Kiwi Economy Feels Bite of War in Middle East
The Kiwi economy is feeling the effects of the war in the Middle East, which has disrupted economic activity and led to higher inflation. The June quarter inflation rate was above the Reserve Bank of New Zealand's (RBNZ) target band, putting a spotlight on the labour market.
According to Kiwi Economics, the labour market data for the June quarter will show that more slack in the market means less inflationary pressure on wages. With an unemployment rate of 5.3% and wage growth at 2.1%, the economy is expected to track sideways.
The war in the Middle East has had a negative impact on business confidence, which dropped over the March quarter but started to recover in the June quarter. However, this recovery could be derailed by further escalation of the conflict.
Kiwi households have also been affected, with increased fuel costs eating into discretionary spending and card spending data showing a negative result for June. Despite this, businesses are not expected to raise prices just yet, but rather cut investment and hiring intentions.