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(CEP News) - As the New Zealand economy struggles in the global recession, the New Zealand Reserve Bank is expected to cut its cash rate on Wednesday. In Japan, retail sales will reveal how consumers are feeling about the slowing economy.
Recent economic data in New Zealand indicates that conditions are deteriorating. The NZIER survey of business confidence sank to a record low reading of -64 in the fourth quarter. The bounce in retail sales in November was attributed to food sales, but overall demand remains weak. Economists are expecting the Reserve Bank of New Zealand to lower the cash rate to 4.00% from 5.00%. A 100 basis points cut would put the cash rate at its lowest levels since the central bank moved to the official cash rate mechanism (OCR) in March 1999. "Banks are still reluctant to lend in New Zealand and with the economy so dependent on small to medium sized businesses (farmers) the credit needs to get flowing and cutting the OCR from 5.00% quickly is a remedy", wrote economists from Barclays Capital. New Zealand trade balance data for December will be released as well. The deficit is forecast to narrow to NZ$100 million from the prior month's NZ$520 million level. On a year-to-date basis, the deficit is expected to grow to NZ$5302.5 billion. Japanese retail sales are expected to reflect the fact that the country's economy has become mired in recession. Japanese retail sales are poised to drop sharply in December. The consensus is forecasting retail trade to fall 1.6% year-over-year following the prior month's 0.9% decline. Matt Robinson, economist with Moody's Economy.com, said that the Japanese consumer is well aware of the deteriorating conditions and he expects annual retail sales to fall for the fourth consecutive month. "Moribund households are delaying avoidable expenditure, hunkering down for a gloomy period of subdued economic activity," Robinson said. Susumo Kato, economist with Calyon, said the recent news indicate that Japanese retail sales will drop sharply. Reports show supermarket sales, department store sales and car sales posted sharp declines in December. "We expect on the back of those that total retail sales for December will be down by -1.5% YOY," Kato added. All times in EST 15:00 NZ RBNZ Official Cash Rate Exp: 4.00% Prior: 5.00% 16:45 NZ Trade Balance December Exp: -NZ$100.0M Prior: -NZ$520.0M 16:45 NZ Imports December Exp: +NZ$3.80B Prior: + NZ$4.21B 16:45 NZ Exports December Exp: + NZ$3.76B Prior: + NZ$3.69B 16:45 NZ Balance YTD December Exp: - NZ$5302.5B Prior: - NZ$5164.0B 18:50 JP Loans & Discounts Corp (Y/Y) December Prior: +3.2% 18:50 JP Large Retailers' Sales December Exp: -5.2% Prior: -3.2% 18:50 JP Retail Trade (Y/Y) December Exp: -1.6% Prior: -0.9% 18:50 JP Retail Trade (M/M) SA December Exp: -0.8% Prior: -0.1% 18:50 JP Foreign Buying Japan Bonds W/E January 23 Prior: +¥254.2B 18:50 JP Foreign Buying Japan Stocks W/E January 23 Prior: -¥384.4B 18:50 JP Japan Buying Foreign Stocks W/E January 23 Prior: +¥402.5B 18:50 JP Japan Buying Foreign Bonds W/E January 23 Prior: -¥90.7B 20:30 JP Bank of Japan Deputy Governor Kiyohiko Nishimura to Speak in Utsunomiya City 21:00 NZ Money Supply M3 (Y/Y) December Prior: +9.4% January 28-29 CN Leading Index December Prior: +96.76 January 28-29 CN Coincident Index December Prior: +97.67 January 28-29 CN Wholesale Prices Y/Y December Prior: -0.4% January 28-29 CN Purchasing Price Index Y/Y December Prior: +4.7% By Steve Stecyk,
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edited by Nancy Girgis,
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