How fast is New Zealand slowing down? – Paxforex

The New Zealand economy has enjoyed robust growth which can largely be a contributor to its commodity sector and demand from China.  This has allowed the New Zealand Dollar to appreciate in value against other major currencies.  While the economic expansion in New Zealand created plenty of great opportunities it has always been dependent on China and to a lesser extent on Australia.  New Zealand has also heavily relied on its construction sector.

As the global economy has slowed down, commodity prices dropped and construction stalled the New Zealand Dollar has entered a severe corrective base which in some cases such as in the NZDUSD spanned over 1,000 pips.  The sharp sell-off was accelerated by comments out of the Reserve Bank of New Zealand which stated that the current exchange rate remains too high and that the forex market has not priced in weaker commodity prices.

Economic data this week showed a mixed economic performance of New Zealand.  On Monday forex traders receive better than expected data out of the New Zealand service industry.  The Performance of Services Index for September was reported at 58.0.  In comparison the Performance of Services Index for August stood at an upward revised level of 57.7. The continued expansion in the New Zealand service sector is a welcome counterweight to the drop in commodity prices.

Consumer confidence in New Zealand declined in October by 3.4% to 123.4.  Consumer confidence in September remained unchanged at an increase of 1.8% to 127.7.  That the increase in consumer confidence could translate into weaker economic output by the New Zealand consumer which will have a negative impact on GDP.  New Zealand needs a healthy consumer and home as demand for its exports is fading due to a slower global economy.

Credit card data out of New Zealand for September showed a mixed picture with a monthly increase of 0.2% and an annualized expansion of 4.4%.  The monthly gain was smaller than the 0.4% reported in August, but the annualized increase was greater than the 4.2%.  The biggest economic disappointment was a slowdown in third-quarter CPI which rose 0.3% for an annualized increase of 1.0%.  This marked a sharp slowdown compare to the 1.6% increase reported in the second-quarter.  The trade deficit for September came in over twice as high as expected atNZ$1,350 million.

Written by Paxforex