The kiwi has been the strongest performing currency across board over the past 24 hours, which was a result of strong positive economic data releases from yesterday. This led the kiwi to soar above 73 cents, against the US dollar for the first time this month. With inflation expectations being fairly stable, and has been for the last 3 quarters, expectations are still below with what would be a consistent inflation target of 2%. Generally, yesterday’s economic data releases conspire with the comments that the RBNZ have been strongly hinting at another Official Cash rate Cut at next Monetary Policy Statement.
Global Dairy Trade Price Index
Dairy product prices climbed at the Global Dairy Trade auction, seeing a 11.4% increase to US$3,327, up from US$2,965 at the previous auction two weeks ago. This also helped boost the kiwi. Rising prices were expected as this was due to a drop off in volumes of milk powder. Some 27,735 tonnes of product was sold, down from 31,525 tonnes at the previous auction. It was for the sixth time in seven auctions we saw an advance this year.
Employment grew 1.4% in the last quarter. There were indications that the labor market continued to strengthen during the third quarter. Even though a slow down of 0.8% was seen, a fourth consecutive employment growth increase is expected.
Inflation expectations, as measured by the RBNZ’s quarterly survey, were little changed in the fourth quarter. The two-year ahead measure increased from 1.65% to 1.68%. The RBNZ had highlighted a decline in inflation expectations as a key risk. Soft inflation expectations can feed into wage and price-setting decisions, which can then make low inflation that much harder to shift.
The unemployment rate fell to 4.9% for the first time since 2008 as it has either been 5% or just above. This was almost entirely led by part time growth. The strong growth is consistent with firm’s intending to hire people
The participation rate rose to an all-time high of 70.1%. The strengthening labor market continues to entice more people into the work force. This simply suggested that the market is clearly tightening even though it is not having an impact on nominal wages as of yet.
Labor Cost index
The data was a little stronger than what was expected. However, there are little concerns about the lack of wage growth and the impact of this on the inflation outlook.