High frequency indicators show a tick up in economic activity, though it remains well below normal levels
Fundamental Forex Analysis

NZIER Consensus Forecasts shows growth outlook highly uncertain

According to the latest projections published by the New Zealand Institute of Economic Research (NZIER) on Monday, the NZ growth outlook remains at a risk of an even greater degree of uncertainty ahead.

Key highlights

The large range in forecasts across the key economic measures highlights the uncertainty in how this recovery will pan out.

Consensus Forecasts for GDP have been revised down sharply for the year to March 2021, before a strong rebound in subsequent years. There is an even greater degree of uncertainty than usual, particularly over the strength of rebound in the year to March 2022. On average, annual GDP is now expected to contract by 9 percent for the year to March 202 1.

Similarly, household spending is forecast to decline sharply over the coming year, before rebounding strongly in subsequent years .

Border closures have had a significant negative impact on tourism activity. Average forecast is for annual growth in exports to rise above 14 percent for the year to March 2022.

The NZD TWI has been revised lower. It also indicated the potential for the OCR to head into negative territory next year. Interest rate forecasts have been revised lower.

A V -shape is also forecast for inflation; annual CPI inflation is expected to decline sharply over the coming year before recovering in subsequent years.

The average forecast for the unemployment rate is for a spike above 8% over the coming year, with one forecast as high as 9.6%.

Market reaction 

The kiwi dollar keeps its offered tone intact following the release of the above report, with NZD/USD losing 0.36% to trade at 0.6420. 


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