That two-quarter recession was the weakest economic performance New Zealand had seen since 1991 — outside Covid disruption.
The data should “confirm a gradual recovery in the economy is under way,” he said.
Economists are picking a range between 0.3% and 0.5% for the quarter-on-quarter growth figure.
At the lower end at 0.3% — and in line with the Reserve Bank’s [RBNZ] forecast — ASB chief economist Nick Tuffley said the details would likely show uneven fortunes by sector.
There would be strength in the primary and exports, while goods-producing industries and investment activity continued to contract, he said.
“Our expectations for [fourth quarter] growth are weaker than a typical cyclical rebound, and we believe that base momentum remains subpar over much of 2025.
“Demand and supply side impediments and the whiplash-inducing global scene are expected to materially constrain the unfolding rebound.”
Tuffley still expected to see just two more 25-basis-point cuts to the Official Cash Rate (in April and May) but acknowledged “the risk of the OCR ending the year below 3.25%”.
“There are few new growth drivers apparent and the RBNZ may need to eventually switch to the gas pedal from the policy brake to prolong the economic expansion.”
Westpac chief economist Michael Gordon is picking a lift of 0.5% but could hardly be accused of striking an optimistic tone.
“We expect a 0.5% rise in GDP for the December 2024 quarter, following sharp declines in the two previous quarters.
“However, this is entirely due to issues that we have identified with the seasonal adjustment of the data. Our sector-by-sector forecasts suggest effectively zero growth in activity over the quarter.”
Next week’s figures would need to be read with caution, and further revisions to recent history could come into play, he said.
“The potential for GDP to be thrown around by technical issues highlights the importance of focusing on a broad range of activity indicators, especially if we’re looking for signs that the economy has reached a turning point.”
KiwiBank economists were more upbeat, but forecast just 0.3% growth.
“Greenshoots are emerging with an uplift across retailing, accommodation, and transport, they wrote.
“The outlook is improving, with more rate relief on the way. We expect momentum to build as we approach a more neutral rate environment.”
But overall, the scorecard was still mixed, with industries such as construction, mining, and business services still doing it tough, they said.
Growing global downside risks could also pose a headwind for the Kiwi economy’s recovery.
The fourth quarter results would likely be “a mixed bag by component”, ASB’s Tuffley said.
“Still-strong dairy production and improved slaughter statistics should support primary sector growth, albeit tempered by softer forestry and logging.”
Meanwhile, the goods-producing sector likely contracted, with growth in manufacturing offset by material weakness in construction.
“Sizeable declines in [fourth quarter] building activity support another contraction in construction, as it retraces from stimulus-driven highs in 2021/22,” he said.
Strength in dairy and meat manufacturing would only partially offset that.
The services likely expanded, but the sectoral differences would be stark.
“Recovering retail spending over the December 2024 quarter broadly reflected some interest rate passthrough to activity and an uptick in inbound tourism spending.”
This would flow through to growth in services such as retail trade, accommodation, and arts and recreation.
But wholesale trade activity likely contracted, Tuffley said.
ANZ’s Russell also picks lumpy results with different sectors at very different stages of recovery.
“Given differences in the sensitivity of industries to interest rates, the recovery won’t be synchronous.
“Of the 16 industry groups that we forecast, we’ve pencilled in contractions for six.”
“While the economy may have returned to growth, it’s very early days into the recovery, and underlying momentum in the GDP data is likely to remain soggy.”
All up, there was plenty of scope for a surprise in either direction, he said.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up for his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here.
