Supporting information:

M14 Survey of expectations – a survey of businesses

Survey operation conducted by The Nielsen Company

June 2013 quarter report

Note that the results of the survey represent expectations held by respondents and in no way represent the views or forecasts of the RBNZ. Graphs and figures in the following report refer to the mean expectation levels of respondents.

Summary of Results

Inflation expectations fall

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Both one and two-year-ahead expectations of Consumers Price Index (CPI) inflation have decreased slightly this quarter. The one-year series fell from 1.68 to 1.52 percent on a mean basis. The median fell from 1.70 to 1.50 percent.

The two-year series fell 0.11 percentage points, from 2.17 percent to 2.06 percent.

Respondents are also asked what they believe quarterly CPI inflation will be for the current and next quarters. Quarterly percentage increases of around 0.35 percent are expected for the June quarter and 0.46 percent for the September 2013 quarter. These quarterly increases imply annual inflation rates of 0.8 and 0.9 percent respectively.

Easy monetary conditions are expected

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Monetary conditions are currently perceived as being easy, and are expected to remain relatively easy over the forecast horizon.

At the time the survey was completed the net percentage of respondents believing monetary conditions to be easier than neutral was 32 percent (compared to 37 percent last quarter). By June 2013 the figure moves to 26 percent. However, looking further ahead, to March 2014, the number of respondents expecting tighter conditions has increased, with a net 14 percent of respondents thinking conditions will be easier than neutral at that time.

One-year GDP growth expectations increase

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Respondents’ one-year-ahead expectations of real annual growth in Gross Domestic Product (GDP) rose from 2.3 percent last quarter to 2.5 percent in the current survey. At the two-year horizon annual growth expectations increased from 2.6 to 2.8 percent.

The latest Statistics New Zealand data indicates real production-based GDP increased 2.9 percent between December 2012 and December 2013 (annual percentage change).

Positive quarterly growth of 0.5 percent is expected for both the March and June 2013 quarters.

Hourly earnings growth expectations little changed

One-year-ahead hourly earnings growth expectations are little changed, with the one-year-ahead series remaining at 2.3 percent and the two year series falling down slightly to 2.6 percent.

The unemployment rate is expected to fall

One and two-year year expectations of the unemployment rate have fallen by about 0.3 percentage points since the last survey. The one-year expectation has dropped to 6.4 percent, the two-year to 6.0. This places the one-year prediction at a higher rate than the latest official Statistics New Zealand figure of 6.2 percent.

Slightly higher interest rates are expected.

The 90-day bank bill rate is expected to be 2.7 percent at the end of June 2013, which is slightly higher than the rate prevailing at the time the survey was taken. By March 2014 it is thought 90-day rates will have increased to 2.9 percent.

10-year government security yields are expected to be around 3.7 percent at the end of March 2014, implying a positive yield gap of 0.8 percent with the expected 90-day rate.

Exchange rates close to current levels are expected

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A US dollar exchange rate of 0.84 is expected for the NZ dollar at the end of September 2013, and to be just one cent lower by March 2014. An Australian dollar exchange rate of 0.83 is predicted for the NZ Dollar at the end of March 2014, a little higher than where the rate was at the time the survey was completed.

Background

The Reserve Bank of New Zealand (RBNZ) Survey of Expectations is a New Zealand-wide quarterly survey of business managers and professionals. The Nielsen Company conducts the survey on the RBNZ’s behalf. Respondents are asked for their expectations of future outcomes of a range of key macroeconomic data.

The latest RBNZ Survey of Expectations was conducted on Wednesday 8 and Thursday 9 May 2013

Sample Composition

The response rate for this quarter was 64 percent out of a sample of 117. Of the completed questionnaires received by the cut-off date, the distribution across activity groups was:

Financial	32
Business	23
Agriculture	8
Labour	5
Other	7
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TOTAL	75

Published 21 May 2013