Economic weather report: Wholesale deflation and services contraction point to another OCR cut

Bernard Hickey delivers the latest Economic Weather Report in association with ASB, including news that wholesale prices for both inputs and outputs fell in the March quarter, which was more than economists expected. The services sector, which includes tourism, contracted for its 11th month in a row in April and the Performance of Services Index showed another deterioration. Both of these figures indicate the Reserve Bank will have room to cut the Official Cash Rate by a further 25 basis points to 2.25% on June 11. But it's unlikely to be passed on by banks to savers and borrowers because their overseas funding costs are high and savers here will not tolerate more rate cuts.

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I'm Bernard Hickey with an Economic Weather Report with ASB
Wholesale prices for inputs fell 2.5% in the December quarter
which was much more than economists expected
Lower oil prices helped push prices lower
Output prices fell 1.4%, which was lower than
economists had expected
These figures show inflation coming off the boil

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The Performance of Services Index showed the services
sector contracting in April for the 11th month running
Activity and intentions in the sector also worsened
from the previous month
The tourism sector is being hit particularly hard
All this suggest the RBNZ will have room to cut
the OCR by a further 25 bps to 2.25% on June 11
I'm Bernard Hickey with an Economic Weather report

Category:

News & Politics

Tags:

• weather
• tourism
• deflation
• rbnz
• asb
• inputs
• outputs
• performance

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