Inflation hits keep coming

Transcription

1 Inflation hits keep coming Inflation expectations continue to slide and risk becoming entrenched. Meanwhile, global growth concerns and dairy weakness dent February business confidence. All up, we view OCR cuts as necessary sooner rather than later. Today s business confidence data were revealing. In particular, the data added weight to our view that OCR cuts are necessary. In fact, we judge the risks as being skewed towards the next move coming earlier than our current expectation of cuts in June and August. Supporting this view is that pricing intentions continue their slide and risk becoming entrenched in firms minds. The ANZ Business Outlook showed overall pricing intentions dipped 5.8pts over February. But more symbolically, inflation expectations also dipped 0.25 points to 1.39% - the lowest level on record. Moreover, these data reinforce other recent very weak inflation indicators. In particular, the RBNZ s own inflation expectations survey this month showed that 2-year-ahead inflation expectations fell to just a fraction above the record low set back in The business confidence data also emphasised the growth risks on top of the risks that inflation continues to undershoot. Firms have reacted to the very jittery start to Sharemarkets in particular have been hit hard, as have oil markets. Moreover, China s growth concerns combined with the dairy sector s extended weakness appear to be weighing on businesses minds. While these headlines have had less impact on firms own business activity levels, the risks to both the growth and accompanying inflation outlook are clearly down. In other words, at current settings, current very low Inflation risks going lower. And as a result, the benefits from waiting and seeing are clearly dissipating. In terms of our OCR view, we have called for cuts in June and August, but given this month s developments we now view the April OCR Review as live. Next week s RBNZ Monetary Policy Statement is likely to be too soon for a sea change in the RBNZ s view. However, we will look to the Statement for clear hints to how far the RBNZ goes in softening its stance. This week, the local data flow is heavy. Locally we have the Q4 Terms of Trade data tomorrow, followed by the first dairy auction of the month. We expect the auction to show the first price lift of the year, providing some relief, at least in terms of sentiment, for farmers. Later in the week we have house price and building data. Also over the Tasman, we expect the RBA to be on hold in its Rate Announcement. The closely watched US Non-farm Payrolls is released at the end of the week and signs of emerging wage inflation may help reinforce the Fed s case for higher US interest rates. Lastly, China s new GDP forecast (released Saturday NZ time) will give a pointer on the economic growth direction over 2016 for NZ s largest trade partner. Foreign Exchange NZD remains supported due to relatively high interest rates, USD strengthens on strong US data. Interest Rates NZ interest rates continue to fall as the market prices in the probability of more OCR cuts this year. Week Ahead Global Dairy Trade auction, NZ Terms of Trade and Q4 Building Activity survey. Week in Review Business confidence plunges, building consents fall, net migration & trade balance higher. Global Calendars RBA rate announcement, Australian GDP. CH Manufacturing PMI. US ISM survey, labour market. Chart of the Week: Inflation hits keep coming Inflation expectations as measured by this morning s ANZ Business Outlook % INFLATION EXPECTATIONS dropped to a record low of 1.39%. This continues the steady decline since the 4.0 middle of Indeed, the fall was broad-based. All five sectors posted falls of Serv ices 0.13 points and above. 3.5 Construction Manuf acturing 2.0 Retail 1.5 Source: ANZ 1.0 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 The biggest, and in turn most surprising fall, was in the construction sector; and when combined with the double-digit fall in construction sector pricing intentions, a major source of pricing pressure within the economy is showing signs of cooling. Construction sector activity levels are high, particularly in Auckland. However, we suspect the slowing rebuild activity in Christchurch is adding back some capacity to the sector. Similarly, expectations were low in the services and retail sectors. All up, these data point to inflation remaining very low this year. ASB Economics economics@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 6 mths ago Year ago ST Bias Support^ Resistance^ NZD/USD UP NZD/AUD FLAT/UP NZD/JPY FLAT NZD/EUR UP NZD/GBP UP TWI UP ^Weekly support and resistance levels * Current is as at 9.30 am Monday; week ago as at Monday 5pm. The NZD/USD remains resilient despite low dairy prices and pricing for more rate cuts by the Reserve Bank of New Zealand. New Zealand s still high (by global standards) interest rates are making New Zealand a magnet for offshore capital flows, and supporting NZD. We expect a modest increase in dairy prices at this week's GDT auction to provide some support to NZD. The NZD/AUD cross is likely to be volatile this week, with a number of NZ and AU event risks (RBA, Global Dairy Trade, AU Q4 GDP). The USD is trading at its highest level since early January because of the stronger than expected US economic data released on Friday. We expect the USD to trade in a relatively tight range in the early part of the week. Volatility will then likely increase in response to the US ISM Manufacturing Survey and Non-farm Payrolls. A pick-up in wage growth from the current rate of 2.6%pa would give the FOMC more confidence that inflation will head up towards their 2%pa target. Short-term outlook: Key data Date Time (NZT) Market US cents NZD/USD (LHS) Source: ASB NZ DOLLAR (past 3 months) Medium-term outlook: Trade-Weighted Index (RHS) Index Dec 28-Dec 18-Jan 08-Feb 29-Feb RBA Cash Rate Announcement 1/ pm 2.00% CH Manufacturing PMI 1/ pm 49.4 Global Dairy Trade Auction 1/3 Overnight - AU GDP, %qoq 2/ pm 0.5% US Non-farm Payrolls, 000 s 5/ am +193 Key events for currencies this week: NZD: Terms of Trade (Tue); GDT auction (Wed). AUD: Q4 Inventories, company profits (Mon); RBA meeting, Q4 current account (Tue); Q4 GDP (Wed); Jan trade balance (Thurs); Jan retail trade (Fri). USD: Feb ISM manufacturing (Wed); Feb ADP employment, Beige book (Thu); Feb Non-farm payrolls (Sat). CNY: Feb manufacturing & non-manufacturing PMIs (Tue & Thu); China GDP forecast (Sat). JPY: Jan Industrial production (Mon); Unemployment rate (Tue). EUR: Feb CPI (Mon); Jan retail sales (Thu). GBP: Feb Markit manufacturing PMI (Tue); Feb Markit construction PMI (Wed); Feb Markit services PMI (Thu). Central Bank Speakers: FOMC: Dudley (Tue), Williams (Thu). Last Quarterly Economic Forecasts In January we increased our NZD/USD forecasts relative to our earlier forecasts made in September The main reasons for a higher NZD/USD are higher New Zealand swap rates and stronger-than-expected demand for New Zealand assets, which is generating support for the NZD. We still project NZD/USD will decline from current levels in the near term, though from a higher level than earlier forecast. We see the NZD/USD reaching a low of 0.62 in the first quarter of 2016, and remaining in the low to mid 60s over We still expect the Reserve Bank of New Zealand to cut the Official Cash Rate by another 50 basis points in Lower New Zealand interest rates will bear down on the NZD. Still-low dairy prices will also constrain New Zealand s Terms of Trade and NZD/USD. The changes to our NZD/USD forecasts, and unchanged AUD/USD forecasts, mean we lifted our forecasts for NZD/AUD. We still predict NZD/AUD will track modestly lower in 2016 though from a higher starting level. We expect the pair to trade above 0.90 over the year ahead. Japan s large current account surplus is very supportive for JPY. Added policy easing from the BoJ will support USD/JPY in the near term, but in H2 2016, we expect USD/JPY to ease. We expect NZD/JPY to trade largely in the low 70s over the coming year, though it is likely to remain higher than that in the near term. Our NZD/EUR forecasts have the cross rate trading in a range centred in the high 50s over the year ahead, while we expect NZD/GBP to trade in the low 40s over

3 Interest Rate Market 29 February 2016 Wholesale interest rates Current Week ago Month ago 6 mths ago Year ago ST Bias Cash rate FLAT 90-day bank bill FLAT 2-year swap FLAT 5-year swap FLAT 5-year benchmark gov't stock FLAT NZSX UP ^Weekly support and resistance levels * Current is as at 9.30am Monday; week ago as at Monday 5pm. NZ rates steadily declined over the week. Market participants continued to re-evaluate the risks around the NZ rates outlook. Potentially influencing the move lower in rates were comments from Finance Minister Bill English suggesting that recent fall in inflation expectation removes a key hurdle for the RBNZ in lowering rates. Monday s surprise decline in business confidence further reinforced the case for further rate cuts. US rates were also relatively subdued for the most part last week then lifted strongly Friday night triggered by stronger US economic data. The surprise upward revision to US Q4 GDP growth along with stronger inflation indicators reinforce that the US Federal Reserve are still likely to lift interest rates this year, ahead of what is currently priced in by markets. % p.a Short-term outlook: Key data Date Time (NZT) Market NZ INTEREST RATES (past 3 months) Official Cash Rate Source: ASB Dec 28-Dec 18-Jan 08-Feb 29-Feb Medium-term outlook: 5-year swap 90-day bank bill RBA Cash Rate Announcement 1/ pm 2.00% CH Manufacturing PMI 1/ pm 49.4 Global Dairy Trade Auction 1/3 Overnight - AU GDP, %qoq 2/ pm 0.5% US Non-farm Payrolls, 000 s 5/ am +193 Comment: Domestic market focus is on the RBNZ s MPS and OCR announcement next week (Thursday 10 th of March). NZ economic data over the past few weeks have reinforced the need for further rate cuts (which we have been calling since November) and NZ interest rates have been falling as market participants come around to our view. This week, the key domestic event is the Global Dairy Trade auction (which is likely to show a small increase). There is some event risk with the RBA announcement on Tuesday and Australian GDP out on Thursday. However, in our view, the market has appropriately captured the downside risks to the Australian rate outlook. Last Quarterly Economic Forecasts The RBNZ left the OCR unchanged at 2.5% at the January OCR review, but moved to a clearer easing bias. Since June 2015, the RBNZ has cut the OCR by 100bp. In light of persistently weak inflation pressures, we continue to expect further OCR cuts in June and August this year. There is now clear risks these cuts occur earlier than June, although the RBNZ still appears to have a high threshold toward further rate cuts. The RBNZ still appears reasonably relaxed on the inflation front almost shrugging off the fact that inflation will now take even longer to return to target. We got the sense from both the January statement and a recent speech by the Governor that the RBNZ sees recent inflation developments (i.e. fall in oil prices, lack of NZD inflation impact) as just starting point shocks rather than having deeper implications for future inflation dynamics. In January, the RBNZ pointed to stable inflation expectations, and its own model suggests core inflation of 1.6%. However, February s Survey of Expectations revealed a sharp drop in 2-year-ahead inflation expectations which weakens the RBNZ s previous stance that inflation expectations remain anchored and highlights the downside risks to the inflation outlook. We continue to expect downside risks to the global and domestic outlook along with ongoing weakness in inflation pressures will convince the RBNZ that further OCR cuts are needed. The RBNZ acknowledged the increased uncertainty on the global outlook. However, it also noted that drought concerns have eased mitigating one of the previous downside risks. The RBNZ s growth outlook appears unchanged and it is still quite confident that growth will pick up due to net migration, tourism and construction. However, while all of these sectors will continue to expand, we note that the growth contribution from all three of these sectors possibly peaked in We require lower interest rates for our growth track to match the RBNZ s. The RBNZ is monitoring housing market developments closely. There are some tentative signs that Auckland house price inflation is moderating, although pressures outside of Auckland may be picking up. If the RBNZ sees evidence of the nationwide housing market beginning to settle and mitigating some of the financial stability risks, it may be more inclined to cut interest rates further. 3

4 Key international data for the week ahead Data Date Time (NZT) Previous Market expects ASB expects EU CPI, February, %yoy 29/ pm AU Balance of Payments, Current Acct, Q4, $b 1/ pm -$20 -$18.1 -$20 CH Manufacturing PMI 1/ pm RBA Cash Rate Announcement, % 1/ pm US ISM Manufacturing Index, Feb 2/ am AU GDP, Q4, %qoq 2/ pm AU Trade Balance, January, $b 3/ pm AU Retail Trade, January, %mom 4/ pm US Non-farm Payrolls, February, 000 s 5/ am Starting in Europe this week, we expect headline CPI inflation to decelerate back down towards 0%pa in February. The second wave of oil price falls in late 2015/early 2016 and the rebound in the EUR should see the drag from energy prices increase once again. Given the persistent slack in the Eurozone economy, core inflation should remain subdued near 1%pa. The benign inflation backdrop should see the ECB announce more policy stimulus on 10 March. It is a big week in Australia. The RBA is expected to leave the OCR unchanged at 2% but maintain its easing bias on Tuesday afternoon. The statement is expected to a non-event with market pricing just 6% chance of a rate cut on Tuesday. From the statement, interest will be around the RBA s interpretation of the mixed Q4 CAPEX data. Australian Q4 GDP is due for release on Wednesday; we expect quarterly growth between 0.5% and 0.7%. Most areas of the economy are expected to expand, except for business investment which will continue to drag. All up, Australian growth remains below trend. Prior to the GDP release, partial information is released on Monday (company profits and inventories) and Tuesday (current account) which will allow analysts to refine their forecasts. We expect net exports will contribute 0.3pp to Q4 GDP growth as export volumes rise and import volumes contract. On Thursday, we expect Australian January trade data to show a smaller deficit, with import growth slowing and export growth lifting as ongoing LNG exports from Gladstone provide a boost. On Friday, we expect to see Australian retail spending rise 0.5% after flat growth in December. Shaky consumer sentiment and low income growth have been headwinds to some parts of the retail sector. But, strong residential construction is lifting household goods spending AUSTRALIAN GDP % % (annual % change) Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 pts Consumer spending Net Exports Business Investment Housing US WAGES & LABOUR SHORTAGES Jobs hard to fill (12 month lead, lhs) Gov't %pa5 4 3 China manufacturing survey data, out on Tuesday, are likely to point to subdued activity in the industrial sector, as exports and investment growth slows. Finally in the US, the US ISM Manufacturing Survey is likely to increase in February but remain below 50 for the 5th consecutive month. Readings below 50 indicate contraction, and the last time the Manufacturing PMI was this weak was in mid However, US labour market remains robust. Employment growth is starting to slow because firms are struggling to find suitable staff to fill vacancies. With the unemployment rate remaining below 5% we expect to see wage growth to continue to accelerate (albeit from low levels). 9 Average Hourly Earnings (rhs) 2 Jan-07 Jan-10 Jan-13 Jan

5 NZ Data Preview: a look at the week ahead Data Date Time (NZT) Previous Market expects ASB expects RBNZ credit aggregates, household credit growth, Jan, %yoy 29/ pm +7.4% - - Terms of Trade, Q4, %qoq 1/3 10:45 am -3.7% 0% 0% Global Dairy Trade Auction, Whole Milk Powder Price Index 1/3 Overnight -2.8% - 6% Building Work Put in Place, Total, Q4, %qoq 3/ am +0.5% +2.0% +5.2% On Monday afternoon, we expect housing credit growth will begin to moderate over 2016, led by a cooler Auckland housing market. Housing credit growth finished 2015 on a strong point. Meanwhile, we expect business credit growth to maintain a steady pace as confidence remains supportive of credit demand. Agricultural credit growth appears to be stabilising at fairly robust levels, with credit demand lifting to cover weaker dairy sector cashflows. On Tuesday, we expect data to show no change in NZ s Terms of Trade (ToT) over the December quarter. We expect falling export and import prices to largely offset each other. On the export price side, we expect lower dairy prices to drive most of the fall. At the same time, we expect lower oil prices to lead import prices down. By the end of 2016, we expect the ToT to lift further from what is already a relatively high level by historical standards. Overnight Tuesday the latest GlobalDairyTrade auction takes place. We expect dairy prices to rise for the first time this year. Recently, commodity and sharemarkets have stabilised somewhat and this appears to be the case for dairy markets as well. Moreover, with prices currently very low, buyers may be tempted into the market on the theory that prices this low won t last forever. Futures pricing currently suggests a rise for whole milk powder prices of around 6%. Index $m 1,100 NZ TERMS OF TRADE Source: Stats NZ Export prices relativ e to import prices f or goods GDP CONSTRUCTION & CONCRETE SALES Building WPIP m3 000's On Thursday, we expect Building Work Put in Place (a partial indicator for construction GDP), to lift 5.2% in Q4, led by strong growth in both residential and non-residential construction activity. Concrete sales also lifted 5% over Q4. Housing construction demand continues to lift, supported by population growth. Non-residential construction demand is also rising, led by strong business confidence across the country and rebuild activity in Canterbury. 1, ,500 2, Concrete (rhs) Source: Stats NZ 600 Mar-03 Mar-08 Mar-13 1,500 USD/MT 2,400 2,300 GLOBALDAIRYTRADE AND WMP FUTURES PRICES Source: GlobalDariryTrade, NZX, ASB USD/MT 2,400 2,300 2,200 2,100 Current WMP futures (Contract 2) 2,200 2,100 2,000 2,000 1,900 1, February auction prices (Contract 3-6) 1,900 1,800 1,700 Mar Apr May Jun Jul Aug 1,700 5

6 Data Recap: weekly recap Data Date Actual Market forecast ASB Forecast Net Migration, January, s.a. 25/02 +6, Overseas short-term visitor arrivals, s.a. %mom 25/ % - - NZ merchandise trade balance, January, $m 26/02 +$8m -250m -250m ANZ Business Outlook, Business Confidence, February 29/ NZ Building Consents, January, %mom 29/02-8.2% - - Tourism continues to boom. The slightly earlier timing of Chinese New Year seems to have contributed to stronger short-term visitor arrival numbers in January. Over the past year, growth in short-term arrivals has been led by increased numbers of holiday makers from China, US and Australia. The increase in tourist numbers and international students, coupled with the lower NZD, has helped boost exports of services which is now the strongest performing sector of the NZ economy. In January, net migration recorded a surge in net inflows of 6,130. Permanent and long-term arrivals remain at very high levels, while departures are very low. A key source of arrivals over the past two years has been from Australia, reflecting the relative strength of the NZ labour market compared to Australia s. However, this trend has been slowly changing with the Australian labour market improving while NZ s is slowing. Strong population growth provides support to the NZ economy via increased demand for goods and services, but also places additional strain on NZ s tight housing market. Net migration has also seen labour supply growth outpace jobs creation. This has contributed to a softer labour market and subdued wage inflation pressures. The Trade balance posted an unexpected surplus of $8 million in January, against expectations of a solid deficit of $250m. The stronger result was due to a lift in non-dairy exports which continue to perform well, in particular a 50% surge in fruit exports with cherries the standout performer. Indeed, of our top 10 exports, 8 have recorded an increase in export values over the past year (with dairy and forestry the exceptions). ANZ business confidence plunged in February, reversing much of late 2015 s gains. Falling business confidence comes as no surprise as the global markets have made a very jittery start to China s growth concerns combined with the dairy sector s extended weakness appear to be weighing on businesses minds. Pricing intentions continued their slide. Overall intentions dipped 5.8pts. But more symbolically, inflation expectations dipped 0.25pts to 1.39% - the lowest level on record. Building consents were soft in January, following three months of steady growth. Given the usual volatility in building consents, the weaker number is not concerning. The softer results appear to be centred in Auckland, with a sharp decline in apartment consents. Weaker apartment consents, particularly at the start of the year, are not too surprising and this result does change our view of gradual growth in Auckland residential construction activity. Canterbury residential consents were also very weak as the bulk of earthquake rebuild and repairs on housing have now commenced or been completed. The recent increase in seismic activity may also contribute to a slowdown in rebuild and repair progress over the early part of '000 NZ SHORT TERM ARRIVALS (monthly, seasonally adjusted) CWC 260 RWC 240 Lions tour Source: Stats NZ EXPORT & IMPORTS $ billion (Monthly, seasonally adj.) $ billion Imports Exports Trade Balance (rhs) -0.5 Source: Stats NZ, ASB % INFLATION EXPECTATIONS 4.0 Serv ices 3.5 Construction Manuf acturing 2.0 Retail 1.5 Source: ANZ 1.0 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 6

7 Global Data Calendars Calendar - Australasia, Japan and China Time Forecast Date (NZT) Eco Event Period Unit Last Market ASB Mon 29 Feb 13:30 AU Inventories Q4 q%ch 0.1 ~ Mar Wed 2 Mar Thu 3 Mar Fri 4 Mar Sat 5 Mar *P = Preliminary 13:30 AU Company operating profit Q4 q%ch 1.3 ~ :30 AU Private sector credit Jan m%ch 0.5 ~ :00 JN Vehicle production Jan y%ch -2.3 ~ ~ 18:00 JN Housing starts Jan y%ch ~ 18:00 JN Annualized housing starts Jan $mn ~ 18:00 JN Construction orders Jan y%ch 14.8 ~ ~ ~ NZ Global Dairy Trade Auction, Whole Milk Powder Feb %ch -2.8% ~ :45 NZ Terms of Trade index 4Q q%ch :30 AU Ai-Group PMI Feb Index 51.5 ~ ~ 12:00 AU CoreLogic RP data house px Feb m%ch 0.9 ~ :30 JN Jobless rate Jan % ~ 12:50 JN Capital spending Q4 y%ch 11.2 ~ ~ 12:50 JN Company profits Q4 % 9.0 ~ ~ 13:30 AU Net exports of GDP Q4 ~ 1.5 ~ :30 AU BoP current account balance Q4 $bn ~ :30 AU Building approvals Jan m%ch 9.2 ~ :00 CH Manufacturing PMI Feb Index ~ 14:00 CH Non-manufacturing PMI Feb Index 53.5 ~ ~ 14:45 CH Caixin China PMI manufacturing Feb Index ~ 15:00 JN Nikkei Japan PMI manufacturing Feb F Index 50.2 ~ ~ 16:30 AU RBA cash rate target Mar % ~ 12:00 NZ QV house prices Feb y%ch 12.6 ~ ~ 13:30 AU GDP Q4 q%ch 0.9 ~ :30 AU Ai-Group PSI Feb Index 48.4 ~ ~ 13:00 AU HIA new home sales Jan m%ch 6.0 ~ ~ 13:00 NZ ANZ commodity price Feb % -2.3 ~ ~ 13:30 AU Trade balance Jan $mn -3,535 ~ -3,000 13:30 AU Retail sales Jan m%ch 0.0 ~ :30 JN Real cash earnings Jan y%ch -0.1 ~ ~ ~ CH China's 2016 GDP Forecast 7

8 Calendar - North America & Europe Time Forecast Date (UKT) Eco Event Period Unit Last Market ASB Mon 29 Feb 09:30 UK Net consumer credit Jan bn 1.2 ~ ~ 09:30 UK Net lending sec. on dwellings Jan bn 3.2 ~ ~ 09:30 UK Mortgage approvals Jan ~ ~ 13:30 CA Current account balance QIV CAD bn ~ ~ 14:45 US Chicago Purchasing Manager Index Feb ~ ~ 15:00 US Pending home sales Jan m%ch ~ Tue 1 Mar 08:55 GE Unemployment rate Feb % 6.2 ~ ~ 08:55 GE Markit/BME Germany manufacturing PMI Feb F Index 50.2 ~ ~ 09:00 EC Markit Eurozone manufacturing PMI Feb F Index 51.0 ~ ~ 09:30 UK Markit UK PMI manufacturing Feb Index 52.9 ~ ~ 10:00 EC Unemployment rate Jan % 10.4 ~ ~ 13:30 CA GDP Dec m%ch 0.3 ~ ~ 13:30 CA Quarterly GDP annualized Q4 % 2.3 ~ ~ 14:05 EC ECB's Lautenschlaeger speaks in New York 14:30 CA RBC Canadian manufacturing PMI Feb Index 49.3 ~ ~ 14:45 US Markit US manufacturing PMI Feb F Index 51.0 ~ ~ 15:00 US ISM manufacturing Feb Index ~ 15:00 US Construction spending Wed 2 Mar 08:30 EC ECB Executive Board Member Coeure speaks in Frankfurt 09:30 UK Markit/CIPS UK construction PMI 10:00 EC PPI Jan m%ch -0.8 ~ ~ 13:15 US ADP employment change Feb ~ 15:00 US Fed's Williams speaks in San Ramon, California 19:00 US U.S. Federal Reserve releases Beige Book Thu 3 Mar 08:30 UK Halifax house prices Feb m%ch 1.7 ~ ~ 09:00 EC Markit Eurozone services PMI Feb F Index 53.0 ~ ~ 09:00 EC Markit Eurozone composite PMI Feb F Index 52.7 ~ ~ 09:30 UK Official Reserves changes Feb mn 527 ~ ~ 09:30 UK Markit/CIPS UK services PMI Feb Index 55.6 ~ ~ 09:30 UK Markit/CIPS UK composite PMI Feb Index 56.1 ~ ~ 10:00 EC Retail sales Jan m%ch 0.3 ~ ~ 13:30 US Nonfarm productivity Q4 F % ~ 13:30 US Unit labor costs Q4 F % ~ 13:30 US Initial jobless and continuing claims Feb ~ ~ ~ ~ 15:00 US ISM Non-manufacturing composite Feb Index ~ 15:00 US Factory orders Jan % ~ Fri 4 Mar 08:30 GE Markit Germany construction PMI Feb Index 57.9 ~ ~ 09:10 EC Markit Eurozone retail PMI Feb Index 48.9 ~ ~ 13:30 US Trade balance Jan $bn ~ 13:30 CA International merchandise trade Jan CAD bn -0.6b ~ ~ 13:30 US Change in non-farm payrolls Feb :30 US Unemployment rate Feb % ~ 13:30 US Average hourly earnings Feb m%ch

9 ASB Economics & Research Phone Fax Chief Economist Senior Economist Rural Economist Economist Nick Tuffley Jane Turner Nathan Penny Kim Mundy (649) (649) (649) (649) (649) 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. 9