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New Zealand GDP seen picking up the pace in fourth quarter on buoyant retail, investment

Reuters logo Reuters 5 days ago By Charlotte Greenfield

Containers sit stacked at a port terminal with residential houses behind in Wellington, New Zealand © REUTERS/David Gray Containers sit stacked at a port terminal with residential houses behind in Wellington, New Zealand New Zealand's economy was expected to show brisk growth last quarter in data due out on Thursday, thanks to buoyant retail spending and business investment.

Eleven economists polled by Reuter's forecast quarterly growth of 0.7 percent on average, in line with central bank predictions.

That would lead to the growth of 3.1 percent for 2017, accelerating from an annual expansion of 2.7 percent in the previous quarter.

A turbulent election period in the third quarter, in which a new centre-left Labour government was elected, was followed by a quiet period with consumers and businesses holding off on big purchases as they waited for a more certain outlook.

But that changed once the Labour-led coalition took the helm in October with business investment holding up, despite some negative sentiment towards the new administration, and a burst of retail spending in the final three months of the year.

"The economy, more generally, appears to have got through the news of the new government," BNZ Bank economists said in a research note.

Strong GDP growth would be welcomed by the Reserve Bank of New Zealand, but it is unlikely to alter its course given its determined focus on seeing previously-tepid inflation settle around the middle of a 1 to 3 percent target band.

The bank slashed rates to a record low 1.75 percent at the end of 2016 and signalled it would hold them there, possibly for years, until it was confident inflation had recovered after spending years below the target band.

Economists saw some weak spots starting to appear in the economy as skills shortages held businesses back and immigration slowed in the wake of tightened conditions for skilled migrant visas.

In particular, the booming construction sector, which has in recent years been a key driver of New Zealand's growth, was hitting severe bottlenecks from rising costs and labour shortages.

Construction was still expected to grow at a reasonable 1.2 percent, but that was a far cry from the 3.6 percent jump in the previous quarter.

"Heading into 2018, capacity constraints are expected to once again limit growth in this sector," said Jeremy Couchman, Kiwibank senior economist.

Statistics New Zealand was also set to release fourth quarter balance of payment figures on Wednesday with economists expecting the current account deficit to widen slightly to NZ$7.32 billion from NZ$7.1 billion in the previous quarter. 

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