auckland in 2008 and recent cash rate cuts by the Reserve Bank of New Zealand are helping to stabilize the market, a real estate company said Monday.
Barfoot & Thompson said the average sale price for the 12-months to December 2008 was NZ$513,597, compared with NZ$538,478 in 2007.
"This is a really good result, given all the dire predictions that have been tossed around," said Barfoot & Thompson Managing Director Peter Thompson.
The company accounts for around 34% of Auckland home sales and 12% of national sales.
Thompson said the market ended the year on a high note with more sales clocked up in the company's final week of trading for 2008 than for any other week during the year.
"We've certainly seen an improvement in the market since the Reserve Bank's most recent move. It seems to have tipped the balance in terms of converting interested parties into committed buyers," said Thompson.
Responding to a sharp downturn in global and domestic economic activity, the Reserve Bank of New Zealand has slashed the Official Cash Rate by 325 basis points since July.
RBNZ Governor Alan Bollard last month estimated that national house prices were down 16% in real terms from their peak in 2007 and were about half way toward a trough.
Economists are currently tipping the central bank to further cut the Official Cash Rate either 50 basis points or 75 basis points at the Jan. 29 review.
"The RBNZ has been easing interest rates to provide some relief to the economy, but more needs to be done in our view," said Goldman Sachs JBWere senior economist Shamubeel Eaqub.
He pointed to a challenging outlook for housing.
"While falling prices and mortgage rates should be positive, still-overvalued pricing, tighter lending criteria and net emigration means there are imposing negatives as well," he said.

-By Rebecca Howard, Dow Jones Newswires; 64-4-471-5990; rebecca.howard@dowjones.com

(END) Dow Jones Newswires