NZ: June quarter GDP jumped by 1.0% - TDS

New Zealand’s June quarter GDP jumped by +1.0%/qtr, outpacing TD/median expectations of +0.8%/q, while the annual growth picked up from 2.6% to 2.8%/y, notes the research team at TD Securities.

Key Quotes

“The OIS strip has adjusted from a 40% chance of a cut over the coming year to closer to 20%. Even when we pushed back our first hike to November 2019, we were more constructive on the economy, and attached only a small risk to the RBNZ delivering a rate cut.”

“The RBNZ decides on the Official Cash Rate (OCR) next week (27 Sep) mere hours after a widely expected US Federal Reserve hike. OCR Reviews used to be place-making 4-5 paragraphs noting that conditions are unfolding as expected, but under RBNZ Governor Adrian Orr this is not guaranteed.”

“Actual activity data since the August MPS has been upbeat, with decent card sales, exports and a revival in housing, however, persistently low inflation and recessionary-level business sentiment are deep concerns for the RBNZ.”

“TD expects the OCR to remain at 1.75% next week (as does unanimous consensus), the Governor to muse that the next move could be “up or down” as per the August policy assessment, as well as repeat that “we expect to keep the OCR at this level ... into 2020”.”