Uncertainty in UK clouds outlook
Figures due out from Statistics NZ this week should show whether the economy has got through a soft patch that saw slower growth at the end of last year.
But Britain’s election result could add extra uncertainty for exporters and investors.
First-quarter GDP numbers are due out on Thursday, and most analysts expect a rebound.
ANZ Research senior economist Phil Borkin forecast 0.8 per cent growth for the quarter, which would take annual growth in the economy to 2.8 per cent – thanks largely to population growth. GDP growth per capita would be a much less impressive 0.6 per cent.
‘‘Overall the figures are likely to provide a reasonably healthy snapshot of the cyclical and structural state of the economy,’’ Borkin said.
But ASB Bank is forecasting only 0.5 per cent growth for the quarter, following a ‘‘paltry’’ 0.4 per cent rise in the December figure, which it said was meant to be a blip.
‘‘The New Zealand economy is supposed to be humming along on the back of strong population growth, improving export incomes and low interest rates,’’ senior economist Jane Turner said.
‘‘Sub-trend growth could be an early warning sign that the economy is not firing on all cylinders.’’
If ASB was right, and growth in the six months to March 31 was below 1 per cent, that would not fit with robust business confidence surveys, she said.
Westpac agreed with ANZ that GDP growth in the latest quarter was likely to be a much healthier 0.8 per cent, though it acknowledged that was at the ‘‘higher end of market forecasts’’.
The banks released their forecasts as another rise in the New Zealand dollar threatened to put a dampener on exporters.
The kiwi gained almost a US cent and more than a pence against the British pound last week, with sterling reeling from the surprise outcome of the British election.
Rick Spooner, chief economist at CMC Markets in Sydney, forecast that minority government was unlikely to have a significant impact beyond the UK, with the impact on Brexit negotiations unclear.
But shares in Xero – which earns almost $50 million of its total $295m annual revenues in Britain – slipped 3.4 per cent to $24.88 on Friday.
That checked a strong upward drive that had seen the stock climb from less than $18 at the start of the year.
Chief executive Rod Drury said the exchange rate had been ‘‘up and down’’ over the past year and he didn’t believe Xero’s market in Britain was threatened by political uncertainty.
‘‘We are watching what is going on over there with interest [but] what we find is in times of uncertainty small businesses grow as large businesses tend to stop spending money and more people look to self-employment,’’ Drury said.
Balance of payments figures are also due out this week, on Wednesday. ANZ forecast the unadjusted number would be a current account surplus of $1.4b, with the annual deficit dropping to a two-and-a-half year low of 2.6 per cent of GDP.
Westpac expected the latter figure to come in at 3 per cent, noting exports had been held back by a drop in milk production.
Despite their different growth forecasts, neither ASB nor ANZ are forecasting significant upward pressure on interest rates from this week’s data.