New Zealand GDP Talking Points:
- New Zealand GDP printed at 2.3% on a year-over-year basis, meeting expectations and beating expectations on a Quarterly basis at 0.7%
- The Kiwi lifted as the beat in GDP lowered odds for a rate cut from the RBNZ
- The fundamental picture going forward for the Kiwi will rely on inflation expectations for the New Zealand economy along with the myriad of global economic data, especially those surrounding the US-China trade war
The New Zealand Dollar rose on Wednesday as Gross Domestic Product for the New Zealand economy on a yearly basis printed at 2.3%, meeting expectations of 2.3%. The upbeat print sent the Kiwi higher and could help bolster strength in coming days and propel it above a key technical level against the USD. The seasonally adjusted quarterly growth came in at 0.7%, beating expectations of 0.5%. But, the previous quarter saw a downward revision from 0.5% to 0.1%.
The report revealed that services growth led the strong performance from the New Zealand economy in the 3rd quarter with retail and accommodations rising 2.4%, the best growth in eight years according to Statistics New Zealand. Growth in primary industries rose 1.5% in forestry, fishing and agriculture, but mining saw a 1.1% decline. Spending on investment was flat, however construction activity in the residential sector remains at historically high levels according to the report.
Along with the upbeat GDP print, the New Zealand economy has seen a modesty recover in economic data through the second half of the year when compared to expectations, reflected by the Citi Economic Surprise Index rising above the zero mark this past July and currently standing at 26.20.
The resulting strength in the Kiwi from the beat in GDP is likely reflected from decreased expectations for a rate cut from the Reserve Bank of New Zealand. While the RBNZ does not take GDP directly into account when factoring rate decisions, they do closely track inflation. Strong GDP prints are likely to lift inflation expectations and in turn, raise the likelihood of the RBNZ keeping rates steady and priming the Kiwi higher as a result. The current 2-year inflation expectations from the RBNZ stands at 1.8%, which falls slightly under the targeted 2 percent mid-point.
–Written by Thomas Westwater, Intern Analyst for DailyFX.com
Contact and follow Thomas on Twitter @FxWestwater
DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.