NZ Economy Shows Signs of Improvement Amid Inflation Worries
The New Zealand economy continues to show signs of improvement, but inflationary pressures are mounting globally. Recent data has been encouraging, with August's PMI indices showing manufacturing and services in expansionary territory for the third straight month. Tourism arrivals remain on an upward trajectory, with Chinese arrivals particularly encouraging at 97% of pre-COVID levels.
However, global inflationary dynamics are a concern, with rising oil prices, ocean freight costs, and import costs all contributing to increased pressure on the economy. The Reserve Bank's OCR is expected to be hiked by 25bps in both October and December, adding upward pressure on mortgage rates.
The housing market is under pressure from weak labour markets, wary consumers, and uncertainty from the upcoming election. House prices fell 0.3% in August, with national house prices now 0.9% below year-ago levels.