New Zealand GDP preview: moderate impact ahead or RBNZ
|- GDP is seen advancing quarterly basis but yearly growth is seen mute.
- NZD/USD bullish potential to increase on upbeat figures.
New Zealand will release early Wednesday its Q4 GDP figures, and while the economy is expected to have ticked up in the three months to December, annual growth is seen slowing further. Growth for the three months to December is forecasted at 0.6% vs. the previous 0.3%, while the annual reading is foreseen at 2.5% from 2.6% in Q3. According to estimates, GDP in the country is expected to be roughly $215.0B, below the long term trend.
Strong household consumption and government investment spending are the reasons behind the estimated quarterly advance. But the release could bring some disappointments: at the beginning of the week the New Zealand Institute of Economic Research (NZIER) showed that economists have slightly lowered their GDP forecasts for this year:
"Although near-term expectations for household spending growth have been revised up, this is offset by downward revisions to investment and export forecasts. Population growth is slowing, but the surge in population in recent years is continuing to support demand for residential investment. However, capacity constraints in the construction sector mean the construction cycle is likely to be more protracted.
Despite the downward revisions, the investment outlook remains reasonably robust. Although there is some caution about investment amongst firms in the face of continued weak profitability, as wage growth picks up this should incentivize firms to invest in labor-saving technology over the coming years."
The same report states that annual GDP growth is expected to peak at 2.9 percent for the year to March 2021 before moderating to 2.5 percent in the subsequent year, while the forecast for household spending has been revised higher for the years through to March 2020. On a down now, export growth forecasts have been revised down amid US-China tensions, slowing growth in China and Brexit uncertainty.
Overall, and beyond the quarterly advance expected, growth in the country is expected to remain mute. The RBNZ will have its monetary policy next March 27, and will likely have a steeper effect on the Kiwi, particularly if policymakers acknowledge the gloom growth perspectives.
NZD/USD Technical Outlook
The NZD/USD pair trades higher in range, flirting with last week's high ahead of the release in the 0.6860 price zone, with the immediate barrier being the 0.6900 figure. Short-term technical readings offer a neutral-to-bullish stance, as an ascending 20 SMA provides support in intraday retracement, although the 100 and 200 SMA remain directionless, converging around 0.6820. The bearish case will be stronger if the pair settles below this last. In the mentioned chart, the Momentum indicator heads nowhere around its mid-line, but the RSI advances, currently at around 60, skewing the risk to the upside.
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