Forex Flash: NZD facing little headwinds as economy, milk prices point higher – BNZ

FXstreet.com (Barcelona) - As with last month, NZ’s outperformance relative to the rest of the world was once again evident in spades during March. No more was this so than in fourth quarter GDP figures. GDP soared 1.5% in Q4, taking the annual increase to a very respectable 3.0%. The expansion was much bigger than anyone expected, and provided a nice contrast to the 0.4% growth recorded in the US over the same period, or the 0% in Japan, -0.6% in the Eurozone, and -0.3% in the UK. We couldn’t see anything particularly ‘weird’ in the data, rather, growth simply surprised across a significant number of industries, and was about far more than “just” Christchurch reconstruction.

Drought conditions will begin to make their presence felt in H1 activity figures. However, surging construction activity means our year-end growth forecast remains at a healthy 3.0%y/y. “If the forward-looking indicators from the March ANZ business survey are any guide, our optimism is justified. Sure, headline confidence eased a touch to 34.6 in March from 39.4 in February. However, the outright levels are still well elevated. Indeed, the own activity readings, at face value, suggest annual GDP growth will scale 4% this year.” notes the BNZ Research Team.

This optimism extends across a range of industries, with exports being the main exception. Still, surging commodity prices will provide income relief to at least some parts of the export community. Milk auction prices rose nearly 25% (cumulative) during March, allowing Fonterra to revise up its payout forecast to $6.25-$6.30, from $5.90-$6.00.