Sun to shine on economy in 2017

"Our biggest concern is what is going to happen offshore." ASB senior economist Jane Turner

New Zealanders can go on holiday this week in the knowledge that 2017 should be another year of steady growth.

A raft of data is due out this week, including monthly trade, migration, building permits, current account and online jobs, offering a snapshot of how the economy is behaving.

And all the signs are that it will be a prosperous New Year.

ASB said it was particularly watching the third-quarter GDP figures on Thursday. GDP, a measure of economic growth, was expected to have grown by a solid 0.8 per cent, meaning annual growth of 3.5 per cent.

That was a very good number compared to the performance of many of our trading partners, ASB senior economist Jane Turner said.

‘‘Admittedly a lot of this is due to strong population growth, so more people tends to generate more activity ... but in saying that we would say growth is comfortably above trend and we expect growth will become even stronger over the coming year.’’

Super-charging the economy was the service sector. The tourism boom was keeping retailers and the accommodation sector busy, and business and professional services were also growing strongly.

‘‘That’s the sort of activity that picks up when other industries are picking up and the more sectors of the economy that are growing at the same time, the more selfsustaining the growth is, the more jobs that are created.‘‘

New Zealand was on a ‘‘very steady footing’’.

Dairying was still volatile but Turner said other parts of the economy, such as construction, retail spending and tourism, would pick up the slack.

Another good sign was confidence levels. An ANZ-ROY Morgan consumer confidence index for December eased a little but a net 13 per cent of those surveyed felt better off compared to a year ago.

Furthermore, a net 32 per cent expect to be better off financially in 12 months’ time.

‘‘There is a lot for consumers to be happy about,’’ ANZ chief economist Cameron Bagrie said.

‘‘There are jobs aplenty; our job ads series has been rising all year. The unemployment rate has fallen to 4.9 per cent.

‘‘Wage growth might be subdued but with little inflation, purchasing power is still moving up. Dairying incomes are on the comeback trail.’’

Even if the housing market was levelling off, property-owning households were still feeling good about the boost they had received to their wealth, Bagrie said.

Looking ahead, Westpac was forecasting more balmy economic conditions.

Low interest rates, strong population growth and a large pipeline of construction work would likely continue and the dairy sector was improving.

‘‘Nevertheless, the economy still faces some challenges, particularly in relation to the housing market.’’

Inflation was expected to stay low, keeping the official cash rate and thus interest rates - low.

‘‘Our biggest concern is what is going to happen offshore,’’ Turner said. ’’And if we see ongoing volatility or some of the risks we’re seeing on the horizon materialise, that’s probably the greatest risk to New Zealand.

‘‘But New Zealand on its own is doing very well.’’