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Views Article – Sharenet Wealth

Asia, Forex

-NZ unemployment rate hits 11-year low, tempers 2019 rate cut views

(Removes extraneous word from headline.) * NZ’s Q2 unemployment rate fell to 3.9% vs 4.3% forecast * Q2 Wages rose 0.8% quarter-on-quarter * Q2 employment rose 0.8% in Q2 vs 0.4% forecast By Praveen Menon WELLINGTON, Aug 6 (Reuters) – New Zealand’s unemployment rate unexpectedly fell to an 11-year-low in the second quarter, sending the currency soaring, as investors dialled back expectations of aggressive interest rate cuts by the central bank this year. However, economists said the data released on Tuesday is unlikely to change the central bank’s thinking ahead of its policy meeting on Wednesday, at which it is expected to cut the official cash rate by 25 basis points to a record low of 1.25%. New Zealand’s unemployment rate fell to 3.9%, the lowest since the June 2008 quarter, reflecting a drop in the number of unemployed males, Statistics New Zealand said in a statement. Economists polled by Reuters had forecast the unemployment rate to rise 4.3% from 4.2% in the previous quarter. After the job market data on Tuesday, the New Zealand dollar shot up 0.7%, reversing days of declines over expectations of rate cuts by the central bank, and an escalation of the U.S.-China trade war. “Prior to this data we were actively considering the possibility of the RBNZ following up with another cut in September. This strong labour market report reduces the odds of a September cut,” said Westpac Senior Economist Michael Gordon. All 16 economists polled by Reuters expect RBNZ to cut rates on Wednesday, and keep the door open for more easing. New Zealand’s expected rate cut would come as central banks globally unleash monetary stimulus to fight slowing growth in the face of intensifying trade disputes. The trade war escalated further on Tuesday as the U.S government designated China a currency manipulator for the first time since 1994. ANZ Bank said earlier in the day it expected the RBNZ to cut the OCR three times this year. “We expect the RBNZ will leave the door open to further rates cut beyond August, although the strength in this labour market report could weigh on the tone of the Committee statement and press conference,” ANZ Economist Michael Callaghan said in a note. Wages rose 0.8% quarter-on-quarter, slightly faster than the 0.7% expected in a Reuters poll. On a year-on-year basis, wages rose 2.2%, following the government’s increase in the minimum wages in April and above RBNZ and market expectations of 2.1%. Employment rose 0.8% in the quarter, compared with a 0.2% decline in the previous quarter and the 0.4% rise expected in a Reuters poll. The participation rate was unchanged at 70.4%. Despite the firmer than expected data, analysts still expect unemployment to rise this year. (Reporting by Praveen Menon; Editing by Sam Holmes)


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