Analysts are expecting some good news out of the next major data from New Zealand.
However, it’s not as likely to move the market directly as much as it would have in the past. And that’s not just because everything is being drowned out by the coronavirus news.
New Zealand was one of the first countries to close their borders to people traveling from coronavirus “hot spots.” It was also one of the last major countries to have a confirmed case.
Consequently, New Zealand imposed its lockdowns late in March, despite having relatively few cases and only one death so far.
For the Data
That means for most of March, retailers remained open and domestic trading continued as usual right up until the last days of the month.
There is an important caveat, though. The travel restrictions placed at the beginning of the year prevented a large segment of tourist arrivals, an important component of retail sales.
Tourist arrivals diminished, but not as much as expected. They managed to actually be higher during the 2019-20 summer than in the previous year, despite the spread of COVID-19.
The lack of cases helped keep New Zealand an attractive destination for travelers well into March before airlines started suspending flights around the world.
Is There Still Optimism?
The low caseload in mid-March and the restart of business in China led many analysts to have an optimistic outlook for New Zealand.
If the country managed to avoid having to enter lockdowns, they could manage to avoid the bulk of the negative impact of the virus. However, in the latter half of the month, the number of cases increased. Local transmission increased, leading to the current shutdown of the economy.
Because New Zealand managed to delay the outbreak longer than other countries, it might take longer for them to declare the all-clear.
But that gave their health authorities (well, the ones that weren’t breaking quarantine to go hiking at the beach like the Health Minister) more time to prepare.
What We Are Looking For
Expectations are for March Electronic Card Retail Sales to increase by 0.3% on a monthly basis. This would be a slowing of the rate from 0.6% in February. This is well within the normal range for the figurenand could be bolstered by people stocking up ahead of the expectation of lockdowns.
We can expect annualized retail sales to increase by 5.3%, a step down from the +8.6% recorded in the prior month. Investors might be comforted by the healthy consumer demand even as the cases of coronavirus increased throughout the month.
As expected, the RBA held off on further rate cuts on Monday, and many see that as foreshadowing what the RBNZ will do in their next meeting.
The bank has committed to a 0.25% rate for the next year. It’s likely to look to support the economy by buying up government debt.
Liquidity injections drive down bond yields and could weaken the currency. Traders will likely be more focused on reports of the RBNZ’s buying activities in the near term – until the economy reopens and the massive increase in debt starts to threaten with increased inflation.