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Q1 GDP Contracts, But Details Not Too Bad

NZD

NZD has fallen in the wake of the sharp downside surprise in Q1 GDP. GDP fell by 0.2% in QoQ terms, versus the 0.6% rise expected. This bought YoY growth to 1.2% versus 2.4% expected.

  • Lots of industries recorded negative growth for the quarter, which was impacted by Covid related restrictions.
  • On an expenditure basis, GDP fell by 0.1%, largely dragged down by a 14% plunge in exports. Household spending (+4.6%) and investment held up well (both for dwellings and other fixed asset investment).
  • No doubt the authorities will be hoping for a Q2 rebound as Covid restrictions eased (case numbers peaked in March) and the tourism related outlook improves.
  • In terms of market reaction - NZD/USD fell towards 0.6260 but we have stabilized somewhat around the 0.6270/75 level, which is around 0.25% sub-NY closing levels.
  • In rates, the 2yr swap rate is down by 14bps to 4.31%. The 2yr bond off by 17bps to 3.70%, while the 10yr has slipped 13bps to 4.14%.
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