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14/06/24
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NZD Drops After Soft Manufacturing Data
On Friday, the New Zealand dollar was down sharply, and NZD/USD traded at about 0.6130, down 0.61% in the European session.
In May, the manufacturing sector in New Zealand contracted for the 14th consecutive month. The manufacturing PMI dropped from 48.9 to 47.2.
New orders have contracted for 21 straight months and in May, production decelerated. Manufacturers were pessimistic about the economic slowdown in New Zealand.
The economy in New Zealand has been battling. The past two quarters experienced negative growth, pointing to a recession, and GDP has declined in 5 of the last 6 quarters.
The Reserve Bank of New Zealand is under pressure to cut interest rates which are at 5.5% and provide households and businesses with some relief.
The central bank faces the problem that inflationary pressures are high and are only dropping slowly. In the March quarter, the consumer price index rose 4.0% y/y down from Q4 2023’s 4.7%, but much higher than the upper band of the RBNZ’s target range of between 1% and 3%.
The RBNZ’s next meeting will be on July 10 and it is expected to keep rates unchanged for the 8th consecutive time.
The producer price index in the US was 0.2% higher, lower than the April reading of 0.5% and the market estimate of 0.1%.
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