New Zealand Q2 GDP — released next Thursday — looks set to be a enormous. The so-called “rockstar” economy, after a recent wobble, looks like it’s back.
According to Jane Turner and Nick Tuffley, economists at CBA’s New Zealand offshoot, ASB Bank, quarterly growth looks set to soar by 1.2%, boosting the annual rate of growth to an enormous 3.7%.
And you thought Australia’s 3.3% year-on-year growth pace was huge — yet another thing the Kiwi’s look set to beat Australia in should Turner and Tuffley be right.
No wonder offshore investors continue to flock to the New Zealand dollar, despite a small pull back overnight.
“Economic momentum has well and truly shrugged off the malaise seen back in H1 2015,” the pair wrote in a research note released on Friday.
“The surge in Q2 growth will be led by the construction sector, manufacturing and retail activity. Unusually strong exports will also contribute to a temporary boost to Q2 growth, led by large lifts in meat, dairy, kiwifruit and oil exports.”
Though they admit that GDP may “get some payback through weaker growth in Q3 as these exports unwind”, they believe that the “underlying trend in growth appears robust”.
While growth looks set to accelerate, Turner and Tuffley don’t believe it will prevent the Reserve Bank of New Zealand from cutting interest rates further into record-low territory, suggesting that the GDP print won’t “significantly alter the outlook for rate cuts”.
“We don’t expect a 1.2% lift in GDP to change the monetary policy outlook significantly,” they said.
“Inflation pressures remain muted (with the exception of construction). Down the track, increased activity will likely lead to tighter capacity pressures, resulting in broader inflation increases. But, if the RBNZ has learnt anything from the past few years, it will not count its inflation chickens until they have hatched.
“Furthermore, the recent lift in the NZD creates a further headwind for the RBNZ’s projected recovery in inflation,” they add.
Here’s a New Zealand dollar daily chart for 2016. Though it had a stumble overnight, it’s been largely one-way traffic for the NZD/USD, rising 17% from the lows seen in January.
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