The New Zealand dollar has been on a roll but is in danger of snapping a seven-day rally during which it gained over 2% against the US dollar. NZD/USD is trading in the European session at 0.6185, down 0.16%.
New Zealand Retail Sales Decline by 1.9%
Another retail sales report, another decline. New Zealand retail sales fell by 1.9% q/q in the fourth quarter of 2023, marking the eighth straight quarter of decline in retail spending. This was much lower than the revised 0.8% decline in Q3 and the market estimate of -0.4%.
The downswing was felt across the economy, as 14 of 15 retail industries recorded a fall in retail activity. On an annualized basis, retail sales slid 4.1%, down from -3.4% in Q3 and below the forecast of -3.6%, the fifth straight quarter of decline.
The weak data indicates that consumer spending is sputtering and that could mean New Zealand’s economy is in a recession. GDP growth contracted in the third quarter by 0.3% and if Q4 also records negative growth would meet the definition of a technical recession.
The retail sales release is doubly significant as it is the final key release before the Reserve Bank of New Zealand meets on February 28th. Governor Orr has not ruled out further rate hikes as part of a pushback against market expectations for a rate cut in mid-2024. Still, a rate hike doesn’t seem likely, especially after the weak retail sales report. The RBNZ has maintained the cash rate at 5.50% since April 2023 and it would be a major surprise if it does not hold rates next week.
NZD/USD Technical
- NZD/USD is putting pressure on resistance at 0.6211. Above, there is resistance at 0.6270
- 0.6168 and 0.6109 are providing support