NZ: Q4 GDP data should disappoint the market – Westpac

Analysts at Westpac, suggests that their forecast of NZ Q4 GDP growth at 0.3% is at the low end of the range (0.3%-1.0%, median 0.6%) of market forecasts, and is substantially less than the 0.8% rise that the RBNZ forecast in its February Monetary Policy Statement.

Key Quotes

“The next Official Cash Rate review on 27 March will have to acknowledge that the balance of developments since February has been to the downside. If our GDP forecast proves correct, the market response is very likely to be negative (i.e. NZD and swap yields lower).”

“Our observation of the full set of NZ GDP data surprises since the 2009 GFC is that every disappointment resulted in a lower NZD/USD one hour after announcement.”

“The average magnitude of response is 1.7% for a 1% data surprise. Thus, in this case, if the surprise is -0.3ppts (Westpac 0.3% – median 0.6%), the response should be a 0.5% fall in NZD/USD, or a 5bp fall in NZ 2yr swap rates. However, given the proximity of the RBNZ meeting, the reaction could be larger.”