NZ Retail Sales Plummet Amid Fuel and Motor Woes

New Zealand retail sales volumes unexpectedly fell in Q2, driven by fuel and motor-related categories. Total retail sales volume dropped -0.5% q/q vs. 1.0% in Q1. However, core retail sales volume increased 0.7% q/q vs. 1.1% in Q1, showing resilient domestic demand.

The Reserve Bank of New Zealand (RBNZ) will make its next policy decision on September 2, which includes a fresh Monetary Policy Statement. Markets have virtually fully priced a 25 bps hike to 2.75%, with the swaps curve implying 75bps of tightening over twelve months.

Elias Haddad from Brown Brothers Harriman notes that while RBNZ tightening is expected, NZD/USD upside is limited due to the cross already outrunning rate differentials.