The headline number on New Zealand GDP was about the only positive sign in the report. The economy grew 0.8% in the quarter compared to 0.6% expected but the inventory changes and downward revisions reveal a weaker economy.
Year-over-year changes show the economy 1.9% larger than last year, which is substantially softer than the 2.2% expected. The Q3 growth was heavily influenced by inventory growth, which will unwind. Similarly, consumption grew at the strongest pace since Q1 2007 but was boosted by the Rugby World Cup.
Nothing jumps out as positive and slowing global growth will keep future inflation in check. The caveat for the FX market is that the OIS market is priced for a 22% chance of a cut at the Jan 26 meeting. I don’t see that happening so NZD should have some modest upside in the coming weeks.
