NZ's Ready Reckoner - Westpac

Noting that the Ready Reckoner assesses how recent data will affect the RBNZ's OCR forecast, analysts at Westpac offered details.

Key quotes:

"The Ready Reckoner quantifies the impact of the various shocks that have hit the New Zealand economy since the last Monetary Policy Statement, in terms of the likely impact on the RBNZ’s Official Cash Rate forecast. The sensitivities represent our best estimate of how the RBNZ’s models will treat the various data surprises.

The Ready Reckoner is meant to be a pure read on the balance of recent data, and is not a prediction of the RBNZ’s actions.

November MPS implied OCR forecast (Q1 2020): 2.0%

Net impact of shocks since November: +10bp

Ready Reckoner estimate of new OCR forecast (Q1 2020): 2.1%

Near-term inflation: -10bp

December quarter inflation was 0.1%, compared to the RBNZ's forecast of 0.3%. 

GDP revisions and near-term surprise: +20bp

GDP was revised up substantially over 2015 and 2016, implying a higher output gap than in previous forecasts. Partially offsetting this, September quarter GDP was 0.6%, compared to the RBNZ's forecast of 0.7%.

Exchange rate: -20bp

The trade-weighted index has been running about 2% higher than the RBNZ's November MPS forecast.

House prices: +15bp

In the November MPS, the RBNZ forecast that house prices would rise just 0.3% over the final six months of 2017. However, the latest data suggests house prices actually rose 2.7%. Furthermore, sales data suggests house prices will outperform previous expectations in the March quarter too. We assume that the RBNZ will revise up its house price forecast by 2.5%.

World economy: +5bp

Most economists are revising up their forecasts of economic growth in NZ's key trading partners, the RBNZ will probably follow suit.

Total change: +10bp"