NZ: Current account shaves down GDP forecasts - TDS

Annette Beacher, Chief Asia-Pacific macro strategist at TD Securities, explains that the New Zealand’s outcome for the Sep qtr deficit was -3.6% of GDP as per expectations but it resulted in lowering their Sep qtr GDP forecast from 1% to +0.7%/q.

Key Quotes

“Two Sep qtr trade reports claimed that exports (nominal, sa) increased by ~6%/q (Sep monthly trade +6.3%/q and Sep qtr terms of trade (ToT) +6.0%/q). Naturally we penciled in +6%/q for the current account, but the outcome was +2.7%/q, less than half. A slump in services (-3.1%/q) was the difference, the weakest quarterly print in five years.”

“So for tomorrow's Sep qtr GDP report, now that the trade contribution is closer to +0.6%pts, we look for +0.7%/q for GDP (before today we were the outlier at +1%/q). However, 3% annual GDP growth is nothing to worry about, and after yesterday's pickup in business confidence and own activity, perhaps the RBNZ can have a merrier Christmas.”