• New Zealand’s GDP misses forecasts in the last quarter of the past year
  • Lower exports due to falling milk production weighed the most on growth momentum
  • Dow Jones (US30 on xStation5) lost 1% as Boeing shares pulled the index down

The beginning of trading on Thursday is quite calm without any substantial moves of note. The Japanese yen is currently the best performing currency as it was the case earlier this week. However, major attention during the Asian session was paid elsewhere, namely to the New Zealand economy from where GDP numbers for the fourth quarter were released. In spite of the fact that growth came in below expectations, the kiwi did barely respond and the NZ dollar seems to have still a chance to continue rising in the near term.

link do file download linkNZ GDP missed forecasts in the fourth quarter as falling milk productions weighed on exports. Source: Macrobond, XTB Research

The New Zealand economy expanded 0.6% in the final three months of 2017 compared to the period between June and September falling short of the consensus set at 0.8%. In a year-over-year basis the data showed a 2.9% pick-up which was also less than the median estimate had pointed out (3.1%). Looking into the breakdown one may notice that two categories such as net exports and inventories turned out to be negative to growth while private and public consumption along with investments added to gross domestic product. Do notice that it is a rare situation when both net exports and inventories subtract from growth and the same period, however, an explanation seems to come from the agricultural sector.

link do file download linkAgriculture and especially milk production contributed to negative net exports in the last quarter of 2017. Source:

As you can see at the chart above agriculture declined the most in the final three months of the past year but despite that growth proved to be quite widespread across many service industries. According to the country’s statistics bureau “hot, dry weather appeared to have a negative impact this quarter on agriculture production, which fell 2.7%” it adds thereafter “falling milk production was reflected in lower dairy manufacturing and dairy exports”. In a nutshell, GDP growth disillusioned to some extent, however, we are far away from a more severe slowdown let alone profound downturn. Although there are no specific signals that growth will accelerate going forward, the current robust pace ought to remains on track.

link do file download linkThe NZDUSD remains locked within a consolidation where a more important resistance can be found at around 0.74. Having assumed that commodities may thrive in the upcoming months given the current phase of the business cycle it could bode well for commodity-related currencies such as AUD or NZD. Source: xStation5

At the end let us point to the Dow Jones (US30) as it dropped as much as 1% on Wednesday while its major peers registered decisively less painful losses. The major culprit were Boeing shares as they slid 2.5% in response to revelations that Donald Trump is considering to slap $60 billion of tariffs on Chinese goods. Investors feared Chinese authorities could target the aerospace giant in retaliation and therefore chose to sell their shares.

link do file download linkTechnically the US30 is getting closer to its crucial support area which may serve as another reasons to consider entering the market. If so, a corrective bounce could take place and buyers would count on a rise even toward 25800 points. Source: xStation5