Economy showing signs of slowdown
"The picture is still fairly robust, but a lot of it is just driven by sheer numbers of people." Westpac acting chief economist Michael Gordon
Figures out this week could show the economy ended 2016 growing only as fast as the population, amid warnings of the start of a slowdown.
On Thursday Statistics New Zealand will release gross domestic product (GDP) figures for the three months to December 31. Economists expect the economy grew by about 0.7 per cent in the December quarter, compared to1.1 per cent growth in the previous quarter.
While construction continues to boom, a wet spring is likely to mean agricultural sector contracted slightly at the end of 2016.
Both Westpac and UBS warn growth may have dropped as low as 0.5 per cent in the quarter, which would mark it as the weakest quarter of growth since the start of 2015.
It would also suggest the economy was growing at around the pace of New Zealand’s annual population growth, currently about 2 per cent, a 40-year high.
New Zealand’s economy grew at 3.5 per cent in the year to September 30, making it one of the strongest economies in the OECD in that period.
However, much of the boost appeared to be driven by construction and the services sector, on the back of record high net migration gains of around 70,000 people a year.
Westpac acting chief economist Michael Gordon predicted growth at the end of 2016 would have been held back by a weak start to the dairy season following a wet spring, as well as a temporary shutdown of the Maari gas field.
While both of these factors were temporary, Gordon said growth was largely being driven by population growth.
‘‘The picture is still fairly robust, but a lot of it is just driven by sheer numbers of people,’’ Gordon said.
‘‘The underlying picture on a per person basis is more like an economy that’s growing at one to one and a half per cent a year, and that’s not terribly fast compared to history.’’
Other economists warn the economy may be losing momentum. Other Statistics figures show the tide has turned for building consents, which, since reaching a record high in August, have dropped 15 per cent since.
UBS economist Robin Clements downgraded his growth forecast by 0.3 percentage points to 0.5 per cent on Friday, blaming weaker than expected manufacturing sales.
Although Clements said manufacturing could have rebounded at the start of 2017, the fall-off in building consents and the recent fall in electronic card transactions suggested consumer spending may slow.
‘‘Relying on consumer spending to underwrite ongoing growth is not a done deal,’’ Clements said in a research note.
ANZ predicts New Zealand’s annual economic growth will fall to about 3 per cent this year, but says the slowdown was due in part to the economy reaching capacity, with a rising number of employers struggling to find skilled employees.