Baxia Markets
June 16, 2021

Can New Zealand Recover From Negative GDP?

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Later today we have the GDP q/q release for the New Zealand Dollar. Traders who are bullish on the New Zealand Dollar will be hoping to see a positive number compared to the negative one they saw last quarter. Set your alarms for 10:45PM GMT, this will be a release you can't miss.


What is it? 


The GPD q/q release is a metric that measures the change in the inflation-adjusted value of all goods and services produced by the economy. However, the actual definition of GDP (Gross Domestic Product) is the total monetary value of all the finished goods and services produced within a country. Since the GDP figure acts as a broad measure of overall production within a country, it is safe to say that the metric can be used to assess a country’s economic health. This is why we care so much about GDP. 



What are the Expectations for the NZD GDP Q/Q Release?


Previously in March 2021 the change in GDP was at -1.0%. The expectation for June 2021 for New Zealand’s GDP q/q is 0.5%. This is a big improvement, but will that be the case?



Professional Insight


"The overall value of imported goods has recovered to pre-COVID-19 levels, but the value of exported goods has lagged behind. This is why we are seeing the current account deficit widen so significantly," International Statistics Senior Manager Darren Allan from Stats New Zealand said in a statement.


From the statement above we can see that the value of exported goods has lagged, meaning the goods being produced within New Zealand and shipped abroad are still not where they should be. Therefore, we can anticipate that the GDP q/q release might not be great. 



What happens if...


We see a GDP change higher than 0.5%? If we are to see an increase in GDP change, for example, 2%, then the NZD is expected to appreciate as a higher GDP signals a strengthening economy. 


What happens if...


We see a GDP change lower than 0.5%? If we are to see a decrease in GDP change, for example, 0.1%, or even worse a negative number, then the NZD is expected to depreciate, as a lower GDP signals a weakening economy. Naturally, this will mean that the NZD will decrease in value versus other currencies.



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