NZ: Forward indicators warns of economic slowdown in Kiwi economy – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that the NZ economic data continues to point to the NZ economy ticking along at a respectable, albeit slowed, pace through the middle part of this year.

Key Quotes

“But recent forward looking indicators of activity are not looking nearly as encouraging, and leave us feeling a little more confident in our call for a December rate cut, which we previously viewed as a close call. Furthermore, inflation pressure remains notably absent. This supports our view that the RBNZ will eventually lower the OCR below 2.5%.”

“Last week’s data (weaker dairy auction, solid retail spending) has caused us to raise our probability of a December cut from 60% to 70%. Yet no matter what happens in December, the inflation outlook remains weak. We’ve recently lowered our December 2015 quarter forecast to -0.2% which leaves us forecasting just 1% inflation for September next year. Consequently, we remain comfortable forecasting further cuts in the OCR.”

“Our model of short-term NZ economic momentum shows a small rebound from a low level, which is consistent with the slower pace of economic activity we have witnessed lately. Our data pulse model’s reading supports our view that 2yr swap rates and the NZD/USD will fall during the next few months, given the usual lag between the data pulse and markets.”

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