Fonterra contamination dominates local market attention

Transcription

1 5 August 13 Fonterra contamination dominates local market attention Fonterra confirms 3 batches of whey protein contaminated with bacterium linked to botulism. Uncertainty over implications for NZ dairy exports. Events highlight growing importance of China for NZ dairy exports. Fonterra has confirmed that 3 tonnes of whey, produced in May 1 in 3 batches, has been contaminated by a bacterium that can cause botulism under certain environmental conditions. customers in 7 countries, including NZ, have used the whey to make 7 tonnes of consumer product. Presence of the Clostridium bacterium (of which there are around 1 species) was detected by Fonterra in March this year. Further test results available on 31st July confirmed the potential presence of Clostridium Botulinum, a rare species of Clostridium. Under a particular set of environmental conditions the bacterium can produce the botulinum toxin. It is the toxin that is dangerous rather than the bacterium itself. A diluted form of the toxin is used in Botox. The bacterium comes out of soil. There was some dust in a pipe in a particular factory, and that is the source of the contamination. The pipe itself is a rarely-used one. Further product from the plant has been tested. Fonterra s mainstream dairy products, including the key milk powders, are not affected. At this stage products that used the affected whey are being recalled. NZ dairy exports in the 1 months to June 13 totalled $11.5 billion, of which $. billion go to China. There is a report that China is banning imports of NZ milk powder, though Fonterra has not received any confirmation. If there is any short-term trade impact it will happen at the low of the export season. Moreover, dairy product can be stored for export at a later date, suggesting any shortterm economic impact could well be modest. Any longer-term implications will depend on Fonterra s and NZ s ability to reassure customers over the quality and safety of NZ food exports. Nevertheless, as NZ accounts for around a third of globally-traded dairy product, it is hard for consumers to substantially substitute away from NZ product. In the here and now, financial markets have reacted. In early trade the NZD has fallen around a cent to around.77. Liquidity is poor on a Monday morning. The fuller impact will likely take the full day to work through as main trading time zones open. Shortdated interest rates initially fell around bp, with the -year swap rate down around 7bp. Much of this move is unlikely to be about Fonterra: interest rates were set to be down around 5bp as a result of the weaker than expected US Non-farm Payrolls result on Friday night. The situation remains fluid, and the full impact may not be clear for some time yet. That will leave NZ markets vulnerable to further developments, such as clarification of whether or not China (and other countries) has imposed a trade ban. Fonterra s CEO has already arrived in China to address the situation, and the Government had more than people working on it over the weekend. For further detail see our Economic Note. Click here for: Foreign Exchange USD strength and news of Fonterra contamination puts downward pressure on the NZD. Interest Rates NZ interest rates fall on offshore rally and uncertainty over implications of Fonterra contamination. Week Ahead NZ employment and wage data this Wednesday the key NZ data releases. Week in Review Business confidence remains high, slight easing in building consent issuance but upward trend remains. Global Calendars RBA and BoJ rate announcements this week, Australian employment also key. Chart of the Week China has become an increasingly important market for NZ dairy exports. Since NZ DAIRY EXPORTS TO CHINA signed its Free Trade Agreement with China in, the proportion of dairy exports (% of total annual dairy exports) 3 to China as a proportion of total NZ dairy exports has surged. For the year to June 13, the value of dairy exports to China reached almost 5% of the total value of NZ 5 dairy exports. China s expanding middle class has seen an increase in demand for protein, which as a food producer NZ is well-placed to address This growing demand for NZ dairy products from China has also driven an increase in the total volume of dairy exports itself, with dairy exports now making up over % of overall NZ export volumes a significant increase from the 15% in. 5 Dec- Dec-3 Dec- Dec-9 Dec-1 Beyond the near-term disruption from the current Fonterra scare, we expect the shift in growth dynamics in China from investment to consumption over the coming years will underpin continued strong demand for NZ dairy products. ASB Economics nick.tuffley@asb.co.nz Please refer to the important disclosures at the end of this document

2 5 August 13 Foreign Exchange Market FX Rates Current* Week ago Month ago mths ago Year ago ST Bias Support^ Resistance^ NZD/USD DOWN NZD/AUD FLAT..9 NZD/JPY DOWN NZD/EUR FLAT NZD/GBP FLAT.5.55 TWI DOWN ^Weekly support and resistance levels * Current is as at 1.3am Monday; week ago as at Monday 5pm. The US dollar strengthened following the release of the US Non-farm Payrolls, as markets focused on the lower unemployment rate and continued to expect the Fed will begin tapering its asset purchase programme later this year. This saw the NZD/USD edge below.75 on Friday night. News of contamination of Fonterra whey milk powder has put further downward pressure on the NZD, with the NZD falling around a cent in early trade to.77. Liquidity is poor on a Monday morning, and the fuller impact will likely take the full day to work through as main trading time zones open. The Australian Treasury s upward revision to its budget deficit forecast for the 13/1 year to A$3 billion (from previous forecast of A$1 billion) put downward pressure on the Australian dollar on Friday. The forecast deficit was much larger than many had been expecting, and the economic outlook was downbeat. Widespread expectations the RBA will again cut its cash rate tomorrow also made the AUD less attractive from a yield perspective. Short-term outlook: Key data Date Time (NZT) Market US cents 7 Source: ASB NZD / USD NZ DOLLAR (past 3 months) TWI Index May 3-Jun -Jun 15-Jul 5-Aug RBA Rate Announcement /.3 pm.5% Employment, HLFS Q 7/ 1.5 am +.3% Unemployment rate, HLFS Q 7/ 1.5 am.3% AU Employment - July / 1.3 pm +k BoJ Rate Announcement / - - Key events in markets this week: EZ service PMI, UK service PMI, EZ retail sales, US ISM non-manufacturing (5 th ); RBA Rate Announcement, AU trade balance, AU house price index, UK industrial production, US trade balance, GlobalDairyTrade auction ( th ); NZ employment, NZ wages, AU housing finance, BoE Inflation Report (7 th ); NZ house prices, AU employment, JP current account, BoJ Rate Announcement, CH trade balance, US initial jobless claims ( th ); NZ electronic card transactions, CH CPI, CH retail sales, CH industrial production, UK trade balance (9 th ). Speakers: Fed: Fisher (5 th ); Evans ( th ); Plosser, Pianalto (7 th ). Medium-term outlook: Last Quarterly Economic Forecasts We revised our forecasts of the NZD outlook in mid-july, prompted by a reassessment of central bank outlooks in particular the US Federal Reserve and the degree of market traction from the Bank of Japan policy easing. We now see the NZD/USD gradually easing from.79 to.7 by the end of 1 (previously hovering around.1-. for most of 1). This largely reflects a continued strengthening in the USD as the US economy continues to recover and as the Fed has made the outlook for US monetary policy a little clearer. We have also pared back our view on the NZD/JPY significantly, largely reflecting the market s reduced enthusiasm on the degree of traction the Bank of Japan s aggressive policy stimulus will have on supporting growth. Nonetheless, the NZD will continue to receive support from an elevated dairy price outlook and evidence the domestic economy is gaining momentum in part due to the stimulus from the Canterbury rebuild. The diverging rate outlooks between NZ and Australia will continue to push the NZD/AUD higher, peaking at.7 in mid-1. We continue to see the EUR remaining weak as the Eurozone economy enters its th consecutive quarter of contraction.

3 5 August 13 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 -year swap DOWN 5-year swap DOWN 5-year benchmark gov t stock DOWN NZSX DOWN * Current is as at 1.3am Monday; week ago is as at Monday at 5pm. NZ govt bond yield is for December 17 maturity (the closest current issue to a five-year maturity). Please be very careful with comparisons of govt bond yields and swap rates. NZ interest rates traded sideways for most of last week. Global markets were very cautious ahead of the Federal Reserve announcement on Thursday morning (NZT). In the end the Fed s statement contained no surprises and so there was little market reaction. Heading into the end of the week, we had seen a steady stream of positive US data, though, particularly Q GDP, the ISM Manufacturing Survey and the ADP employment survey, all of which beat expectations. That prompted some hope that Friday s Non-Farm Payrolls data would be strong, and US Treasury yields and the USD rose heading into the release. In the end though, July s jobs gains were weaker than expected, pushing yields/rates lower as the chances of imminent tapering from the Fed seemed to recede a little.nz rates opened lower this morning (down around 9bps across the curve), partly due to the rally offshore at the end of the week and partly in response to uncertainty created by the Fonterra contamination story. Short-term outlook: Key data Date Time (NZT) Market % p.a NZ INTEREST RATES (past 3 months) 5-year swap 9-day bank bill Source: ASB Official Cash Rate.. 13-May 3-Jun -Jun 15-Jul 5-Aug RBA Rate Announcement /.3 pm.5% Employment, HLFS Q 7/ 1.5 am +.3% Unemployment rate, HLFS Q 7/ 1.5 am.3% AU Employment - July / 1.3 pm +k BoJ Rate Announcement / - - Comment: The Fonterra contamination story is likely to dominate the domestic story over the next few days. The major uncertainty is over how long it will take to resolve the issue and resume exports to China (assuming confirmation of its ban). Wednesday s employment data are expected to be fairly soft after very strong Q1 data. Offshore, the major event will be the RBA announcement tomorrow. A cut would come as no surprise to us or the market the key question will be whether more cuts are likely over the rest of the year. Medium-term outlook: Last Quarterly Economic Forecasts The RBNZ kept the OCR on hold at.5%, as widely expected, at the July Review. The accompanying statement was broadly unchanged from the June MPS, particularly in regards to its growth outlook. There was more focus on the flow-on effects of rising housing market pressures and stronger construction activity on inflation pressures, with the RBNZ noting these developments will be an important influence on OCR increases. The RBNZ noted weak headline inflation (Q annual CPI inflation was just.7% - below the RBNZ s 1-3% target band) but continues to expect inflation will trend up towards the mid-point of the target band over the coming year. Interestingly, the RBNZ has more explicitly tied the lift in the OCR to the degree of inflation pressure spill-over from momentum in the housing market and construction sector. Although Q headline CPI was weaker than expected, non-tradable inflation was slightly stronger than the RBNZ had expected. In addition, there was a sharp spike in Q construction prices in Auckland an early sign of potential inflation spill-over from Canterbury construction activity. The July OCR statement indicated a growing preparedness from the RBNZ to respond to rising domestic inflation pressures over the coming year, particularly in light of stronger consumer demand and now that the NZD has eased and will no longer be a source of tradable deflation. The RBNZ s focus on the spill-over effects of the stronger housing market and construction activity on inflation pressures means non-tradable inflation will likely gain prominence in the central bank s deliberations when assessing upcoming CPI outcomes. We expect strengthening domestic demand and the effects of the recent decline in the NZD will see annual headline inflation rise to the mid-point of the RBNZ s target band by Q next year. The RBNZ also now describes the NZD as high rather than overvalued the modest fall in the currency has been the biggest economic development since the June MPS. Overall, we continue to expect the RBNZ to first lift the OCR in March 1, with the OCR gradually rising to % in late 15. Restrictions on high-lvr lending remain highly likely. 3

4 5 August 13 NZ Data Preview: a look at the week ahead Data Date Time (NZT) Previous Market expects ASB expects Employment, Household Labour Force Survey Q 7/ 1.5 am +1.7% +.3% +.% Unemployment rate, Household Labour Force Survey Q 7/ 1.5 am.%.3%.% Labour Cost Index Q 7/ 1.5 am +.% +.5% +.5% QV House Prices - July / 1. pm +7.% - - Electronic Card Transactions July 9/ 1.5 am +1.1% +.% +.5% Food Price Index - July 1/ 1.5 am +.1% - - New Zealand Data Previews Wednesday 7 August Household Labour Force Survey Q Previous: employment +1.7% qoq, ASB(f) +.% qoq; unemployment rate.%, ASB(f).% Employment rebounded strongly in Q1, following very weak turnouts over H 1, and the unemployment rate dropped sharply from.% to.%. Q1 is ordinarily a weak quarter for employment, so there is usually a sharp drop in the number of unemployed from Q1 to Q. This time around, though, the seasonal weakness in Q1 did not materialise (hence the exceptionally strong seasonally-adjusted result). Without that seasonal effect, the change from Q1 to Q is unlikely to be as pronounced as is usual, and so after seasonal adjustment the Q result is likely to look weak (i.e. a higher unemployment rate). For these somewhat arcane reasons, a moderately weak result shouldn t be interpreted as a signal of deteriorating labour market conditions. We expect a steady improvement in employment conditions over the rest of the year, underpinned by increased activity in Canterbury in particular. Business surveys suggest a gradual improvement in hiring intentions over recent months. Friday 9 August Electronic Card Transactions - July Previous: +1.1% mom, ASB(f) +.5% mom Retail electronic card spending increased by 5.% from year-ago levels in June. Recent increases have primarily been driven by higher spending on durable goods and on hospitality. Durables spending is likely to remain strong thanks to housing market activity. Hospitality spending has likely been supported by record numbers of visitor arrivals over recent months. We expect modest growth in the core retail spending categories to continue in July. The largest increases, though, are likely to come in the fuel spending category, as there was a sharp spike in petrol prices during the month. Higher prices tend to push up the value of spending. 3 EMPLOYMENT & UNEMPLOYMENT % % Unemploy ment rate (rhs) Annual employ ment growth Source: Stats NZ -3 Mar-93 Mar-97 Mar-1 Mar-5 Mar-9 Mar APC RETAIL ELECTRONIC CARD TRANSACTIONS Ex-auto Total Source: Stats NZ Jan- Jan- Jan- Jan-1 Jan-1 1 1

5 5 August 13 Key International Data Date Country Data/event ASB (f) Comment 5 August EZ PMI composite, July A modest upward revision to the flash estimate of 5. looks possible given the upward revision to the manufacturing PMI last week. The PMI readings suggest Eurozone economy is finally emerging from recession. 5 August UK PMI services, August The services PMI reached a 7-month high of 5.9 in June as UK economic recovery speeds ahead through the summer. Further modest upside looks possible in coming months. 5 August US ISM Non-manufacturing Index, July 53 The US Non-manufacturing ISM index is expected to print around 53, indicating ongoing expansion for services in the US. August AU House Price Indexes, Q - House prices are lifting largely because of: (i) lower interest rates; and (ii) pent-up demand for housing. This trend is expected to continue. August AU Trade Balance, Jun $.bn The trade balance increased to $.7bn in May due to bigger lift in exports than imports. A surplus of a similar amount is expected in June as the domestic economy transitions from the mining investment phase of the mining boom to the mining extraction (or production) phase. August AU RBA, Interest Rate Decision.5% The RBA has had an easing bias for some time now. The labour market is soft and the inflation outlook is currently assessed as being benign. We expect the RBA to cut rates to.5%. August UK Industrial production, July Industrial production is still contracting on an annual basis, but should return to positive territory through the second half of the year as manufacturing emerges from recession. 7 August AU Housing Finance, June No. of own-occupiers Value of all loans.% 1.9% Housing finance has picked up. Loans to owner-occupiers and in particular to investors have been trending higher. Industry sources suggest August was another solid growth month with both the number and value of loans growing by around %. 7 August UK BoE Inflation Report, July The August Inflation Report and press conference will be a huge event for GBP markets. It will likely be very dove-ish. We expect an announcement of official forward guidance, most likely involving both an explicit time horizon and conditional economic threshholds. Governor Carney will also have opportunity to discuss new GDP and inflation forecasts in detail as well as communication initiatives. August JN Current Account Balance 7 Japan s current account surplus has collapsed since the natural disaster in March 11. The June trade deficit was bn, and this should see the June current account surplus remain in the vicinity of 7 (seasonally adjusted). JN Bank of Japan policy meeting We do not expect any changes to the Bank of Japan s policy settings at the August meeting. However the BoJ may modestly lift its assessment of the economic outlook AU Labour Force, July Employment Unemployment rate Participation rate 1k 5.7% 5.3% The monthly employment numbers bounce around. But looking through the monthly volatility, the recent trend is one where jobs growth is a little bit less than required to cover labour force growth. That looks most likely to be the case again and we expect moderate jobs growth of around 1k in July. That would be just enough to keep the unemployment steady. CH Industrial Production, July.5%YoY We expect industrial production to have risen in July by.5%. While the July official manufacturing PMI shows a slight improvement and remains above the crucial 5 level, the usual slowdown in the summer months is expected to be exacerbated by the ongoing record heat waves. The recovery in the manufacturing sector remains sluggish. CH Retail Sales, July 13.5%YoY We expect retail sales to have increased by 13.5% in July, continuing its slow recovery from Q1 s weather-induced slowdown. 5

6 5 August 13 CH Trade Balance, July Exports Imports %YoY.5%YoY Exports fell by 3.1% (YoY) in June, reflecting a crackdown on inflated trade between Hong Kong and the Mainland as well as a base effect from a year earlier. As we expect the base effect to subside, exports should have increased by % in July. However, signs of a strong recovery in external demand remain elusive. Similarly, imports should have recovered to be up.5 %YoY, contributing to a trade balance of USD bn. CH Consumer Price Index, July 3%p.a. Food prices are expected to have increased at a faster rate in July from a low base a year ago. Core CPI inflation is expected to stay firmly below %, but we expect the headline CPI to rise by 3%p.a. 9 August AU RBA, Statement on Monetary Policy Current RBA inflation forecasts are based on exchange rate assumptions of USD1. and TWI=77. All else unchanged, we think it more likely than not that the RBA will revise up its medium-term inflation projections. It also looks likely that the RBA will downgrade its growth projections given Q1 GDP growth came in below the central bank s expectation. International Data Charts Australian house prices are lifting largely because of: (i) lower interest rates; and (ii) pent-up demand for housing. The Australian trade balance has been in surplus for the past few months and we expect that continue in June. AUSTRALIA - HOUSE PRICES (annual % change) % % $bn 3. TRADE BALANCE (3-month moving average) $bn ABS House Prices RP-Data Rismark house prices Mar-5 Mar-7 Mar-9 Mar-11 Mar-13 Australian job growth recently has been a little bit less than required to cover labour force growth. That looks most likely to be the case again in July. A moderate increase in jobs is expected. LABOUR MARKET % '. 9 Unemployment rate (lhs) Jan-9 Jan-97 Jan- Jan-3 Jan- Jan-9 Jan-1 Australian housing loans have been trending higher at levels around 15% higher than last year. -3. % % HOUSING LOAN APPROVALS (annual % change) Owneroccupiers plus investors Employment growth (3mnth average, rhs) 3.5 Jan- Jan-9 Jan-1 Jan-11 Jan-1 Jan Sep- Sep-9 Sep-1 Sep-11 Sep

7 5 August 13 The RBA is likely to downgrade its near-term growth and medium-term inflation forecasts in its August SMP due to a softer-than-expected Q1 growth forecast and a weaker AUD. The UK services PMI reached a 7-month high of 5.9 in June as UK economic recovery speeds ahead through the summer. Further modest upside looks possible. % KEY RBA FORECASTS (annual % change) Growth Inflation % RBA forecast range (May'13) Sep Sep 9 Sep 1 Sep Sep 11 Sep 1 A modest upward revision to the Eurozone services PMI flash estimate of 5. looks possible given the upward revision to the manufacturing PMI last week. We do not expect any changes to the Bank of Japan s policy settings at the August meeting. However the BoJ may modestly lift its assessment of the economic outlook. JAPAN INFLATION 3% BoJ's Inflation Target (.%) % Headline CPI - Core CPI (ex fresh food) -3 Jan-97 Jan- Jan-3 Jan- Jan-9 Jan Japan s current account surplus has collapsed since the natural disaster in March 11. The June current account surplus remain in the vicinity of 7 (seasonally adjusted). JPY bln JAPAN: CURRENT ACCOUNT Current Account JPY bln,, 1, 1, Net Income -1, Trade -1, -, -, Mar-5 Mar-9 Mar-99 Mar- Mar-13 7

8 5 August 13 Data Recap: weekly recap ANZ Business Outlook The July ANZ Business Outlook shows that business confidence held up at the very high level established in June. Headline confidence rose again, reaching the highest level since April Firms expectations of their own activity levels slipped very slightly but also remain very strong. Encouragingly, the rally in confidence appears to be broad-based across sectors. The most pessimistic sector is agriculture, where a net 3% of firms expect their own activity levels to increase over the next 1 months. Construction remains the most bullish sector, underpinned by increased reconstruction activity in Canterbury NZ BUSINESS CONFIDENCE % % Own business General economy 7 35 Along with very strong confidence readings, the last two months have shown early signs of gathering inflation pressures. Pricing intentions have risen from.3 in May to 9. this month. Part of that increase has been due to the agriculture sector (probably influenced by strong dairy prices). But pricing intentions have risen in every other sector as well. At the same time, inflation expectations and capacity utilisation have picked up across every sector. RBNZ Credit Aggregates Net new housing lending measured $7m in June, with total housing lending 5.% higher than a year ago. On a seasonally-adjusted basis, household lending growth slowed a little to.% mom, down from the.5% pace that had been sustained over the previous three months. A slight slowdown in lending growth is not that surprising, given that there was evidence of lower house sales during the month. We attribute the lower number of sales to supply constraints rather than a drop-off in demand. Business credit growth remains subdued, up just 1.% on year-ago levels. Business credit demand has been relatively subdued despite some impressive business confidence readings so far this year. Agricultural lending was fairly flat in June, and the annual rate of growth dropped from 5.% to.%, the slowest since October 1. Building Consents Dwelling consent issuance declined by % in June, with the decline broadbased across the regions. Excluding apartment consent issuance, core dwelling consent issuance also declined by.5%. This is softer than our expectations, although consent issuance tends to be volatile from month to month. Beyond the monthly volatility, the trend remains one of a recovery in house-building demand, albeit at a slightly more modest pace. Looking at the regional breakdown, we estimate that consent issuance in Auckland and Canterbury fell 17.5% and 7.% over the month, respectively. However, this follows strong growth in dwelling consent issuance in both regions in the previous month. There had been reports that problems in the Christchurch City Council consent issuing process had seen a backlog of consent applications in the region, and the Council had its building consent accreditation revoked at the beginning of July. Hence it is likely house-building demand in Canterbury is stronger than what the number of consent issuance suggests. -35 Source: ANZ -7 Jan- Jan-3 Jan- Jan-9 Jan-1 % 3 1 Household LENDING GROWTH (annual change) Agriculture Business Source: RBNZ, ASB -1 Jan-9 Jan-97 Jan- Jan-3 Jan- Jan-9 Jan-1 No NZ DWELLINGS CONSENTED (seasonally adjusted, monthly) Source: Stats NZ, ASB Excluding Apartments Total 75 Jan- Jan-3 Jan- Jan-9 Jan % No

9 5 August 13 US Non-Farm Payrolls The US economy added a net 1, jobs in July, according to the latest Non- Farm Payrolls data. That was a little softer than the expected gain of 15, and there were also downward revisions totalling, jobs to the previous two months. s (monthly change) % 1 Source: Bloomberg US Payrolls The downward revisions mean that the 3-month average for job gains was 175k in the 3 months to July, the -month average 199k, the 1-month average 19k. Sub-k per month job gains make it a little more likely that tapering of the Federal Reserve s asset purchase programme is delayed a fraction and less likely that it will be announced in mid-september. The 3- month moving average for job gains has slowed noticeably since the turn of the year as growth has been depressed by fiscal consolidation. However, the unemployment rate did drop further in July, falling tenths to 7.%. This is down from 7.% at the end of 1 and is more encouraging Net change Unemployment rate (rhs) Jan- Jan- Jan-1 Jan-1 1 Global Data Calendars Calendar - Australasia, Japan and China Time Forecast Date (NZT) Eco Event Period Unit Last Market ASB Mon 5 Aug 13:3 AU Retail sales Jun m%ch.1 ~.3 13:3 AU Retail sales ex inflation Q q%ch. ~. 13:5 CH HSBC/Markit services PMI Jul Index 51.3 ~ ~ 17: IN HSBC/Markit services PMI Jul Index 51.7 ~ ~ Tue Aug 11:3 AU Ai-Group PSI Jul Index 1.5 ~ ~ 13:3 AU Trade balance Jun $bn.7 ~. 13:3 AU House price index Q q%ch.1 ~ ~ 13:3 AU ANZ job advertisements Jul m%ch -1. ~ ~ 1:3 AU RBA cash rate target Aug % : JN Leading index CI Jun P Index 11.7 ~ ~ 17: JN Coincident index Jun P Index 1. ~ ~ Wed 7 Aug 1:5 NZ Average hourly earnings Q q%ch :5 NZ Unemployment rate Q q%ch..3. 1:5 NZ Employment change Q q%ch :5 NZ Participation rate Q q%ch :3 AU Ai Group PCI Jul Index 39.5 ~ ~ 13:3 AU Home loans Jun m%ch 1. ~ 13:3 AU Investment lending Jun m%ch 1.5 ~ ~ 13:3 AU Owner-occupier loan value Jun m%ch.3 ~ 1.9 Thu Aug ~ CH Trade balance Jul $bn 7.1. ~ ~ JN Bank of Japan Monetary Policy Statement ~ JN BOJ 1 monetary base target Aug tn 7 ~ ~ 11:5 JN Housing loans Q 3. ~ ~ 11:5 JN BoP current account adjusted Jun bn 3.3 ~ ~ 11:5 JN Trade balance BoP basis Jun bn -9.7 ~ ~ 1: NZ QV house prices Jul y%ch 7. ~ ~ 13:3 AU Employment change Jul 1.3 ~ 1. 13:3 AU Unemployment rate Jul % 5.7 ~ :3 AU Participation rate Jul % 5.3 ~ 5.3 ~ AU WA State Budget : JN Tokyo average office vacancies Jul ~.5 ~ ~ 1:3 AU Foreign reserves Jul $bn 51.9 ~ ~ Fri 9 Aug 1:5 NZ Card spending retail Jul m%ch 1.1 ~ ~ 9

10 5 August 13 13:3 CH CPI Jul y%ch.7. ~ 13:3 CH PPI Jul y%ch -.7 ~ ~ 17: JN Consumer confidence index Jul Index.3 ~ ~ 17: JN Bank of Japan's Monthly Economic Report for August 17:3 CH Industrial production Jul ytd 9.3 ~ ~ 17:3 CH Retail sales Jul ytd 1.7 ~ ~ 1:3 AU TD securities inflation Jul m%ch. ~ ~ 13:3 AU Retail sales Jun m%ch.1 ~.3 13:3 AU Retail sales ex inflation Q q%ch. ~. 13:5 CH HSBC/Markit services PMI Jul Index 51.3 ~ ~ 17: IN HSBC/Markit services PMI Jul Index 51.7 ~ ~ Calendar - North America & Europe Please note all days and times are UK time. Add 11 hours for NZ times. Mon 5 Aug :55 GE PMI services Jul F Index 5.5 ~ ~ 9: EC PMI services Jul F Index 9. ~ ~ 9: EC PMI composite Jul F Index 5. ~ ~ 9:3 UK PMI services Jul Index 5.9 ~ ~ 1: EC Retail sales Jun m%ch 1. ~ ~ 15: US ISM non-manufacturing composite Jul Index 5. ~ ~ 1:5 US Fed's Fisher speaks on the Economy in Portland, OR Tue Aug 9:3 UK Industrial production Jun m%ch. ~ ~ 9:3 UK Manufacturing production Jun m%ch -. ~ ~ 11: GE Factory orders Jun m%ch -1.3 ~ ~ 13:3 CA International merchandise trade Jun C bn ~ 13:3 US Trade balance Jun $bn ~ 15: UK NIESR GDP estimate Jul %. ~ ~ 15: US IBD/TIPP economic optimism Aug Index ~ 15: US JOLTs job openings Jun ~ 3, ~ ~ 1: US Fed's Evans speaks to Reporters in Chicago Wed 7 Aug :15 SZ CPI - EU harmonised Jul m%ch. ~ ~ 9:3 UK Lloyds employment confidence Jul Index -33. ~ ~ 1:3 UK BOE's Carney speaks at Publication of Inflation Report 1:3 UK Bank of England Inflation Report 11: GE Industrial production Jun m%ch -1. ~ ~ 1: US MBA mortgage applications Aug % -3.7 ~ ~ 13:3 CA Building permits Jun m%ch.5 ~ ~ 15: CA Ivey Purchasing Managers Index Jul Index 55.3 ~ ~ 17:3 US Fed's Plosser speaks on Economy in Washington 1: US Fed's Pianalto speaks in Cleveland : US Consumer credit Jun $bn ~ Thu Aug 7: GE Trade balance Jun bn 13.1 ~ ~ 7: GE Current account balance Jun bn 11. ~ ~ 9: EC ECB Publishes Monthly Report 13:3 US Initial jobless and continuing claims Aug ~ ~ ~ ~ Fri 9 Aug 9:3 UK Trade balance Jun mn -,35 ~ ~ 9:3 UK Construction output Jun m%ch. ~ ~ 1

11 5 August 13 *A = Advance **F = Final 13:15 CA Housing starts Jul ~ 13:3 CA Unemployment rate Jul % ~ 13:3 CA Net change in employment Jul ~ 13:3 CA Participation rate Jul ~.7 ~ ~ 15: US Wholesale inventories Jun m%ch -.5. ~ 15: US Wholesale trade sales Jun m%ch 1..7 ~ ASB Economics & Research Phone Fax Chief Economist Senior Economist Economist Economist Nick Tuffley Jane Turner Christina Leung Daniel Smith nick.tuffley@asb.co.nz jane.turner@asb.co.nz christina.leung@asb.co.nz daniel.smith@asb.co.nz (9) (9) 31 5 (9) (9) (9) ASB Economics ASB North Wharf, 1 Jellicoe Street, Auckland 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. 11