Strong economic growth forecast for December quarter – but don't celebrate yet

Westpac thinks the New Zealand economy will turn out to have rebounded dramatically at the end of the year, when figures emerge on Thursday.

Monday, March 14th 2022, 11:23AM

by Eric Frykberg

ANZ has a similar view but cautions against too much enthusiasm.

Thursday is when Stats NZ unveils its Gross Domestic product (GDP) data for the December quarter.

Westpac economists think there will have been a 3.8% rise for the quarter, cancelling out a 3.7% drop in the previous quarter.

This number is higher than a Reserve Bank (RBNZ) forecast of 2.3% for the December quarter, which came in a monetary statement at the start of last month.

Westpac admits to being surprised by this.

It says the biggest contribution to the growth will have come from non-food manufacturing, up 10%. This was probably caused by retailers and wholesalers needing to rebuild stocks after supply disruptions here and overseas.

The next biggest growth sectors were construction and mining, while transportation was flat and hospitality declined.

Westpac adds the quarterly growth rate of 3.8% will translate into an annual growth rate of 3.9%.

ANZ economists have a similarly bullish view. They are forecasting quarterly growth 3.5%, annualising out to 3.6%.

Despite those rosy figures, the ANZ economists warned people 'not to get out the bubbly just yet'.

It pointed out that the world has changed in the 11 weeks that Stats NZ has needed to count the data from December.

It cites international tumult, rampant Omicron and extreme inflation eating away at households spending ability as factors that could upend everything.

In addition, a high GDP figure for December could only 'lower the hurdle' for a technical recession to follow. This would happen if the economy shrinks for two quarters in a row.

High international interest rates and a serious trade imbalance could add to the problems.

It said regarding trade in services, the closed border has annihilated most travel- related exports, pushing the services balance from its usual surplus into deficit.

Tags: economy