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19 Mar 2015
New Zealand: Signs of a slowdown ahead - Capital Economics
FXStreet (Bali) - Paul Dales, Chief Australia & New Zealand Economist at Capital Economics notes that the NZ Q4 GDP, while coming strong, the details support a slow down by more than widely expected.
Key Quotes
"0.8% q/q rise in New Zealand GDP in Q4 (consensus 0.8%) shows that the economy ended 2014 on a strong note, but the details support our view that this year will be a different story with growth slowing by more than widely expected."
"Most striking was the 0.5% q/q fall in real gross national disposable income, which was the first decline since mid-2012. This reflected the immediate and direct impact of the worsening in the terms of trade triggered by last year's plunge in dairy prices. Real GDP was not directly affected, rising by 0.8% on the production measure and by 1.1% on the expenditure measure. But it takes time for the indirect impact on real GDP from a deterioration in the terms of trade to be felt, and that will come through this year in the form of slower investment and consumption growth."
"Indeed, fixed investment rose by just 0.2% q/q in Q4 (3.0% in Q3) and consumption was up by a muted 0.6% (1.4% in Q3). Expenditure GDP was strong only because a 6.1% leap in exports meant that net trade added 0.8ppts to growth. With both New Zealand's main trading partners (China and Australia) slowing, this is unlikely to be repeated."
"In short, the 3.0% rise in GDP in 2014 as a whole is as good as it gets. Our forecast that growth will slow to around 2.3% this year would be consistent with the RBNZ cutting rates to 3.0% or so and the NZ dollar falling below US$0.70 from 0.75 now."
Key Quotes
"0.8% q/q rise in New Zealand GDP in Q4 (consensus 0.8%) shows that the economy ended 2014 on a strong note, but the details support our view that this year will be a different story with growth slowing by more than widely expected."
"Most striking was the 0.5% q/q fall in real gross national disposable income, which was the first decline since mid-2012. This reflected the immediate and direct impact of the worsening in the terms of trade triggered by last year's plunge in dairy prices. Real GDP was not directly affected, rising by 0.8% on the production measure and by 1.1% on the expenditure measure. But it takes time for the indirect impact on real GDP from a deterioration in the terms of trade to be felt, and that will come through this year in the form of slower investment and consumption growth."
"Indeed, fixed investment rose by just 0.2% q/q in Q4 (3.0% in Q3) and consumption was up by a muted 0.6% (1.4% in Q3). Expenditure GDP was strong only because a 6.1% leap in exports meant that net trade added 0.8ppts to growth. With both New Zealand's main trading partners (China and Australia) slowing, this is unlikely to be repeated."
"In short, the 3.0% rise in GDP in 2014 as a whole is as good as it gets. Our forecast that growth will slow to around 2.3% this year would be consistent with the RBNZ cutting rates to 3.0% or so and the NZ dollar falling below US$0.70 from 0.75 now."