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

On a more upbeat note, goods-producing industries, which had the strongest growth in the March 2019 quarter, climbed 2.0% — mainly driven by increased activity in the construction industry, up 3.7%, its largest uptick since the September 2017 quarter. The rise in construction was reflected in a 9.9% surge in non-residential building investment and a 2.7% increase in residential buildings.

Also, among the more positive contributors, manufacturing activity rose 1.4% in the three months to March 2019, after a 0.4% drop in the December 2018 quarter. Increased food, beverage, and tobacco manufacturing contributed “strongly” to the rise, according to Stats NZ.

Creating a Spark

Continued slowness in the rate of New Zealand’s economic growth is likely to lead the RBNZ, as well as the country’s government, to inject more stimulus.

For the central bank’s part, the RBNZ said that additional monetary stimulus is needed to achieve its objectives of ensuring inflation increases to its 2% mid-point target, and employment remains around its maximum sustainable level.

The RBNZ noted that without additional stimulus, inflation and employment are likely to be below their targets over the medium-term, and as a result, “a lower OCR is necessary to achieve our objectives.”

The bank anticipates GDP growth to remain “soft” over the middle of 2019, but expand later as fiscal and monetary stimulus increases, while stronger GDP growth over 2020 is expected to encourage firms to increase investment.

The RBNZ expects GDP growth to come in at around 2.7% in the March 2020 quarter and lift to 3.0% in 2021, with 0.5%, 0.6%, 0.7% and 0.8% of quarterly growth in the June 2019, September 2019, December 2019 and March 2020 quarters, respectively.

Market participants will likely be paying close attention to the RBNZ’s next rate decision on September 25 for any signs of a further dovish tilt, as well as on fiscal policy and government spending plans, for additional insights into the country’s general economic and financial well-being.  

In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of the U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more.


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


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