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14 May 2015
Strong NZ retail sales buries rate cut expectations by RBNZ – TDS
FXStreet (Barcelona) - Reviewing New Zealand’s retail sales, manufacturing PMI and bond holdings data release, the Team at TD Securities see the much greater than expected gain in retail sales at 2.7%/qtr as diminishing the probability of a rate cut by RBNZ in the short-term.
Key Quotes
“It was a monster Q1 Real retail sales release. Q1 retail sales volumes rose 2.7%/qtr, the strongest quarterly gain since 2003, exceeding TDs (1.3%) and the market’s (+1.6%) expectations. In annual terms volumes picked up +7.4% and all 15 retail industries recorded sales rises. The last time this occurred was in Q4 2006.”
“We believe today's strong release removes the likelihood of rate cuts, at least in the short term. The RBNZ said in its April OCR statement that ‘it would be appropriate to lower the OCR if demand weakens, and….” and today’s data shows that demand, at least in retail is hot placing upside risk for Q1 GDP.”
“BusinessNZ’s Manufacturing PMI registered its 31st successive monthly rise, showing the sector continues to expand (i.e. above 50). However today’s release shows that the pace of expansion slowed in April, to 51.8 from 54.6 in March. Respondents referred to weaker economic conditions and the NZD/AUD cross as headwinds for the sector. Also the sector noted that demand from the agriculture sector dropped, not a complete surprise given the sharp drops in the milk price.”
“Non resident bond holdings jumped in April to 70% from 66.5% in March. The two issues that registered the largest offshore buying were the Aprils 20s, from 73.8% to 83.4% and the April 23s from 69.3% to 76.5%.”
“We expect data for May will reveal offshore buying picked up, particularly as momentum for the RBNZ to cut has grown.”
Key Quotes
“It was a monster Q1 Real retail sales release. Q1 retail sales volumes rose 2.7%/qtr, the strongest quarterly gain since 2003, exceeding TDs (1.3%) and the market’s (+1.6%) expectations. In annual terms volumes picked up +7.4% and all 15 retail industries recorded sales rises. The last time this occurred was in Q4 2006.”
“We believe today's strong release removes the likelihood of rate cuts, at least in the short term. The RBNZ said in its April OCR statement that ‘it would be appropriate to lower the OCR if demand weakens, and….” and today’s data shows that demand, at least in retail is hot placing upside risk for Q1 GDP.”
“BusinessNZ’s Manufacturing PMI registered its 31st successive monthly rise, showing the sector continues to expand (i.e. above 50). However today’s release shows that the pace of expansion slowed in April, to 51.8 from 54.6 in March. Respondents referred to weaker economic conditions and the NZD/AUD cross as headwinds for the sector. Also the sector noted that demand from the agriculture sector dropped, not a complete surprise given the sharp drops in the milk price.”
“Non resident bond holdings jumped in April to 70% from 66.5% in March. The two issues that registered the largest offshore buying were the Aprils 20s, from 73.8% to 83.4% and the April 23s from 69.3% to 76.5%.”
“We expect data for May will reveal offshore buying picked up, particularly as momentum for the RBNZ to cut has grown.”