New Zealand is expected to produce a much stronger set of national accounts and GDP numbers for the last quarter of 2017 later today.
That’s when Statistics New Zealand will release the national accounts and GDP gross domestic product figures, giving an indication of how quickly the economy grew in the three months to December 31 and in 2017.
The quarter covered a period during which business confidence plunged to the lowest level in around nine years, amid both election uncertainty and the surprise change in Government.
But while some NZ economists warned at the time that this fall would see a slowing in growth, most analysts are not convinced.
Market consensus is for quarter on quarter growth of 0.8% and annual growth of 3.1%, up from the 2.7% rate in the year to September. By contrast Australian growth slowed to 0.4% in the last quarter for an annual rate of 2.4%, down from 2.9% in the September quarter.
The growth data will be the final major data point for the Reserve bank of NZ to mull over ahead of its cash rate decision a week today (Thursday). The forecast is for no change from the 1.75% rate.
New Zealand inflation is running at 1.6%, so like its Australian counterpart, the bank is under no pressure to try and nip cost pressures before they get out of hand.
Next week’s rate rise from the US Federal Reserve will put the Federal Funds rate at the Kiwi rate when it is expected to be boosted to a range of 1.50% to 1.75% now. It is already at the Australian cash rate of 1.5% at its present range of 1.25% 1.50% as at the Fed’s December, 2017 meeting.
Economists at ASB (owned by the Commonwealth Bank) say solid growth at the end of 2017was led by strong retail sales and a rebound in the housing marker.
But they cautioned that the impact from the change in government might take a while to appear. Measures of both building consents and manufacturing activity pointed to weakness at the start of 2018, while business confidence remained low, ASB economists pointed out.
"As further policy details are revealed we expect business confidence to recover and for investment and employment activity to resume," ASB said.
"Beyond the near-term uncertainty, the key challenge for the economy will be escalating capacity constraints (particularly in the labour market) and the cost pressure that will come along with increasingly tight resources."
Westpac senior economist Michael Gordon was more downbeat about the economy’s performance, predicting the economy expanded by just 0.6% in the final quarter, roughly the speed at which the population is growing.
“With population growth still running strong at about 0.5 per cent a quarter, this would mark the second quarter when growth has been barely above zero in per capita terms,” Gordon told New Zealand media.
