New Zealand released its CPI official stats for December quarter. The data released yesterday points out to quarterly inflation of 0.1% in the final quarter of 2018, higher than the 0.9% reported in the September quarter and ahead of market expectation of 0%. Market analysts were expecting a flat inflation result for the December quarter with the annual inflation rate of 1.8 percent. However, the year-on-year inflation rate stood at 1.9%, in the fourth quarter, unchanged on the previous quarter.
The outcome, however, stands below the Reserve Bank's forecast of 0.2 % CPI in December quarter and 2% for the year 2018.
The 0.1 percent quarterly inflation was majorly attributable to price rise in international airfares, games, and toys. The seasonal drops in vegetable prices placed a cap on advances during the quarter. The price rise was primarily offset by continuous falling fuel price throughout the quarter.
As stated by leading NAB economist, Kaixin Owyong, The NZ inflation data highlights some upside risk to international travel and furniture/household goods prices. Therefore, while sticking with a 0.3 percent quarter on quarter reading for headline Australian CPI, NAB anticipated the risk of a 0.4 percent quarter-on-quarter print. For core inflation, NAB is lifting the trimmed mean CPI expectation to 0.4 percent quarter on quarter from a range of 0.3 percent to 0.4 percent.
The New Zealand Dollar rose sharply on the back of the data, with the Pound-to-New Zealand Dollar trading around 1.92. However, the evolution of the dollar depends on the unfolding of several macro-economic factors. Market sentiments are not bright coming out of the Davos Economic Forum. The recent data release by Chinese authorities, nation’s economic growth has slipped to 6.4% in the last quarter of 2018, though in line with market expectations but the slowest annual rate since the 1990s.
Harvard professor Kenneth Rogoff, the former chief economist at the IMF, has warned probable slowdown in the Chinese economy with no significant hopes from US-China trade negotiations. He has stated that the policy instruments of the central bank and government are losing the effectiveness with lesser hopes from the nation’s dwindling credit-driven growth model.
On the other hand, the US government is on a political shutdown since around a month, caused by President Donald Trump to try to seize US$5.7b out of Congress for Mexican border wall construction. Moody's Analytics has estimated a US$8.7 billion economic loss for the nation.
The prolonged trade tension between global superpowers, chaotic Brexit, a slowdown in the Chinese economy, Australia’s probable slip into recession all weigh heavily on the market sentiments. IMF’s recent data has trimmed its 2019 global growth forecast to 3.5 percent. Though ABS had reported 21,600 job creation and a dip in the jobless rate to 5%, the full-time job numbers have witnessed a fall of 40% over last one year without passing on to wages growth.
Market analysts are eagerly waiting for some global macro-economic upside and boost to the prevailing negative sentiments at a time when markets are on edge.
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