Unlike most other countries, New Zealand does not publish it’s consumer confidence data on a monthly basis. We only get that information once each quarter. So, in order to get a better view of the changes in consumer sentiment, analysts turn to proxies. These are other data sets that reflect how willing New Zealanders are to spend.
Chief among them, and therefore likely to be the most important data point for New Zealand this week is tomorrow’s Electronic Card Retail Sales. Sometimes it causes the market to change course. It could be especially relevant this time around since the RBNZ is trying to spur consumer spending and credit by cutting the rates.
We could expect to see expansion in electronic card transactions if the central bank’s policy changes are reaching their goals.
What We Are Expecting
Expectations are for Monthly Electronic Card Retail Sales to decline by -0.1%. This would be a repeat of the prior month’s figure. On an annualized basis, that would imply a slowing of the pace of growth to just 1.2% from a prior of 1.6%.
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Card sales have a habit of bouncing between -0.5% and 0.5% on the monthly measurement. Therefore, we would expect a stronger reaction in the market to occur if the result were beyond those ranges. Higher retail sales imply better consumer sentiment. And this would reduce the likelihood of further RBNZ action. So, we could see the NZD get stronger in that scenario. The opposite would happen with a negative number
The Long Term Numbers
Slowing sales growth on an annualized basis is likely more concerning to regulators. Typically buying with credit cards increases well above 1.0%. And the figure seems to be settling near the bottom of the range. A lack of consumer spending would lead to flagging inflation. It would also be in line with the outlook expressed by many NZ businesses that performance will remain poor for the rest of the year.
Credit cards, in particular, are especially relevant. This is because they’re related to interest rates, which are supposed to be dropping due to the RBNZ. Theoretically, people should be more encouraged to spend on credit because of the lower cost. But if sales aren’t improving, it might mean the central bank’s rate cuts were not enough.
The Recent Moves
Over the last couple of trading days, the Kiwi has found itself supported primarily by external factors. Friday’s lower than expected NFP in the US suggested that the Fed might be more willing to take action. This would supply more liquidity to markets and support carry flows to New Zealand.
Over the weekend, the PBOC reduced reserve requirements. This allows for more liquidity in its banking system, which would be expected to support buying NZ products.
As mentioned previously, New Zealand seems to be avoiding some of the more negative impacts of the trade war because their primary exports to China are for consumer goods on the domestic market. But, this hasn’t been enough to prevent the economy from following a similar trajectory as Australia’s.
Without other factors getting in the way, though, it wouldn’t be surprising for the NZD (and AUD) to strengthen leading up to next week’s FOMC meeting.