New Zealand’s Current Account Balance unexpectedly showed a surplus of NZ$124 million in the second quarter, marking the first quarterly surplus since the first three months of 2003. Economists were forecasting a –NZ$1.98 billion result ahead of the release. In annual terms, the deficit narrowed to –NZ$10.6 billion or 5.9% of GDP, the smallest share of total output in nearly 5 years. Details behind the headline figure look far from encouraging however: imports fell -19.6% from a year earlier, outpacing a -3.5% decline in exports and painting a picture of stagnant consumer demand in the island nation. The deficit is likely to continue to narrow in the months ahead as rising unemployment weighs on spending. Indeed, the central bank expects the external gap will narrow to 5.5% of GDP while a survey of economists polled by Bloomberg predicts the jobless rate will rise to a decade high of 6.8% by the end of this year.
Traders welcomed the announcement, sending the New Zealand Dollar 90 pips higher against its US counterpart in the hour following the data release as traders expressed relief that the central bank may not be pushed to lower interest rates to cheapen the currency and thereby offer exporters a boost to help narrow the current account shortfall, which has been on the forefront of policymakers’ concerns since it led to a downgrade of the New Zealand’s credit outlook by the Fitch ratings agency.
Al Bawaba
