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New Zealand Retail Sales More Than Double Expectations in August
Monday, 12 October 2009 22:22:35 GMT  |  Ilya Spivak, Currency Analyst
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New Zealand Retail Sales more than doubled economists’ expectations in August, adding 1.1% from the previous month to clock in the largest gain in nearly two years. Sales fell -0.6% from the previous year, the smallest decline since October 2008. Rising home values and record-low interest rates seem to have boosted consumer confidence, which surged to the highest in 3 years in the third quarter. Rising unemployment continues to present a hurdle however, with economists expecting the jobless rate to rise to top 7% next year. The stronger New Zealand Dollar may be playing an important role in delaying firms’ hiring plans, weighing on exporters’ profits as it drives away foreign demand that accounts for close to 30% of the economy’s total output. The government and the central bank are both keenly aware of this and have made attempts to talk down the buoyant currency. On balance, this suggests that the RBNZ is unlikely to substantially speed up the timetable to raise interest rates from the “latter part of 2010” despite encouraging signs from leading economic indicators (such as today’s report), fearing that beating other central banks to the punch will drive the Kiwi dollar even higher and derail recovery.

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