A couple of weeks ago the November NBNZ Business Outlook survey was release – and man was it a stinker.
The key point was the decline in own activity expectations – with a net 14% of firms expecting their own level of activity to contract! In conjunction with the RBNZ inflation expectations number (specifically the surveys wage growth measure) this was one of the “green lights” for the massive rate cut in December.
However, I can’t get past the inflation expectation number from the Businesses Outlook, 3.7%. This is with the economy having contracted and petrol prices collapsing. Sure this is a slow moving measure – but it is moving in the wrong direction!
I realise that anyone reading probably cannot understand why I still care about inflation (as seen here) – but I’m afraid that can’t see a massive build up of spare capacity in New Zealand, I don’t see any “demand deficiency”, or “savings glut” (although who knows – maybe I’m suffering from recession fatigue). Without this, all the Bank can do is focus on its mandate to keep price growth low and stable.
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