“Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.” Do you think the author copies and pastes that into each policy release or has it been typed out word for word at every meeting since last November when the cash rate was cut to 1.75%?
A lower exchange rate, slightly narrower trade deficit, improvement in terms of trade, lower unemployment rate, and higher inflation rate are all things the RBNZ should be happy about so we will need to see what they say about all that and if they feel that further depreciation of the currency is required for more balanced growth. I expect OCR to remain on hold and maybe we get a less dovish statement. There are still a number of uncertainties surrounding the new Government’s policies, specifically regarding housing policies and next year’s tax cuts and their impact on inflation, which will be difficult to forecast until said policies have been published.
Based on the information at hand, I don’t see a reason to be bearish heading into this meeting though I am cautious about the impact the Aussie news could have on the Kiwi as they can be quite sympathetic to each other. Also going to need some bullish technicals…
Data released since the September meeting
New Zealand’s trade deficit narrowed to NZD 1143 million in September of 2017 compared to a NZD 1388 million gap in the same month of the previous year and expectations of a NZD 900 million deficit. Exports advanced 8.9 percent year-on-year on strong demand from China and Japan, while imports only climbed by 1.4 percent after a sharp contraction in shipments from the United States. The annual trade deficit for the year ended August of 2017 narrowed modestly to NZD 2.91 billion, from NZD 3.20 billion in August of 2017. Read more
New Zealand’s terms of trade improved 1.5% percent on quarter in the three months to June of 2017, following a downwardly revised 3.9 percent rise in the previous quarter. It is third straight increase following declines in the preceding two quarters to September of 2016, leaving the terms of trade index close to an all-time high set 44 years ago in the June 1973 quarter. Good export prices went up 2.4 percent (compared to a downwardly revised 6.9 percent in the previous quarter). Exports prices of dairy products went up 3.9 percent after an 18.1 percent surge in the three months to March of 2016. Meanwhile, goods import prices went up 0.9 percent after increasing 2.9 percent in the previous quarter. Petroleum and petroleum product prices went down 4.2 percent after a sharp 11.1 percent rise in the preceding period. Read more
New Zealand’s unemployment rate edged down to 4.6 percent in the third quarter of 2017 from 4.8 percent in the previous period, below market expectations of 4.7 percent. It was the third straight decline and the lowest jobless rate since the last quarter of 2008. Annual wage inflation, as measured by the labor cost index, edged up to 1.8 percent from 1.7 percent in the previous period. Private sector wages rose by 1.9 percent year-on-year (vs +1.6 percent in the previous quarter) and the growth of public sector wages slowed down to 1.5 percent (vs +1.9 percent). On a quarterly basis, wages increased by 0.6 percent. Read more
Despite the improving trend in unemployment, wage growth remains subdued. The Labour Cost Index (LCI) rose by 1.9% in the year to September. However, about 0.3% of that increase was due to the pay equity settlement for aged and disability care workers. Excluding that impact, annual labour cost inflation actually slowed a little, from 1.7% in the June quarter to 1.6% today. Westpac
Consumer prices in New Zealand increased 1.9 percent year-on-year in the third quarter of 2017, above market expectations of 1.8 percent and up from 1.7 percent in the previous period. The inflation rate regained footing after easing in Q2 for the first time in six quarters. Read more
The ANZ Business Confidence Index in New Zealand declined to -10.1 in October from 0.0 in September of 2017. It was the lowest level and the first negative reading since September of 2015, as all major sub-indices excluding construction fell. Among the reasons behind the headline’s decline was the uncertainty triggered by the recent presidential election. A net 22% of businesses expect better times ahead for their own business, down 8 points on September. Read more