Nov. 14 (BusinessDesk) - Unexpectedly poor retail trade statistics for the September quarter saw the New Zealand dollar drop sharply this morning as markets digested further signs the country's economy has softened markedly after a stronger than expected first half of 2012.
The 0.4 percent seasonally adjusted quarterly fall in retail sales volumes was led by supermarkets and motor vehicles, and saw the kiwi currency fall to 81.54 US cents from 81.91 cents immediately before the report was released. It recovered some lost ground to trade at 81.63 cents just after midday.
The drop was seen as indicating speculation the economy is weak enough to warrant a rate cut from the Reserve Bank next month.
The 0.4 percent fall produced a 2.1 percent gain from a year earlier, according to Statistics New Zealand. A quarterly gain of 0.5 percent had been forecast in a Reuters survey, for an annual increase of 2.9 percent.
The third quarter retail sales data comes after figures showed the jobless rate unexpectedly jumped to 7.3 percent, suggesting the economy’s pace is stumbling. Reserve Bank governor Graeme Wheeler has said he has room to cut interest rates if needed and his next review is on Dec. 6. Markets were pricing in a 24 percent chance of a cut to the official cash rate next month.
NZ economy to remain "patchy", dollar can't be managed: English
Finance Minister Bill English says New Zealand's economy will continue to grow around 2 to 3 percent annually, but its progress will be "patchy", with stronger than expected growth in the first half of this year being followed by weaker second-half growth.
In a grilling before Parliament's finance and expenditure select committee this morning, English also made an unexpected defence of recent firming trends in house prices.
Household incomes had increased by a third in the last four years, while average house prices had risen nationally by only 1.3 percent in the same period, he said.
"House prices on average have moved up one percent in nominal terms. Disposable income is up a lot over that period," he said. "We wouldn't be surprised to see a bit more interest going back into the housing market", especially with the lowest interest rates in 40 years.
English expressed a more optimistic view than official forecasters on whether New Zealand would contain its forecast unsustainably high current account deficit with the rest of the world, saying households were saving more and the government remained committed to a Budget surplus in 2014/15.
To questions from Green Party leader Russel Norman about whether the government should try to manage down both the external deficit and the New Zealand dollar exchange rate, English said he was "unpersuaded" this could be done successfully.
"If we thought we could manage it, we would go and manage the damn thing," he said. The high New Zealand dollar was a "signal from the world" that New Zealand had "sound prospects of producing stable yields compared to other countries."
"Our problem is one of success."
Coats restructure will be a drag on 2012 result, says GPG
Guinness Peat Group, the investment firm liquidating its portfolio, said it is accelerating its reorganisation of the Coats thread-making business, its biggest asset, which will drive up costs and dent profit this year and next.
Full-year profit before interest and tax at Coats would be in line with market expectations before reorganisation costs, which were expected to be between 16 million pounds and 19 million pounds higher than in 2011, it said in a statement. Charges in 2013 would be 13 million pounds to 19 million pounds.
“In order to position Coats strongly for the future, the board and management continue to identify actions to optimise the footprint and cost base of the business,” GPG said in a statement to the London Stock Exchange.
“This accelerated programme brings forward projects planned for future years and one consequence of this is that management do not envisage incurring separately identifiable reorganisation expenditure from 2014 onwards,” it said.
The general economic environment for Coats is ‘expected to remain fragile for the rest of the financial year,” it said.
Behind Coats, GPG’s biggest remaining assets are is 33.6 percent holding of insurer Tower, 22 percent of Ridley Corp, 73 percent of CIC Australia, 11.6 percent of PrimeAg Australia and 47 percent of Capral.
Diligent going gang-busters
Diligent margins expand to 40% in Q3, more to come
Diligent Board Member Services has posted another stellar quarter of revenue growth for the three months to Sept. 30, marked by an increase in adjusted earnings margins to 40 percent for the first time.
The company’s software for managing corporate governance information flows, known as Diligent Boardbooks, is taking off in the US, boasting more than 46,000 users, with its total of 1,615 licenced public and private companies, almost double the number using the product a year earlier.
Quarterly revenue of US$11.8 million was up 145 percent year on year, while cumulative sales for the nine months of the current financial year of US$45.9 million were up 133 percent.
The company did not disclose an earnings figure for the quarter, releasing a set of presentation slides to the NZX.
Tables in the presentation show ebitda margins turned positive for the first time in the first quarter of the 2011/12 financial year, at 3 percent, rising to 15 percent by September last year, and 40 percent in the most recent quarter.