In respect of New Zealand, analysts at ANZ Bank explained that the 0.9% sa q/q rise in production-based GDP in 2015 Q4 was stronger than the 0.7% q/q pick in the March MPS and the market consensus. Key Quotes: Annual growth was 2.3% y/y, barely above nationwide population growth. That’s a slight upward starting point surprise to RBNZ estimates of capacity pressures, but not sufficiently large to suggest a change of tack. However, the Q4 result was flattered by a stronger-than-expected contribution from the seasonal balancing item (+0.3ppts) so the “miss” has some statistical noise in it. Growth in the services (+0.8% q/q, 2.4% y/y), goods (+0.3% q/q, 1.7% y/y), and primary sectors were broadly in in line with our expectations. Eleven of the 16 broader production components rose in Q4. Areas of weakness look to be related to climatic conditions (falls in agriculture, primary manufacturing, and electricity) although transport value added fell, surprisingly. Ten of the 11 services industries saw lifts. Strength was particularly evident in sectors benefiting from strengthening employment (arts & recreation services, and “other” services), increasing borrowing (finance & insurance) and the booming tourism sector (retail & accommodation). The Q4 lull in house sales activity coincided with more moderate moves in rental, hiring & real estate services, and business services activity. There was also some evidence of recoil in sectors that were strong in Q3, particularly transport, postal & warehousing. Rebounding construction (+2.5% q/q)) contributed slightly less than one fifth of the rise in GDP, underpinned by broad-based increases in residential, non-residential and (more volatile) heavy & civil construction activity. Expenditure-based GDP rose 1.1% sa q/q (+3.7% y/y). Private consumption posted a solid 1.0% increase, underpinned by increases in durable, non-durable and services consumption. Investment in fixed assets slipped 1.1% but this followed a 2.6% surge in Q3. Falls in transport equipment and plant & machinery overshadowed climbs in construction components. A slightly negative net trade contribution – with 0.7% q/q growth in import volumes offsetting the 0.3% growth in export volumes – was more than offset by the strong contribution from inventories (1.3ppts) following a Q3 rundown. Low inflation and the declining terms of trade are sapping nationwide incomes, with quarterly nominal GDP falling 0.1% q/q (+3.5% y/y). Real gross national disposable incomes were up a tepid 0.4% in Q4, with annual average growth slowing to 1.4%. Today’s report confirms that the economy ended 2015 on a solid footing. Few surprises here. However, we are now well into 2016, with slowing global growth, dairy wobbles and tightening financial conditions flagging downside risks. Viewed in combination with low inflation and easing inflation expectations, that’s an environment where the odds favour an even lower OCR. For more information, read our latest forex news.