NZ: Q2 current account firmer than expected - Westpac

Sandeep Kanihama FXStreet Contributor

New Zealand’s current account deficit narrowed to 2.8% of GDP in the year to June, following a revised deficit of 2.9% last quarter, notes Satish Ranchhod, Senior Economist at Westpac.

Key Quotes

“The result was stronger than the average market forecast for a deficit of 3.1%, which was also our own forecast.”

“The improved current account deficit was mainly due to rises in both goods and services exports.”

“While today’s data were a little stronger than expected, they have only limited implications for tomorrow’s GDP report (we’re forecasting a 0.8% gain over the quarter). Both exports and imports were close to expectations.”

“Details

Adjusting for normal seasonally variation, the June quarter recorded a current account deficit of $1.6bn. That was a marked improvement from last quarter’s deficit of $2.8bn. Underlying the improvement in New Zealand’s trade position was a rebound in goods exports. This followed weather related disruptions in recent quarters that affected some of our key agricultural exports, including dairy. We also saw a strong lift in services exports over the quarter. This was mainly related to very strong tourist spending over the quarter on the back of some high profile sporting events (the Lions tour and Master games). These strong gains in exports more than offset modest increase in imports.
The investment income deficit narrowed to $1.9 bil in the June quarter. This was largely due to higher returns on New Zealanders’ offshore investments. Earnings by overseas-owned firms in New Zealand were down a little in the June quarter. However, this followed a solid lift in March, and still points to fairly positive business conditions in New Zealand.
In nominal terms, New Zealand’s net foreign liabilities did increase in June, mainly due to changes in equity prices. However, net foreign liabilities have been steadily declining relative to GDP for most of the past decade. This trend continued in the June quarter, with our net liability position reaching a multi decade low of 57.5% of GDP (vs. 57.8% last quarter).”

“Outlook

Looking ahead, we expect the current account balance will remain around current levels for the remainder of this year. While goods exports are likely to continue rising, services exports are likely to ease next quarter as tourism flows normalise. At the same time, the slowing housing market and softening domestic demand are likely to dampen imports.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD holds losses near 1.1850 as US, China holidays keep trade muted

EUR/USD opens the week on a softer note, trading near 1.1860 during the Asian session on Monday. Activity is likely to remain muted, with United States markets closed for the Presidents’ Day holiday, while Mainland China is also shut for the week-long Lunar New Year break.

GBP/USD flat lines as traders await key UK macro data and FOMC minutes

The GBP/USD pair kicks off a new week on a subdued note and oscillates in a narrow range, just below mid-1.3600s, during the Asian session. Moreover, the mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold remains below $5,050 despite Fed rate cut bets, uncertain geopolitical tensions

Gold edges lower after registering over 2% gains in the previous session, trading around $5,030 per troy ounce during the Asian hours on Monday. However, the non-interest-bearing Gold could further gain ground following softer January Consumer Price Index figures, which reinforced expectations that the Federal Reserve could cut rates later this year.

Week ahead: Data blitz, Fed Minutes and RBNZ decision in the spotlight

The US jobs report for January, which was delayed slightly, didn’t do the dovish Fed bets any favours, as expectations of a soft print did not materialize, confounding the raft of weak job indicators seen in the prior week.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.