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Home / Business / Economy

BNZ lifts 2016 growth forecast after robust data

BusinessDesk
25 Jan, 2016 11:00 PM2 mins to read

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BNZ economists today revised up their 2016 forecast for gross domestic product growth to 2.4 percent from a previous projection of 1.9 percent.

BNZ economists today revised up their 2016 forecast for gross domestic product growth to 2.4 percent from a previous projection of 1.9 percent.

Bank of New Zealand raised its estimate for New Zealand economic growth this year after robust services and manufacturing data.

The BNZ-BusinessNZ performance of services index remained robust in December even as it slowed from a month earlier, slipping 0.9 points to a seasonally adjusted 58.9 last month, according to data released today.

That's the third-highest result in 2015, and more than the average 57.8 through the year. All five sub-indices fell in December, but remained above the 50 reading that separates contraction from expansion.

READ MORE:
• TPP national assessment analysis released
• Economy still growing: GDP up 0.4 per cent

The PSI comes after its sister survey, the performance of manufacturing index, hit a 14-month high in December, with an uptick in new orders pointing to further improvements ahead. The performance of composite index, which combines the two measures, fell 0.3 of a point to 58.5 on the GDP-weighted basic, and rose 0.7 of a point to 58.0 on a free-weighted basis. The last time both measures recorded values over 58.0 was November 2007.

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BNZ economists today revised up their 2016 forecast for gross domestic product growth to 2.4 percent from a previous projection of 1.9 percent, on expectations for a bigger cycle in net immigration and the sharp rebound in the domestic growth indicators over recent months.

"December's PSI wasn't far off the eight-year high it posted in November of 59.8," BNZ senior economist Craig Ebert said in his report. "When we look at the overall PSI, over a longer stretch, it becomes clear that it's been picking up the pace for a good number of years now.

"Today's PSI, combined with the 14-month high we saw in last week's PMI, is suggestive of GDP (economic) growth in the range of 3-4 percent on an annual basis," Ebert said.

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The services sector accounts for about two-thirds of the economy.

Across the PSI's sub-indices, activity decreased most in supplier deliveries, down 2.2 points to 55.4. Employment fell 1.5 points to 53.6 and stocks/inventories dropped 1.6 points to 55.3. Activity/sales recorded a reading of 62.1, down 0.3 of a point, and new orders/business was down 0.1 of a point to 64.3, still firmly in expansion mode.

BNZ's Ebert said the lead from new orders/business suggests current production strength can be sustained in early 2016, despite "solid rather than spectacular" numbers for job expansion.

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