NZ: Stronger growth, significant upward revisions to history - TDS

Annette Beacher, Chief Asia-Pac Macro Strategist at TDS, notes that New Zealand’s Sep qtr GDP rose by +0.6%/qtr, matching TD and median expectations.  However, significant upward revisions to history (+1%pts to annual GDP growth) are a deal-breaker for the markets, she further adds.

Key Quotes

“NZD jumped through $US0.70, retracing yesterday’s data-disappointment-led fall.  Swap rates are 1-2bp higher albeit in very thin trading conditions.”

“The RBNZ next meets on 8 Feb.  Significant upgrades to growth, low unemployment and forthcoming outsized fiscal spending all demand another hawkish tilt from RBNZ Governor Spencer.  Unfortunately, uncertainty around the ‘expanded’ RBNZ mandate and policy decision-making process implies that the RBNZ could end up quite behind the curve if it sits tight in the meantime.”

“We do not favour medium- to longer-dated NZGBs due to inevitable NZDMO issuance upgrades down the track as well as so-far unpriced RBNZ tightening next year. Curve steepening is our preferred scenario over the coming six months, as well as NZD outperformance.”