Shoppers get their bargains during the Boxing Day Sales at a quiet Commercial Bay Shopping Centre in Auckland last summer. Photo / Brett Phibbs
Shoppers get their bargains during the Boxing Day Sales at a quiet Commercial Bay Shopping Centre in Auckland last summer. Photo / Brett Phibbs
Economists expect GDP data due on Thursday to show the economy contracted in the fourth quarter of 2022, and have almost universally described the slump as ”payback” for the big bounce in the third quarter.
ASB is forecasting a 0.5 per cent slump, which it says will have “an elementof payback” to it following the “whopper” 2 per cent lift in the third quarter.
“GDP data is hugely backwards-looking at the best of times, but that’s doubly the case this time around given the impact of Auckland flooding and then Cyclone Gabrielle in January and February,” ASB senior economist Nathaniel Keall said.
“Still, the print should provide a signal on the momentum (or lack thereof) the economy maintained heading into this year’s force majeure shocks.”
Both ANZ and KiwiBank have pencilled in a 0.3 per cent contraction for the quarter.
“It’s largely payback from the surprisingly strong 2 per cent growth in Q3. But even with a weak print, growth over the second half was impressively strong,” said chief economist Jarrod Kerr.
“At 1.2 per cent, that’s well above the pre-Covid quarterly average of 0.7 per cent.”
Key measures of economic activity slowed into year end, KiwiBank said.
“From building work to manufacturing sales and retail trade, the data point to weak activity.”
One upside to growth was the ongoing recovery in tourism, providing support to services industries.
Looking ahead though, the Cyclone clean-up and rebuild posed upside risks to the 2023 growth outlook.
However, the RBNZ’s sheer determination to constrain demand cannot be discounted, Kerr said.
Miles Workman, senior economist at ANZ. Photo/Supplied
“Our working base case still involves a (shallow) recession this year. But the rebuild questions the magnitude of the contraction and the starting point.”
The New Zealand economy was quite seasonal, with summer activity typically benefiting from Christmas spending, more people getting out and about, peak international tourist flows, and the spring/summer uplift in the housing market, said ANZ’s Workman.
“But lockdowns and closed borders have messed with the usual order of things over the past few years, and the data are still recovering from that,” he said.
While much of this seasonal uplift did indeed occur, he said the the big question was how it occurred relative to normal seasonal patterns.
With international visitor arrivals still about 32 per cent below their pre-pandemic level and the housing market still in retreat, it “simply wouldn’t pass the sniff test” to see strong seasonally adjusted economic activity in the quarter, he said..
“That, combined with the fact that seasonally adjusted growth in Q3 likely overstated economic momentum, suggests there is a risk GDP comes in weaker than our forecast.”
But even if it did come in weaker than predicted it would still be a stretch to see it as anything other than “noise”, he said.
Despite the weather disruptions, broadly, the underlying headwinds facing the New Zealand economy haven’t changed all that much, said ASB’s Keall.
“We still expect a marked slowdown in growth over the latter half of 2023.”
The cooling housing market would likely dampen construction activity before long and rising debt servicing costs were likely to continue taking a bite out of household budgets - with softer household consumption the likely result.
Slowing growth among NZ’s major trading partners would also weigh on the export sector, he said.
“We think it will be mid-2024 (or possibly later) for the RBNZ to be confident that pressures on capacity have cooled sufficiently to warrant OCR cuts,” he said.
“A relaxation on the monetary policy brakes by the RBNZ should support the recovery in demand and broader economic activity we see emerging from the second half of 2024.”
