‘Respectable’ quarterly growth tipped

But one expert believes data due out this week will show a slowdown in the country’s economic momentum

Data out this week is expected to show 2017 was a solid year for growth, but post-election uncertainty and other factors are expected to temporarily take the shine off activity in the current year, economists said.

Gross domestic product is forecast to have expanded by 0.8 per cent in the December quarter from a year earlier, according to the median in a Bloomberg poll of 12 economists.

The Reserve Bank projects quarterly growth of 0.7 per cent in the fourth quarter.

ASB expects the data, due out on Thursday, to show GDP growth over the final quarter was led by strong business services, a rebound in housing market activity and strong retail trade volumes. “However, we expect post-election uncertainty will temporarily impact growth over H1 2018, with business and employment intentions remaining weak in February’s business confidence survey,” ASB said in a commentary.

ANZ expects to see “respectable” GDP growth of 0.7 per cent in the quarter. “Primary, goods-producing and services sector activity should all contribute positively to overall growth,” ANZ said.

“Net exports look set to drag on expenditure-based growth, but final domestic demand growth should be strong,” it said.

ANZ said it had turned a little more circumspect on the near-term growth picture last year on an expectation that a softer housing market, capacity pressures, credit headwinds and poli- Michael Gordon, Westpac tical uncertainty, which would act as modest headwinds. “However, the recent flow of data has suggested that if there is to be a growth wobble, it is unlikely to be a large one – that’s encouraging in terms of what it suggests about the economy’s flexibility and resilience,” it said. At the lower end of the forecast scale, Westpac economist Michael Gordon said this week’s data should highlight a slowing in the New Zealand economy’s momentum.

Westpac expects a 0.6 per cent rise in GDP for the December quarter, similar to the subdued pace in the previous quarter. “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,” he said.

Gordon said there were no obvious one-off factors driving the quarterly result. Goods turnover was relatively brisk in the December quarter, with some of the strongest gains seen in the retail, wholesale and transport sectors. However, growth in services was more subdued, he said.

Construction was mixed, with the building work survey showing flat home building, but a rise in nonresidential building. “The construction sector is increasingly facing capacity constraints, and is unlikely to match the rapid growth rates of previous years,” he said.

The poor season for dairying continued into the December quarter, although milk collections didn’t fall short by as much as they did in the September quarter. Collections picked up strongly in October, before an unusual dry spell hammered pasture growth in November.

Balance of payments data due on Wednesday is expected to show a slight widening in the current account deficit. — Additional reporting: BusinessDesk