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Deleveraging Ahead as New Zealand Credit Card Spending Slows?

Deleveraging Ahead as New Zealand Credit Card Spending Slows?

Gregory Marks,

THE TAKEAWAY: Total card spending MoM in New Zealand decreased to 0.2% from 1.2% prior -> retail card spending missed estimates of 0.5% coming in at 0.4% -> June print revised downwards by 0.1% -> NZDUSD Flat

Central bankers at the RBNZ are plagued with a combination of record low interest rates, rising unemployment, a housing bubble and carry trade fueled NZD. Although the central bank wishes to calm housing prices, the RBNZ may be wary to raise its key benchmark interest rate as to not fuel a further appreciation of the Kiwi in the near term. But with slower Chinese growth possibly pushing the currency lower, the RBNZ may see fit to raise rates when the Kiwi has fallen to an appropriate level as deemed by Governor Wheeler.

Deleveraging_Ahead_as_New_Zealand_Credit_Card_Spending_Slows_body_Picture_5.png, Deleveraging Ahead as New Zealand Credit Card Spending Slows?

While Chinese led growth fueled the Australian and New Zealand economies over the past decade, the nations did not find themselves in the same deleveraging cycle as the United States did.

Deleveraging_Ahead_as_New_Zealand_Credit_Card_Spending_Slows_body_Picture_4.png, Deleveraging Ahead as New Zealand Credit Card Spending Slows?

The question now becomes whether this current Chinese slowdown will trigger an end to the consumer’s borrowing cycle, as the total outstanting balance in credit cards appears to be topping out. A slowing in the volicity of money would then negatively perpetuate decreases in spending, thus having adverse implications on the currency, employment and stability of the economies moving forward. Of course, downside risks would be limited surrounding RBNZ rate decisions as speculation of rate hikes linger.

Deleveraging_Ahead_as_New_Zealand_Credit_Card_Spending_Slows_body_Picture_3.png, Deleveraging Ahead as New Zealand Credit Card Spending Slows?Deleveraging_Ahead_as_New_Zealand_Credit_Card_Spending_Slows_body_Picture_2.png, Deleveraging Ahead as New Zealand Credit Card Spending Slows?

The Kiwi fell ahead of and into the print before quickly recovering most of its meager losses against the greenback. The NZDUSD pair is down over 40 pips from its intraday high moving into the Asian session as traders evaluate the weakened Dollar.

NZD/USD (5-Minute Chart)

Deleveraging_Ahead_as_New_Zealand_Credit_Card_Spending_Slows_body_Picture_1.png, Deleveraging Ahead as New Zealand Credit Card Spending Slows?

Source: FXCM Marketscope

Gregory Marks, DailyFX Research Team

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