Asia-Pacific: The Week Ahead (Sept 16-20), New Zealand – Trudging Slowly Over Low Growth

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Ranchhod continued that households’ confidence about the economic outlook has been trending down for around 18 months and is now weighing on spending appetites. He said that the number of households “who think now is a good time to purchase a major item has fallen to a two-year low. That’s already been reflected in spending on household durable items, which has essentially been flat since late 2018.”

He added that households are also reporting that they have been “scaling back their spending on entertainment activities and dining out.”

While lackluster confidence among New Zealand’s consumers has not deterred the country’s stocks from remaining at lofty levels, amid the RBNZ’s economic stimulus measures, they have had a rocky ride in recent months. 

Although certain of the nation’s equities – as evidenced by iShares MSCI New Zealand ETF (Nasdaq: ENZL), which has as its top holding a2 Milk Company (OTCMKTS: ACOPF) – have climbed roughly 27.4% from their most recent 52-week low set in late October 2018, prices have more recently been more volatile.

To date, ENZL has retraced nearly all of its losses from its peak in late July to late August and has also reached overbought territory, according to its Relative Strength Indicator (RSI).

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Following the consumer confidence numbers, investors will also receive an update on New Zealand’s current account for the second quarter, as well as a fresh gauge of GDP growth.

Tuesday, Sept 17

  • Current Account (Q2)

GDP

The pace of economic growth in New Zealand remained at a five-year low in the three months to March 2019, having inched up 0.6% over the prior quarter and 2.7% above the same year-ago period, according to Stats NZ.

The March quarter’s rate of growth marked the slowest annual advancement for New Zealand’s economy since December 2013.

Wednesday, Sept 18

  • GDP (Q2)

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Among the slower-growth sectors contributing to the malaise, activity in the service industries rose only 0.2% in the March 2019 quarter, the slowest rate of advancement since the September 2012 quarter. On a year-over-year basis, service industries grew 3.1%.

Of the 11 service industries, seven recorded growth, with the main drivers being health care and social assistance, up 1.7%, as well as transport, postal, and warehousing, up 1.2%.

However, retail, accommodation, and restaurants fell 0.5%, likely due to cautious household spending, as well as fewer visitor arrivals to New Zealand in February and March 2019. Rental, hiring, and real estate services declined by 0.2% on the back of lower property sales.

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DISCLOSURE: AUTHOR SECURITY HOLDING: NO POSITIONS

The author does not hold any positions in the financial instruments referenced in the materials provided.

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