New Zealand economic growth slowing - AmpGFX

Analysts at Amplifying Global FX Capital, explain that recent reports show evidence of peaking in New Zealand’s economic activity.

Key Quotes

“The housing market in New Zealand has been weakening since late last year with tougher macro-prudential policies and more conservative bank lending practices as banks witness regulatory pressure on parent companies in Australia.”

“The QV house price index has slowed from 13.5%y/y growth in February to 9.7%y/y in May, a low rate of growth since June-2016.  REINZ house sales fell 31%y/y in April, a low since 2010 (May data are due this week).”

“The New Zealand economy has been growing at an enviable rate above perception of potential, albeit with the help of rapid immigration that has added to broad demand in the economy, but helping hold down wages.”

“However, more recent reports show evidence of peaking in economic activity.”

“Retail spending fell 0.4%m/m in May, well below +0.2% expected.  Annual growth slowed to a still solid 5.2% 3mth-yoy, but down from the recent peak of 6% in February.”

“Job ads fell 0.6% in May; annual growth slowed from a recent peak of 21%y/y in December to 13.4%y/y in May.”

“Manufacturing activity volume (feeding into the GDP report on Thursday) fell 0.3%y/y in Q1, following a 2.0q/q fall in Q4 (revised weaker from -1.8%q/q).  The fall was driven by a deep fall in meat and dairy product manufacturing.”

“The volume of building work put in place in Q1 also fell 3.4%q/q in Q1 also pointing some drag on Q1 GDP.”

“The market is predicting GDP of 2.7%y/y later this week, unchanged from Q4, but given these recent reports, the risk appears to be a weaker outcome.”