"Covid continues to act as a handbrake on the economy. While the December quarter was marked by ongoing government-mandated restrictions, the March quarter included the peak of the Omicron wave, with worker absenteeism being a substantial issue," said Westpac chief economist Michael Gordon.
"We expect a stronger pickup in the June quarter, and our forecast for growth in 2022 overall remains broadly unchanged."
A flat forecast did mean there was a good chance that GDP could go backwards for the quarter, he said.
"But that wouldn't tell us anything about the prospects of a recession this year. For one thing, the economy is already running well above its sustainable potential, so a brief pullback in GDP would still leave us outside the realm of what could sensibly be called a recession."
ANZ's Mile's Workman also warned of making too much of a first-quarter slowdown.
"There's probably too much Covid noise lingering in these data to comfortably diagnose the trend," he said.
"Downside Omicron risks in Q1 imply equivalent upside bounce risk in Q2, meaning the RBNZ may well look through a forecast miss to some extent."
Some parts of the economy were trucking along okay, he said.
But capacity pressures were acute, limiting growth.
"Industries more reliant on foot traffic, such as transport services, retail, and accommodation and food services, will have once again borne the brunt of it."
The partial GDP indicators had been mixed, he said.
"Retail spending fell 0.5 per cent, building work put in place lifted 3.2 per cent, manufacturing volumes fell 3.5 per cent, wholesale trade (adjusted for price changes) was relatively flat, and hours worked across services industries lifted just 0.1 per cent."
ANZ's expectation for no growth in Q1 was driven by a 0.8 per cent contraction across goods-producing industries and a 0.2 per cent contraction across primary industries, largely offset by a 0.3 per cent lift across services industries (which account for around two-thirds of GDP).
ASB's more optimistic take on the first quarter was offset by a more downbeat outlook for the rest of the year.
"The future is ultimately what matters, so while New Zealand's economic resilience thus far has been impressive, we need to be mindful growth is still set to slow this year," said economist Nat Keall.
Cars queue for Covid-19 testing in February. Photo / Michael Craig
"A fair chunk of the lift this past quarter was probably the continued bounce back from last year's lockdown. For example, there was still a chunk of construction activity in the pipeline to work through, and probably a bit of pent-up demand from households as well.
"We don't expect that momentum to be sustained, given the mounting headwinds on the way."
Those headwinds were multiple, he said.
Widespread capacity constraints continued to heavily impact many sectors, with labour and many raw materials in short supply.
Inflation remained prevalent in part thanks to those same dynamics. Interest rates were set to rise. Construction was slowing as credit conditions tighten and the housing shortage eased.
House prices would retrace from their highs.
"Agricultural production has been poor after a run of poor weather," Keall warned.
"Households will be less likely to open their wallets in light of the above after the spending binge of the past couple of years."
- Full coverage on nzherald.co.nz from 10.45am this Thursday.
