Latest / Best of Business / Paul Bloxham: HSBC Chief Economist on GDP rising 0.8 percent for the March quarter

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Paul Bloxham: HSBC Chief Economist on GDP rising 0.8 percent for the March quarter · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk ZB Follow
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  Speaker 2: And with us now as Paul Blocks of HSBC's chief economist, Hello,
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  Speaker 2: Paul good A, what did you make of that GDP
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  Speaker 2: figure for Q one?
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  Speaker 3: Well, it was positive, It was pretty strong and really
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  Speaker 3: in the end, and not only because the print itself
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  Speaker 3: for the quarter was pretty solid, but there were upward
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  Speaker 3: revisions to the previous numbers as well. And I think,
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  Speaker 3: you know, it tells us that the New Zealand economy,
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  Speaker 3: as we kind of thought, was in a reasonably solid
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  Speaker 3: upswing in you know, coming out of the second half
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  Speaker 3: of last year into the first part of this year.
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  Speaker 3: And I think that's that's pretty evident in those numbers.
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  Speaker 3: The challenger course is going to be that with the
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  Speaker 3: Middle East conflict having hit the economy and fuel costs
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  Speaker 3: having gone up and so on, the second quarter print
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  Speaker 3: will be weaker. We'll see. We think the economy will
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  Speaker 3: close to close to stall, but not quite stall, but
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  Speaker 3: certainly coming into it, the economy did seem to have
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  Speaker 3: some pretty decent positive, positive momentum and that's that's a
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  Speaker 3: good story. I think New Zealand was on a recovery phase.
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  Speaker 3: That's what we've kind of been expecting.
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  Speaker 2: Okay, it is a good story, and it is a
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  Speaker 2: story that's kind of been disrupted somewhat, as you say,
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  Speaker 2: by what's happened in the Middle East. Can we assume
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  Speaker 2: that once the stuff in the Middle East dies down,
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  Speaker 2: off we go again on that story.
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  Speaker 3: Well, that's what we're thinking. Yes, we think that this
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  Speaker 3: is going to be a disruption in the short run.
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  Speaker 3: But as you've talked about in your remarks before, you know,
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  Speaker 3: as I hopped on that, you know, things are looking
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  Speaker 3: starting to look a bit better in terms of the
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  Speaker 3: Middle East developments. The straight up ONEMOS looks as though
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  Speaker 3: it's on a pathway to reopening. Oil prices it down clearly,
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  Speaker 3: and that should take some of that that shock away
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  Speaker 3: in terms of its impact. And I think there are
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  Speaker 3: reasons to think the New Zealand economy is in this
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  Speaker 3: in this positive recovery phase. So, I mean, it's tricky
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  Speaker 3: for the rbn Z because obviously the economy was already
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  Speaker 3: in a recovery. It's going to slow down a bit
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  Speaker 3: into the second quarter. Inflation does rise, it will have
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  Speaker 3: risen in the second quarter. That's that's clear because you
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  Speaker 3: get a shock, but it will start to come down.
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  Speaker 3: What should the RBNZ do in all of this, I
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  Speaker 3: still think they're probably going to err on the side
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  Speaker 3: of starting to lift the policy rate because they're so
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  Speaker 3: low and they're well below neutral. The economy probably doesn't
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  Speaker 3: quite need the stimulus that's being delivered, and I think
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  Speaker 3: they'll be somewhat concerned that that pick up and inflation
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  Speaker 3: embeds itself a little bit and that gets harder to
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  Speaker 3: get inflation back to target. But I don't think they're
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  Speaker 3: going to be on some sort of rapid tightening phase.
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  Speaker 3: They don't need to be.
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  Speaker 1: No.
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  Speaker 2: I mean, there seems to be diverging opinion now on
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  Speaker 2: what the Because everybody had basically locked it in for
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  Speaker 2: the next thing to be a race rise, right now
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  Speaker 2: people are saying, well, actually, maybe it's not going to be,
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  Speaker 2: and we're going to be looking and it seems to
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  Speaker 2: be inging on that last few sets of data before
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  Speaker 2: the decision.
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  Speaker 3: Would you say that, I think so? But I think
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  Speaker 3: I mean the main thing to watch out for is
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  Speaker 3: what's going on with inflation expectations. They've made it pretty
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  Speaker 3: clear that that's what they're really really focused on. And
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  Speaker 3: what we know is that, you know, inflation is in
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  Speaker 3: the target band. The headline rates picked up, and we
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  Speaker 3: know that it's going to pick up quite sharply into
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  Speaker 3: the second quarter. We know that short term inflation expectations
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  Speaker 3: have already risen. They may very well start to come
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  Speaker 3: down as things improve in the Middle East, developments and
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  Speaker 3: so on. But I still think, you know, so that's
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  Speaker 3: going to I think that's where that the hinge is
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  Speaker 3: going to be. But I still think they'll learn likely
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  Speaker 3: on the side of caution, and they've already given obviously
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  Speaker 3: at the last meeting, pretty clear guidance that they were
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  Speaker 3: very very close to lifting rates last time, decided not
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  Speaker 3: to delay it a bit. I still think given the
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  Speaker 3: better economic outcomes we've seen in the figures as we've
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  Speaker 3: just described, that the more likely they're more likely to
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  Speaker 3: lift rates than not come the next meeting.
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  Speaker 2: Okay, now, how long do you reckon it's going to
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  Speaker 2: take before the oil price has come back to where
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  Speaker 2: they were pre war? How many years?
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  Speaker 3: I think it's going to be a while. You know,
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  Speaker 3: we still have oil prices in the early part of
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  Speaker 3: next year in our projections, sitting around seventy five dollars
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  Speaker 3: about for example, so you know, well above where we
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  Speaker 3: were at the beginning of this year, around sixty And
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  Speaker 3: I think there's a couple of stories. I mean, one
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  Speaker 3: of them is it's going to take a while for
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  Speaker 3: the traffic to be cleared, and there's been some destructive
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  Speaker 3: damage to infrastructure and so on, which is going to
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  Speaker 3: constrained supply. But the other really big one is going
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  Speaker 3: to be that a lot of what's helped the global
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  Speaker 3: economy absorb this shock has been a rundown in inventories,
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  Speaker 3: and so China has been running down its inventories, the
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  Speaker 3: US has been running down its inventories, and that's been
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  Speaker 3: a very big cushion for the global system in terms
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  Speaker 3: of allowing more oil supply into the system and preventing
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  Speaker 3: oil prices from going up really sharply. Well, what's going
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  Speaker 3: to happen as soon as we get a sort of
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  Speaker 3: a freer flow of supply is the beginnings of the
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  Speaker 3: rebuild of those inventories. So as you rebuild inventories, that's
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  Speaker 3: going to create more demand. I think, you know that's
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  Speaker 3: going to be something that means that it oil prices
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  Speaker 3: stay more elevated for an extended period of time.
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  Speaker 2: Yeah, it's always good to talk to you, Paul. Thanks
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  Speaker 2: so much for your time.
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  Speaker 3: Mate.
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  Speaker 2: That's Paul Block, some Hspecies, Chief Economist.
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