Economic Outlook for New Zealand (GDP Forecast)
June 25th, 2009 Posted in Analyst Picks, In-Depth Analysis
New Zealand’s currency weakened yesterday after a government report showed the current-account deficit narrowed as imports slumped and the profits of foreign-owned companies declined amid the worst recession in more than 3 decades. The New Zealand Dollar (NZD) was last down 2% at 0.6303 against the USD, after going as low as 0.6298.
Indeed, the New Zealand economy has recently been hit hard as demand for exports has fallen, unemployment has climbed, and consumer spending has faltered. However, a government report issued today may show New Zealand’s economy contracted at a slower pace in the first quarter. Gross domestic product (GDP) shrank 0.7% in the 3 months ended March 31 from the previous 3 months, according to economist estimations. The economy contracted 0.9% in the 4th quarter.
The New Zealand Dollar may face an event risk ahead of the Thursday’s GDP data release. Expectations that Domestic Growth would weakened has raised expectations that the central bank would need to cut interest rates further. If the New Zealand GDP falls more than expected, speculation of such a move could rise and weigh on the NZD. Yet, the better than expected growth number is enough to spark bullish price action and lead to at least 50 points in profit.
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