As reported on Monday evening (21:00 GMT) in the agency Westpac McDermott Miller, consumer confidence in New Zealand has fallen to its lowest level since 2012. The consumer confidence index in the 3rd quarter amounted to 103.1, which is 0.4 lower than the previous value and less than the forecast of 104.0. The fall of this index is noted against the background of a general deterioration in the economic situation in the country and the world.
The New Zealand dollar reacted with a fall, while the NZD / USD continued to decline.
The New Zealand currency remains vulnerable amid the risks of a slowdown in the global economy and a trade conflict between New Zealand’s two largest trading partners — China and the United States.
In August, the RBNZ cut the rate at once by 50 bp to 1.00%, explaining this decision by the aggravation of the trade war between the US and China and the loss of momentum in the New Zealand economy. "World economic activity continues to weaken, which reduces the demand for goods and services from New Zealand. Increased uncertainty and reduced international trade contribute to lower economic growth in the trading partner countries", the RBNZ said in a statement. Central bank executives believe that wage growth in the country remains weak. At the same time, inflationary expectations are falling, and low levels of business confidence indicate a slowdown in hiring and wage growth.
Meanwhile, weaker data continues to come from China, indicating a further slowdown in the world's second largest economy amid the ongoing trade conflict with the United States.
According to data released on Monday by the National Bureau of Statistics of China, in August industrial production grew by 4.4% (in annual terms), which is much less than the forecast (+ 5.2%) and less than in July, when the growth was 4.8 %
Investments in fixed assets outside agriculture in January-August increased by 5.5% compared to the same period last year, which is slightly below the forecast. Annual growth in retail sales in August slowed to 7.5% from 7.6% in July, while growth forecast for August was 7.9%.
Many economists expect a further slowdown in economic growth in China from 6.2% in the 2nd quarter, and some of them expect a slowdown below the lower limit of the target range set by the authorities.
China is the largest buyer of New Zealand agricultural products, the core of the economy of which is the timber and agricultural complex. The slowdown in the Chinese economy is also an alarming signal for investors investing in the New Zealand economy.
Recent data show that New Zealand’s annual GDP growth may be below 2%, although economists believe that annual GDP growth should be 3% to sustainably achieve the inflation target.
Data on the country's GDP for the 2nd quarter will be published on Wednesday at 22:45 (GMT). According to the forecast, GDP growth in the 2nd quarter was + 0.4% (+ 2.0% in annual terms).
Of the news today regarding NZD, you should pay attention to the publication (after 2:00 p.m. (GMT)) of data on the results of a dairy auction organized by the New Zealand company Fonterra (a specialized trading platform GlobalDairyTrade - GDT). Two weeks ago, the price index for dairy products prepared by Global Dairy Trade came out with a value of -0.4%.
The main part of the New Zealand economy is forestry and agriculture, and a significant part of New Zealand exports are dairy products, primarily milk powder. The share of dairy exports in total exports of New Zealand is approaching 20%.
If the data indicate another fall in world prices for dairy products (forecast: -1.7%), primarily for milk powder, then the New Zealand dollar will decline.
In general, the long-term bearish trend of the NZD / USD pair continues, which resumed in April 2018. Despite the expected easing of the monetary policy of the Fed, the fall of NZD / USD is likely to continue in the current situation of a slowdown in world and New Zealand economies and international trade conflicts.
Meanwhile, the US dollar remains attractive and is trading steadily on the eve of the 2-day Fed meeting, which will end on Wednesday with the publication of the decision on the interest rate (at 18:00 GMT).
The Fed is expected to cut rates by 0.25% to 2.00%. This decision has already been taken into account in dollar quotes. If Fed officials do not make unexpected statements aimed at further easing monetary policy, then the US dollar will most likely resume growth after a short-term decline.
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