New Zealand Economic Forecast

New Zealand Economic Outlook

November 13, 2018

Recently-released data points to a continuation of solid domestic demand dynamics in Q3, following two-year high growth in Q2 driven by upbeat activity in the services sector. The labor market continued to tighten, with the unemployment rate falling to its lowest level in over a decade in Q3. This, together with steadily rising housing prices—to which household wealth is closely linked—and contained inflationary pressures likely propped up household purchasing power and buoyed private consumption in the quarter, as evidenced by the fastest quarterly rise in retail card spending in nearly eight years in Q3. On the external front, however, soaring fuel imports in September led the trade balance to record the largest ever monthly deficit for the second month in a row and widened the 12-month trade shortfall to its largest in nearly a decade, potentially dragging on overall growth in Q3. Meanwhile, consumer confidence weakened while business sentiment improved in October, albeit slightly, painting a mixed picture for activity heading into Q4.

New Zealand Economic Growth

The economy is poised to maintain a healthy rate of expansion next year, underpinned by resilient private spending as consumers benefit from the tight job market and gradual wage gains. An accommodative monetary policy stance and increased room for fiscal stimulus should also support growth going forward. The main downside risk to the outlook stems from a sharper-than-expected slowdown in China, New Zealand’s largest trading partner, which could adversely affect commodity prices and reduce export demand. Its trade conflict with the U.S. also heightens such risk. Met the why particular panelists expect the economy to expand 2.7% in 2019, which is unchanged from last month’s forecast, and 2.5% in 2020.

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New Zealand Facts

Bond Yield2.821.20 %Nov 13
Exchange Rate0.68-1.69 %Nov 13
Stock Market3,9460.11 %Nov 13

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