Supporting information:
Historical data (Excel spreadsheet)J6 Survey of expectations – a survey of businesses
Survey operation conducted by The Nielsen Company
March 2010 quarter report
Introduction
The Reserve Bank of New Zealand (RBNZ) Survey of Expectations is a New Zealand-wide quarterly survey of business managers. The Nielsen Company conducts the survey on the RBNZ’s behalf. Respondents are asked for their expectations of future outcomes of a range of key macroeconomic data.
The latest RBNZ Survey of Expectations was conducted on Wednesday 10 and Thursday 11 February 2010. Note that the results of the survey represent expectations held by respondents and in no way represent the views or forecasts of the RBNZ. Graphs and figures in the following report refer to the mean expectation levels of respondents.
Summary of Results
Inflation expectations little changed
Respondents’ inflation expectations of consumer price index (CPI) inflation have barely moved since last quarter, for both the one and two-year horizons. Average one-year-ahead CPI inflation expectations are unchanged at 2.1 percent. Two-year-ahead expectations have increased fractionally, from 2.61 percent last quarter to 2.65 percent now, an increase of just 0.04 percentage points. The median two-year rate is 2.6 percent.
Expectations of quarterly CPI inflation are also little changed. A quarterly rise of 0.5 percent is expected for the March 2010 quarter, unchanged from respondents’ expectations in the last survey. A quarterly rise of 0.6 is expected for June 2010. These quarterly increases are equivalent to annual inflation rates of 2.2 percent for the years to March and June 2010.
Tighter monetary conditions are expected
Monetary conditions are currently perceived to be relatively easy, however over 2010 an increasing proportion of respondents expect tighter monetary conditions.
At the time the survey was completed, the net percentage of respondents who believed monetary conditions were easier than neutral was 14 percent. This compares with a net 8 percent in the December quarter survey who believed conditions were easier than neutral. By June this year, a net 1 percent of respondents believe conditions will be tighter than neutral, while by December 2010 this figure increases to 24 percent.
Little change in one-year hourly earnings growth expectations
One-year-ahead hourly earnings growth expectations increased slightly, to 2.2 percent, just 0.1 percentage points higher than in last quarter’s survey. The two-year rate fell, and is now 2.6 percent compared with last quarter’s expectation of 2.8 percent.
The unemployment rate is expected to fall
By December 2010 the unemployment rate is expected to have fallen to 7.1 percent. A year later, in December 2011, the unemployment rate is expected to have dropped further, to 6.4 percent. These one and two-year expectations are both 0.2 percentage points higher than those recorded in the last survey. The latest official unemployment figure (for the December 2009 quarter) is 7.3 percent.
GDP growth expectations continue to increase
Respondents have again revised up their expectations of GDP growth. One-year-ahead expectations have leapt from their nadir of -0.2 percent, recorded in the June 2009 quarter survey, to 2.1 percent this quarter. This represents a turnaround of 2.3 percentage points since the June 2009 quarter survey. Since last quarter, two-year growth expectations have improved by 0.3 percentage points, and are now 2.6%. The latest Statistics New Zealand data indicates real GDP fell by 1.3 percent between September 2008 and September 2009 (annual percentage change).
Positive near-term quarterly growth is again expected to be positive this survey, with a quarterly increase of 0.4 percent expected for the December 2009 quarter and 0.5 percent in March 2010.
Exchange rates close to current levels are expected
An exchange rate of US$0.70 is expected for the NZ dollar at the end of June, and to be around that same level by the end of December 2010. The NZD/AUD exchange rate is expected to be around NZ$0.80 by the end of December 2010, not far from where the rate was when the survey was completed.
Higher interest rates are expected.
The 90-day bank bill rate is expected to be 2.9 percent at the end of March 2010, a little higher than the rate prevailing at the time the survey was taken. However, by December 2010, respondents believe 90-day rates will have increased to 3.8 percent, consistent with respondent expectations of tightening monetary conditions.
10-year government security yields are expected to be around 6.1 percent at the end of December 2010, implying a positive yield gap of 2.3 percent with the expected 90-day rate. Over the last year or so the gap between short-term and long-term rates has widened significantly as short-term rates fell and long-term rates trended upwards. Implicitly, the survey results suggest respondents expect this gap to persist.
Sample Composition
The response rate for this quarter was 60 percent out of a sample of 121. Of the completed questionnaires received by the cut-off date, the distribution across activity groups was:
|
Financial |
27 |
|
Business |
26 |
|
Agriculture |
6 |
|
Labour |
5 |
|
Other |
8 |
|
|
__ |
|
TOTAL |
72 |
|
|
|
Published 23 February 2010
