Credit growth picks up as invasion rattles markets


Private sector credit grew 0.4% in January, which saw annual growth pick up to 4.1%, its strongest pace in 17 months.

Despite the pickup, credit growth is still well-contained and annual growth is well below its long-run average. 

Growth in housing credit continues to lead the charge, and point to ongoing momentum in the housing market.

"Other personal" and business credit growth remain subdued, rising 0.1% and 0.2% respectively in January, but annual growth rates are lifting. With interest rates likely to remain low for some time, we expect credit growth to gradually pickup further.

Share Markets: 

The US stockmaket gained ground although geopolitical concerns, given developments in the Ukraine, limited the move.

US economic data released on Friday night was mostly upbeat, boosting investor sentiment. The S&P 500 hit a record high earlier in the day. The Dow and the S&P 500 gained 0.3% on Friday.


US government bonds were little changed, edging lower at the long end (yields up slightly) on improved risk appetites, but retracing most of the move as news of Russian incursions in Crimea unfolded. The move higher in

US bonds is likely to continue on risk aversion, given these geopolitical concerns.

Australian three-year government bond yields (implied by futures) traded between 2.86% and 2.89%. The 10-year yield initially rose from 3.97% to 4.02%, but completely retraced into the close.

Foreign Exchange: 

The Australian dollar opened weaker this morning, dipping below 89 US cents as concerns about developments in the Ukraine over the weekend weighed on risk appetites.

The Aussie dollar was also sharply weaker versus the Yen, which benefited from safe haven flows.

The Yen also appreciated versus the US dollar. The New Zealand dollar gained on Friday following the release of upbeat business confidence data, although it later retraced those gains on reduced risk appetites.

The Euro gained ground, despite developments in the Ukraine, with higher than expected inflation numbers dimming expectations of a rate cut from the ECB this week.


The gold price slipped as equity market gains reduced safe haven demand, although geopolitical concerns could see that reverse. The oil price rose on talk of fewer shipments from North Dakota, although the move was limited with concerns about the impact on oil demand of slower growth in China.


The manufacturing PMI was a little stronger than consensus expectations, falling to 50.2 in February, from 50.5 in January (but compared to expectations for a decline to 50.1).

The reading remains above 50 indicating China's manufacturing activity continues to expand, although at a less rapid pace than in January.


The Euro zone flash CPI was unchanged at 0.8% in the year to February, and the core rate rose further from 0.8% in the year January to 1.0% in the year to February.


The jobless rate was steady at 3.7% in January at a six-year low. Meanwhile, the job-to-applicant ratio increased to 1.04 the highest since August 2007, indicating a greater availability of jobs.

Retail sales rose a solid 1.4% in January, taking annual growth to 4.4% in the year. The surge is likely to be temporary ahead of a sales tax hike in April.

Industrial production rose 4.0% in January the second consecutive monthly increase. The data points to stronger momentum in the Japanese economy, but the test will come after the sales tax hike takes effect on 1 April.

The national headline CPI rose 1.4% in the year to January, while core prices (excluding fresh food) rose 1.3% in the year to January. It was the eighth consecutive month of annual increases in the headline rate, providing greater assurance that Japan's days of deflation are behind it.

New Zealand:

Building permits fell 8.3% in January, following a 7.1% increase in December. Despite the fall, approvals for January were 24% higher than a year ago.

Business confidence rose from 64.1 to 70.8 in February, the highest in nearly 20 years. The high level of business confidence has been supported by rising dairy prices and growing momentum in economic activity.

It further cements expectations the RBNZ will hike its official cash rate soon.

United States:

US GDP growth was revised down from 3.2% annualised to 2.4% in the second estimate for Q4 2013. The main drivers of the revision were personal consumption (contribution cut by 0.5 percentage points, half of that due to a lower durables spending estimate) and net exports and inventories, both shedding about 0.3 percentage points of their advance reported contribution.

Business spending on equipment and software was revised up increasing investment's contribution to the GDP bottom line by 0.4 percentage points.

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