NZ economy may have expanded 0.8% in 4Q on primary sector rebound

Friday 9th March 2018

New Zealand's economic growth probably accelerated in the fourth quarter as primary industries recovered from a lull, services sector activity expansion continued, and the housing market showed renewed signs of life.

Gross domestic product is forecast to have expanded 0.8 percent in the three months ended Dec. 31 and 3.1 percent from a year earlier, according to the median in a Bloomberg poll of 12 economists. The Reserve Bank projects quarterly growth of 0.7 in the fourth quarter.

GDP expanded 0.6 percent in the September quarter as ongoing weakness in the primary sector offset a strong recovery in construction.

ANZ Bank New Zealand senior economist Phil Borkin said he expects GDP expanded 0.7 percent quarter-on-quarter and annual growth of 3.1 percent. "Primary, goods-producing and services sector activity should all contribute positively to overall growth," he said.

In the prior period, agriculture, forestry and fishing activity contracted 1 percent as wet weather sapped production. While the December quarter was marked by dry conditions, any decline in milk production would have been offset by higher animal slaughtering.

ASB Bank senior economist Jane Turner expects quarterly growth was 0.8 percent as does Kiwibank senior economist Jeremy Couchman.

Capital Economics also expects the economy expanded 0.8 percent on renewed momentum in the housing market, said Paul Sales, chief Australia and New Zealand economist. "The pick-up in activity in the housing market at the end of last year should have filtered through to stronger activity in real estate services," he said.

Dales also expects retail activity bounced back from a dip when the boost from the Lions rugby tour faded, with more normal levels in the fourth quarter, he said.

However, with net migration passed its peak and the housing market unlikely to continue to gather momentum, Dales expects GDP growth will ease in 2018.

Westpac Banking Corp anticipates quarterly growth was more muted at 0.6 percent and slower annual expansion at 2.9 percent. According to senior economist Michael Gordon, there are no "obvious one-off factors driving the quarterly result, just modest growth across a range of sectors."

While goods turnover was relatively brisk in the December quarter, with some of the strongest gains seen in the retail, wholesale and transport sectors, Gordon said he expects growth in the services sector was more subdued. Within the primary sector, Gordon said milk collections didn’t fall short by as much as they did in the September quarter, despite the poor dairying season continuing in December

Statistics New Zealand will publish the data on March 15.

(BusinessDesk)

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