Still on track to be back in black

Transcription

1 Still on track to be back in black Budget 214 is a key event over the week ahead, and the Government s steady return to surplus is expected to continue. Speeches reveal the RBNZ s thinking on FX and LVR restrictions, taking some punch out of this week s Financial Stability Review. European Central Bank President Mario Draghi hints that policy easing is on the cards next month. Last week the opposition Labour Party was in the spotlight when it revealed some fresh thinking about monetary policy with its variable savings rate idea (read more here). This week the Government takes centre when it releases the Budget. With the New Zealand economy robust, we expect Budget 214 to show that the Government remains on track to achieve its stated objective of running an operating surplus in 214/15. All up, and despite being in an election year, we expect only minor surprises, with election lollies scarce on the ground (read more here). This Government has had a less is more approach, and this is unlikely to change; accordingly we don t expect much in this Budget that will change the RBNZ s monetary policy outlook. Two speeches last week revealed the RBNZ s thinking on two key issues the level of the NZD, and the RBNZ s thoughts on the high LVR restrictions, taking some punch out of this week s Financial Stability Report. The first speech was from the RBNZ Governor about the Dairy industry, but the content of the speech had a heavy focus on the NZD. Governor Wheeler noted: if the currency remains high in the face of worsening fundamentals, such as a continued weakening in export prices, it would become more opportune for the Reserve Bank to intervene in the currency market to sell New Zealand dollars. In our view, active FX intervention by the RBNZ is unlikely but it can t be dismissed completely. Irrespective, as we have seen with previous attempts to push the NZD lower, any impact on the NZD is likely to be fleeting particularly if the RBNZ is lifting rates. The second RBNZ speech was from Deputy Governor Spencer on housing. The Deputy Governor did clarify how temporary the RBNZ s high LVR restrictions may be, stating the earliest it is likely to remove the LVR restrictions is late this year. That timing is in line with our view that the restrictions are most likely to be removed between late 214 and mid-215. The RBNZ will not remove the restrictions unless it is confident that the housing market is slowing on a sustained basis and that interest rates will be sufficient to continue containing house prices, as well as getting confirmation beforehand that net migration is slowing. Last week we had several central bank meetings. The ECB was probably the most interesting, because ECB President Draghi gave a strong hint that the Bank was on the verge of easing monetary policy. Draghi stated the Governing Council is comfortable with acting next time, but added the caveat that before acting, the ECB want to see the staff projections that will come out in the early June. Offshore data this week includes the Australian Government Budget and the Bank of England s inflation report. On the local data front, the latest RIENZ data are expected early this week, and will provide further details on the state of the housing market, and keep an eye out for ASB s latest Housing Confidence Survey which is out on Tuesday. The March quarter Retail Trade Survey is due on Wednesday, and provides an early piece of data for the March Quarter GDP puzzle. Click here for: Foreign Exchange The NZD eases as the RBNZ mentions intervention again. Interest Rates NZ yield curve flattens as offshore developments put downward pressure on long-term rates. Week Ahead REINZ housing data, Q1 Retail Sales, Budget 214. Week in Review Q1 labour market report, Electronic card transactions Global Calendars Australian Federal Budget, Bank of England Inflation Report, US and EZ inflation reports. Chart of the Week Budget 214 EMPLOYMENT & UNEMPLOYMENT % % Annual employ ment growth Source: Stats NZ Unemploy ment rate (rhs) - Mar-9 Mar-97 Mar-1 Mar-5 Mar-9 Mar The Q1 labour market data released last week told a story of continued employment growth being offset by strong labour participation and population growth. That is keeping the unemployment rate stubbornly high and wage pressures subdued. From the perspective of households, more job opportunities and greater job security are being countered by low wage growth. For some, the silver lining of low wage growth will be that interest rates will not need to rise as quickly. The economy has so far found an adequate supply of workers to meet the demands of the recovery, and we expect that to continue as strong migration inflows carry on over 214. That suggests wage pressures will remain weak and wage-driven price increases are unlikely to be large or widespread. Overall, the degree of slack still evident in the labour market should keep overall inflation pressures contained, and that supports our long-held view that OCR increases will be fairly gradual from now on, and the OCR peak will be 4.5%. ASB Economics nick.tuffley@asb.co.nz Please refer to the important disclosures at the end of this document

2 Foreign Exchange Market FX Rates Current* Week ago Month ago mths ago Year ago ST Bias Support^ Resistance^ NZD/USD FLAT NZD/AUD FLAT NZD/JPY FLAT NZD/EUR FLAT.2.5 NZD/GBP FLAT/DOWN TWI FLAT ^Weekly support and resistance levels * Current is as at 1.am Monday; week ago as at Monday 5pm. The NZD pushed higher over the first half of last week, testing top side resistance on the USD cross just below.88. NZD/USD hit a high of.8779m while NZD/AUD peaked at around.94. On Wednesday morning, RBNZ Governor Wheeler gave a speech ostensibly on the dairy sector in which he raised the possibility of direct intervention in the currency. The key comments was, if the currency remains high in the face of worsening fundamentals, such as a continued weakening in export prices, it would become more opportune for the Reserve Bank to intervene in the currency market to sell New Zealand dollars. For now, we do not think the RBNZ has met its high active intervention hurdle. At this stage we would put the chances of active intervention by the RBNZ at 1% or less. This week, the NZD is likely to stick to its recent ranges against both the USD and the AUD. There are no top-tier data releases in either the US or Australia, and the government budgets (here and Australia) are not typically market-moving. A potential flashpoint in currency markets could be the release of UK unemployment data and the Bank of England s Inflation Report on Wednesday evening (NZT). Both should be GBP-supportive if the recent trend of an improving UK economic outlook continues. The situation in Ukraine has the potential to flare up and influence financial market sentiment over the week ahead. Short-term outlook: Key data Date Time (NZT) Market US cents NZ DOLLAR (past months) NZD/USD (LHS) Feb 1-Mar 1-Mar 21-Apr 12-May Medium-term outlook: TWI (RHS) Source: ASB Index Australian Federal Budget 1/5 9.pm - RBNZ Financial Stability Report 14/5 9.am - NZ Retail Sales Q1 qoq 14/5 1.45am.9% BoE Inflation Report 14/5 1.pm - NZ Budget 15/5 2.pm - Key events in markets this week: NZ Food Prices, AU Federal Budget, AU Housing Finance, CH Retail Sales, CH Industrial Production, US Retail Sales (1 th ); RBNZ Financial Stability Report, NZ Retail Sales, EZ Industrial Production, UK Unemployment, BoE Inflation Report (14 th ); NZ Budget 214, BusinessNZ PMI, JP GDP, EZ CPI, EZ GDP, US Empire Manufacturing Survey, US CPI, US Industrial Production (15 th ); AU Lending Finance, US Housing Starts and Building Permits, University of Michigan Consumer Confidence (1 th ). Last Quarterly Economic Forecasts In April our FX strategy team fundamentally changed its USD view. Our FX strategists now do not expect the USD to significantly strengthen until the real (i.e. inflation-adjusted) Fed Funds rate turns positive in early 21. The new forecasts do however include some mild USD strength as the US-G two-year swap spread begins to turn positive in early 215. We have not changed our view that the Federal Reserve s rate hike cycle will start in the second half of 215 and that the tightening cycle will be very gradual. What has changed is the forecast of how the USD reacts to the FOMC s tapering of asset purchases and the subsequent lift in the nominal Fed Funds Rate. Our NZD/USD forecasts have lifted to reflect the change in the USD forecasts discussed above. Our year-end forecasts for NZD/USD are.87 for 214 and.8 for 215. We have also lifted our AUD/USD forecasts. A large part of the alteration to the AUD forecasts reflects changes to the USD forecast discussed above. However, the improving Australian economic outlook has also provided reasons to lift our AUD forecasts. The NZD/AUD looks past its peak, with gradual depreciation to continue. We expect NZD/AUD to slide just below.9 by the end of 214. Momentum in the UK economy remains robust, and indications are that the GBP should remain firm overall. We expect NZD/GBP will hold above.5 until mid-215, after which higher UK interest rates will drive a gradual depreciation. Our strategists long held view that JPY has yet more downside because of the collapse of Japan s current account surplus is still in place, and we expect NZD/JPY to peak at around 95 in early

3 Interest Rate Market Wholesale interest rates Current Week ago Month ago mths ago Year ago ST Bias Cash rate FLAT 9-day bank bill FLAT 2-year swap FLAT 5-year swap FLAT 5-year benchmark gov't stock FLAT NZSX FLAT * Current is as at 1am Monday; week ago is as at Monday at 5pm. The NZ yield curve remained under flattening pressure last week, with the downward pressure on interest rates from receiving interest in the 2-year tenor easing back late last week. Added to that, paying interest in the short end (from continued interest to fix mortgage rates) is putting upward pressure on short-term swap rates. In contrast, low US ten-year Treasury yields put downward pressure on NZ swap rates of longer duration. Markets focused on the comments regarding the potential for FX intervention in RBNZ Governor Wheeler s speech on the dairy sector outlook. Meanwhile, RBNZ Deputy Governor Spencer s speech noted it would be late this year at the earliest before the RBNZ would consider removing the LVR restrictions. US Treasury yields continue to trade near the bottom of their recent range, with Fed Chairman Yellen s testimony to Congress containing few surprises. Yellen reiterated that loose monetary policy remains warranted in the US given unemployment and inflation still fall short of the Fed s goals. ECB President Draghi was also dovish in the press conference accompanying the ECB Rate Announcement in highlighting the potential for further easing in the next meeting in June. Short-term outlook: Key data Date Time (NZT) Market % p.a NZ INTEREST RATES (past months) 9-day bank bill Official Cash Rate Source: ASB Feb 1-Mar 1-Mar 21-Apr 12-May Medium-term outlook: 5-year swap Australian Federal Budget 1/5 9.pm - RBNZ Financial Stability Report 14/5 9.am - NZ Retail Sales Q1 qoq 14/5 1.45am.9% BoE Inflation Report 14/5 1.pm - NZ Budget 15/5 2.pm - Comment: Q1 Retail Sales, RBNZ Financial Stability Report (FSR) and 214/15 Budget are the key releases here in NZ this week. The FSR will contain detailed analysis on the effects of the LVR restrictions on the housing market. The Budget is expected to show the Government continuing on its prudent course towards hitting its 214/15 operating surplus objective, with few implications for interest rates. Offshore, with both the Federal Reserve Chairman and ECB President reiterating their dovish stance last week, there is the risk that BoE Governor Carney will also adopt a dovish tone at the release of the BoE Inflation Report on Wednesday. UK economic data have been encouraging and point to growth picking up over 214, however recent BoE communications have focused on the continued slack in the UK economy. Last Quarterly Economic Forecasts As widely expected, the RBNZ lifted the Official Cash Rate (OCR) from 2.75% to.% at the April Review. The RBNZ s forecasts (within the March Monetary Policy Statement) indicate around six 25bps hikes by March next year, and the OCR rising to % by early 217. In April, the RBNZ s view on the strength of the economy remains understandably upbeat. Following the April hike, we slightly altered our forecast to build in a follow-up hike in June (previously July). We continue to expect the RBNZ will then pause for an extended period (until December) to assess the impact of the first few OCR increases. We continue to expect a further four hikes over 215, taking the OCR to a peak of 4.5%. This is less aggressive than the RBNZ s forecasts. Our forecast is also slightly less aggressive for 214 than market pricing. Sitting behind that less aggressive OCR forecast is the fact that we still see several reasons why the tightening cycle should be fairly cautious or gradual. There are considerable uncertainties over how households respond to rising interest rates and, given the short duration of outstanding mortgages, higher interest rates may well have a quick and noticeable impact on the economy. The NZD will remain firm on the back of rising interest rates, prolonging the challenges for non-commodity exporters. In April the RBNZ noted the recent weakness in dairy prices and strength in the NZ dollar but didn t appear overly concerned about them at this stage. But, assuming the NZD remains firm over 214 in line with our forecasts, the NZD will trigger RBNZ caution in time.

4 Key International Data Date Country Data/event ASB (f) Comment Tues 1 May AU Housing Finance No. of own-occupiers Value of total lending -2.7% -4.% The total value of housing-related lending lifted by 1.9% in February, to be up 2.4% over the past year. Demand for housing remains strong, driven by record low interest rates, population growth and expectations of house price appreciation. Demand from the investor segment, in particular, has driven the lift in housing finance. Industry sources suggest that both the number of loans to owner-occupiers, and the value of total lending fell over March. CH Retail Sales, Apr, %YoY 12.5 Chinese retail sales rose by 1.2% (MoM) in March, compared with the average of just.7% in Jan-Feb. The slight pick-up in momentum should continue in April. As such, we expect Chinese retail sales to have grown by 12.5% in April from a year ago. CH AU 9.pm (NZT) Industrial Production, Apr, %YoY Commonwealth Budget, Chinese industrial production grew by 8.8% (YoY), up from its pace of 8.% in Jan Feb. On a sequential basis, the growth was.8% (MoM) in March, compared with.% (MoM) in the first two months of the year. We expect industrial production to have expanded by 9% in April from a year ago. - The Budget will be tough, but measures may be back-end loaded. We expect fiscal initiatives to fall under a couple of broad headings: (i) delivering on election promises; (ii) cherry picking the Commission of Audit; and (iii) promoting infrastructure spending. The rhetoric justifying a tough Budget sits at odds with concerns about growth and labour market prospects. We expect forecasts of a budget deficit of $45bn in 21/14 and $28bn in 214/15. US Advance Retail Sales, Apr, %MoM. Similar to other US indicators, US retail sales activity has recorded two months of strong gains following the impacts of colder than normal weather. The recovering US labour market, firmer consumer confidence and a lift in the services sector ISM supports expectations for a further lift in sales in April. Wed 14 May UK ILO Unemployment Rate, Mar, %.8 The ILO unemployment rate dipped below the Bank of England s 7% threshold in February. The UK unemployment rate is currently at its lowest level since February 29. Given the positive momentum in the UK economy and the improvement in the timelier claimant count unemployment rate, we think the ILO measure fell further in March. UK Bank of England Inflation Report The Bank of England s (BoE) May quarterly Inflation Report should be rather upbeat. The UK economy continues to grow strongly, inflation remains just below the BoE s target and the labour market continues to strengthen. We aren t expecting any major changes to the BoE s economic forecasts. The key focus in the May report will be on whether the BoE provides further guidance around the amount of spare capacity in the UK economy and the outlook for interest rates. Thur 15 May JP GDP, Q1.9% Japanese industrial production surged by 2.8% in Q1. The correlation between industrial production and GDP is high and suggests a strong increase in Q1 GDP. EZ GDP, Q1 A, %QoQ The Eurozone recovery is ongoing. The Eurozone is expected to have recorded its fourth straight quarter of positive growth in Q1. The high frequency activity data such as retail sales and industrial production and leading indicators such as the composite PMI are pointing to an acceleration from the.2% (QoQ) growth recorded in Q4 21. Growth of.4-.5% (QoQ) would not be surprising. Thur 15 May US Industrial Production, Apr, %MoM. US industrial production is recovering strongly following weather-induced weakness in January. Following a 1.2% (MoM) lift in February, production lifted a further.7% in March to be.8% higher than a year ago. Leading indicators, such as factory orders, durable goods orders and the ISM manufacturing new orders index suggest ongoing improvement in April. 4

5 International Data Charts In Australia, we expect forecasts to show a Federal Budget deficit of $45bn in 21/14 and $28bn in 214/15. % BUDGET BALANCE PROJECTIONS (% of GDP) CBA Fiscal Model estimates Apr'14 % The UK ILO unemployment rate dipped below the Bank of England s 7% threshold in February. We think the ILO measure fell further in March. % % UK UNEMPLOYMENT RATE MYEFO Nov' ILO (rhs) / 2/4 27/8 211/12 215/1-2.5 Claimant count (lhs) 2. Jan-5 Oct- Jul-8 Apr-1 Jan-12 Oct Japanese industrial production surged by 2.8% in Q1. The correlation between industrial production and GDP is high and suggests a strong increase in Q1 GDP. GDP (lhs) JAPAN: IP & GDP (quarterly % change) 1 The Bank of England s (BoE) May quarterly Inflation Report should be rather upbeat. The key focus in the May report will be on whether the BoE provides further guidance around the amount of spare capacity in the UK economy and the outlook for interest rates. % % BANK OF ENGLAND UK UNEMPLOYMENT FORECASTS Actual Outcomes BoE Nov '1 Forecasts Industrial production (rhs) - Jun- Jun-5 Jun-7 Jun-9 Jun-11 Jun BoE's 7% Unemployment Threshold BoE Feb '14 Forecasts.. Apr-9 Jul-1 Oct-11 Jan-1 Apr-14 Jul-15 Oct-1 Note: Mode MPC Unemployment Forecasts, Based on Market Interest Rates 7..5 The rebound in US retail activity following the harsh winter weather is expected to continue in April. Improved confidence and the recovering US labour market also provide support to expectations of improved retail sales. SERVICES ISM & RETAIL SALES Points mma% 7 Services ISM (lhs). 1.5 The Eurozone is expected to have recorded its fourth straight quarter of positive growth in Q1. The high frequency data such as retail sales and industrial production and leading indicators such as the composite PMI are pointing to an acceleration from the.2% (QoQ) growth recorded in Q4 21. Growth of.4-.5% (QoQ) would not be surprising. %QoQ EUROZONE GDP & ESTIMATE (%QoQ) %QoQ Core retail sales (rhs) Jan-5 Jan-7 Jan-9 Jan-11 Jan Eurozone IP/Retail/PMI Based GDP Estimate (%QoQ, rhs) Eurozone GDP (%QoQ,first estimate, lhs) R 2 = Mar-7 Sep-8 Mar-1 Sep-11 Mar

6 NZ Data Preview: a look at the week ahead Data Date Time (NZT) Previous Market expects ASB expects REINZ housing data for April Sometime this week Retail Sales Q1 214 (volumes) 14/5 1.45am +1.2%.8% +1.5% Government Budget /5 From 2pm New Zealand Data Previews Sometime this week REINZ housing data for April Housing market pressures have clearly eased in the six months since the RBNZ s LVR restrictions came into effect, and higher interest rates are also starting to become an important influence on housing demand. On the supply side, recent listings data suggest some improvement in listings, which is helping the supply/demand imbalance, but there are still a very low number of houses on the market. Although housing supply continued to improve slightly on a nationwide basis in April, housing supply constraints remained acute in Auckland and Canterbury. On top of these dynamics, April nationwide housing activity may be impacted by the timing of Easter and ANZAC day, which created two short weeks in a row. Barfoot and Thompson s Auckland April sales data showed a significant 14.2% mom fall in sales activity (ASB s seasonally-adjusted estimate), with declines in sales across the price brackets. Wednesday 14 May Retail Sales Q1 214 Previous: +1.2% qoq (volumes), ASB (f) +1.5% Retail sales have been growing at a solid but not spectacular pace over 21 (volumes rose.7%). The labour market started to improve and the housing market also provided a boost, with higher prices increasing household wealth and greater sales volumes pushing up related spending (e.g. on furniture and appliances). Over 214, sales growth should accelerate a little. The housing market is cooling but job opportunities are increasing and consumer confidence has soared over late 21/early 214. A return to the %+ growth of the mid- 2s is not likely, though, as wage growth remains very subdued and credit demand is low NZ consumers are much more wary of debt these days. We are expecting a fairly strong result for Q1, after some areas of surprising softness in the previous quarter. No HOUSE SALES BY PRICE (seasonally adjusted) Source: REINZ, ASB 4k-k Restrictions introduced k-1m -4k 1m+ Jan-11 Jan-12 Jan-1 Jan-14 EX-AUTO RETAIL SALES (seasonally adjusted, annual change) Source: Stats NZ Volumes Nominal - Mar- Mar- Mar- Mar-9 Mar-12

7 Thursday 15 May Government Budget 214 With the New Zealand economy robust, we expect Budget 214 to show that the Government remains on track to achieve its stated objective of running an operating surplus in 214/15. Unlike the key 214/15 year, there may be a stutter in 21/14. The accounts are likely to show a larger than expected 21/14 deficit, as forecast tax revenues lag Treasury estimates. The latest published accounts, for the eight months ended 28 March, showed revenues running $1.1bn behind. While Treasury expects close to half of this shortfall to reverse, the other half will persist and be reflected in a larger operating deficit for the year. % 4% 2% % -2% -4% -% OPERATING BALANCE (excluding gains and losses, %GDP) ASB f /c Looking to 215/1 and beyond and as economic growth kicks on, the Government will have more fiscal choice. However, in line with recent Budgets we expect the Government to stick to its less is more bias. As a result, the Government is likely to continue to favour paying down debt and reducing Government charges at the expense of increasing spending allowances. -8% Source: Treasury, ASB -1% All up, and despite being in an election year, we expect only minor surprises, with election lollies scarce on the ground. 7

8 Data Recap: weekly recap Q1 Labour Market The Q1 labour market data tell a story of continued employment growth being offset by strong participation and population growth. That is keeping the unemployment rate stubbornly high and wage pressures very subdued. Overall, the story is the same one we have been telling for some time, and the data largely met our expectations. Continued job gains reflect the broad-based expansion underway in the NZ economy, although the Canterbury rebuild remains a key driver of employment growth. From the perspective of households, though, more job opportunities and greater job security are being countered by very low wage growth. Particularly as inflation is starting to rise, low wage growth will restrict households purchasing power and should constrain spending growth. For some, the silver lining of low wage growth will be that interest rates will not need to rise as quickly. The economy has so far found an adequate supply of workers to meet the demands of the recovery, and we expect that to continue as strong migration inflows carry on over 214. That suggests wage pressures will remain weak in the near term and wage-driven price increases are unlikely to be large or widespread. Overall, the degree of slack still evident in the labour market should keep overall inflation pressures contained a little longer than expected. EMPLOYMENT & UNEMPLOYMENT % % Annual employ ment growth Source: Stats NZ Unemploy ment rate (rhs) - Mar-9 Mar-97 Mar-1 Mar-5 Mar-9 Mar Electronic card transactions Retail card spending posted a modest increase in April. Spending across the categories was very mixed. The largest category, consumables, posted a.7% monthly increase, which was the largest since November 21 and pushed the annual rate of growth up to 5.8%. Growth in this category has been fairly modest, and we would expect to see a step-up in growth as strong migration flows through into increased spending on necessities such as groceries. In contrast to consumables, spending on durables fell by.2% in April. After increasing strongly over 21, growth in this category seems to have stalled. That is not all that surprising given the recent slowdown in house sales. APC RETAIL ELECTRONIC CARD TRANSACTIONS Total The area of major weakness in April, as it was in March, was apparel spending (down 2.7% mom). It is possible that good weather has once again delayed the usual winter purchases. Spending in this category is now down.7% from the same month last year. A slight pick-up in growth in the large consumables category is encouraging, but weakness in apparel spending continued in April. It is possible that much of that is weather-related and will reverse out over coming months. We expect consumer spending to grow at a strong but not spectacular pace over 214. Consumer confidence is soaring and employment conditions are looking very good. But consumers are still cautious about taking on debt, and low wage growth is restraining purchasing power 4 Ex-auto 2 Source: Stats NZ Jan-5 Jan-7 Jan-9 Jan-11 Jan-1 8

9 Global Data Calendars Calendar - Australasia, Japan and China Time Forecast Date (NZT) Eco Event Period Unit Last Market ASB Mon 12 May 11:5 JN BoP current account balance Mar bn :5 JN BoP current account adjusted Mar bn : AU NAB business confidence Apr Index 4. 1: AU NAB business conditions Apr Index 1. Tue 1 May 1:45 NZ Food prices Apr m%ch -. 11:15 AU RBA's Ellis speaks in Sydney 1: AU Home loans Mar m%ch : AU Owner-occupier loan value Mar m%ch 1.9 1: AU House price index QI q%ch.5. 17: CH Fixed assets ex rural Apr y%ch ytd y%ch 17: CH Retail sales Apr y%ch : CH Industrial production Apr y%ch AU Federal Budget Statement 214/15 Wed 14 May 7:18 CH Foreign direct investment Apr y%ch :45 NZ Retail sales ex inflation QI q%ch :5 JN Domestic CGPI Apr m%ch. 18: JN Machine tool orders Apr P* y%ch : IN Wholesale prices Apr y%ch Thu 15 May 1: NZ Business NZ manufacturing PMI Apr Index : AU RBA's Ellis speaks in Sydney 11:5 JN GDP QI P** q%ch : AU New motor vehicle sales Apr m%ch -. Fri 1 May 1: JN Industrial production Mar F m%ch. 1: JN Capacity utilization Mar m%ch -2. *P = Preliminary **F = Final Calendar - North America & Europe Time Forecast Date (UKT) Eco Event Period Unit Last Market ASB Tue 1 May 1: GE ZEW survey expectations May Index 4.2 1: EC ZEW survey expectations May Index 1.2 1: US Retail sales advance Apr m%ch : US Import price index Apr m%ch..4 15: US Business Inventories Mar %.4.4 Wed 14 May 7: GE CPI Apr F* m%ch -.2 9: UK ILO unemployment rate months Mar %.9 9: UK Employment change M/M Mar 29. 1: EC Industrial production Mar m%ch.2 1: UK Bank of England inflation report 1: US PPI final demand Apr m%ch.5.2 1: US PPI ex food and energy Apr m%ch..2 9

10 Time Forecast Date (UKT) Eco Event Period Unit Last Market ASB Thu 15 May 7: GE GDP QI P** q%ch y%ch : EC CPI Apr m%ch y%ch 1: EC GDP QI A*** q%ch y%ch 1: US Empire manufacturing May : US CPI Apr m%ch y%ch 1: US Initial jobless and continuing claims May 14:15 US Industrial production Apr m%ch :15 US Capacity utilization Apr % :15 US Manufacturing (SIC) production Apr %.5 15: US NAHB housing market index May Index Fri 1 May : US Fed's Yellen speaks to U.S. Chamber of Commerce in Washington *F = Final **P = Preliminary ***A = Advance 1: EC Trade balance Mar bn 15. 1: US Housing starts Apr : US Building permits Apr ,15. 14:55 US University of Michigan confidence May P ASB Economics & Research Phone Fax Chief Economist Economist Economist Economist Rural Economist Nick Tuffley Christina Leung Daniel Smith Chris Tennent-Brown Nathan Penny nick.tuffley@asb.co.nz christina.leung@asb.co.nz daniel.smith@asb.co.nz chris.tennent-brown@asb.co.nz nathan.penny@asb.co.nz (49) (49) 1 51 (49) (49) 1 5 (49) (49) ASB Economics ASB North Wharf, 12 Jellicoe Street, Auckland Important Disclaimer This document is published solely for informational purposes. It has been prepared without taking account of your objectives, financial situation, or needs. Before acting on the information in this document, you should consider the appropriateness and suitability of the information, having regard to your objectives, financial situation and needs, and, if necessary seek appropriate professional or financial advice. We believe that the information in this document is correct and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its compilation, but no representation or warranty, either expressed or implied, is made or provided as to accuracy, reliability or completeness of any statement made in this document. Any opinions, conclusions or recommendations set forth in this document are subject to change without notice and may differ or be contrary to the opinions, conclusions or recommendations expressed elsewhere by ASB Bank Limited. We are under no obligation to, and do not, update or keep current the information contained in this document. Neither ASB nor any person involved in the preparation of this document accepts any liability for any loss or damage arising out of the use of all or any part of this document. Any valuations, projections and forecasts contained in this document are based on a number of assumptions and estimates and are subject to contingencies and uncertainties. Different assumptions and estimates could result in materially different results. ASB does not represent or warrant that any of these valuations, projections or forecasts, or any of the underlying assumptions or estimates, will be met. 1