A logging truck and trailer on the Desert Road in the Central North Island. Photo / File
A logging truck and trailer on the Desert Road in the Central North Island. Photo / File
Fresh GDP data due on Thursday is expected to show the economy was still growing through the year to September 30
ANZ is forecasting a 1.1 per cent expansion. That would take the annual growth rate to a solid 5.7 per cent year on year (2.5 per cent average growth).
But senior economist Miles Workman warns that the data will offer few clues as to the strength of next year’s expected downturn.
“The bar is extremely high (stratospheric) for these data to have material implications for monetary policy,” he said.
“The data are noisy, ancient history, and won’t provide much forward signal given the RBNZ’s recent hawkishness.”
Kiwibank, ASB and Westpac economists agree, although they have all pencilled a slightly lower forecast at 0.9 per cent growth for the quarter.
“In short, it’s good to take the numbers with a grain of salt and to focus on the broader outlook and not just quarter-to-quarter swings,” said ASB senior economist Nathaniel Keall.
“Concrete production was a better indicator last quarter and there is little doubt that the cooler housing market and higher interest rates are starting to bite, but it may be there is enough in the near-term building-work pipeline to have kept growth in positive territory,” Keall said.
Keall expects a “decent uptick” in manufacturing but a relatively poor performance from the primary sector.
“Agricultural output has tumbled over the past twelve months and looks to have remained soggy over [the quarter],” he said.
“Farmers continue to battle high input costs, labour shortages, regulatory uncertainty and a mixed bag of weather conditions.”
The service sector is likely to have remained resilient with consumers still confident and active through the quarter even as inflation pressures continued to mount.
Whatever the final number, growth was set to slow from here, Keall said.
“The New Zealand economy has proven remarkably resilient through the challenges of the last two and a half years, but a period of slower growth now beckons.”
Kiwibank’s Mary Jo Vergara sees construction activity and manufacturing bouncing back to give the goods-producing industry the strongest quarterly growth.
“When comparing to last year’s output, the services industry looks to be the top performer, helped by the continued recovery in tourism,” she said. “The return of tourists should see the Kiwi economy close out 2022 on a positive note. But fundamentally, economic momentum is slowing.”
As far as monetary policy was concerned, the GDP data was hardly front and centre right now, said ANZ’s Workman.
Miles Workman senior economist ANZ.
Photo / Supplied
“That’s partly owing to the fact that [the third quarter] is both noisy and ancient history, and partly owing to the fact that inflation and indicators of capacity stretch (particularly in the labour market) are the dominant drivers of policy decisions currently,” he said.
“And with the RBNZ forecasting a recession from the second half of 2023, it’s not as if a softening in economic momentum over coming quarters is going to suggest it’s time to change tack.”
Conversely, stronger-than-expected growth wouldn’t necessarily suggest the RBNZ needed to hike by more either, he said, as long as that growth was driven by supply-side factors.
The strong annual growth rate would reflect a big rebound from the lockdown last year, he said.
In the third quarter of last year, lockdown impacts saw the economy contract by 3.9 per cent (quarter on quarter).
That meant annual growth figures were going to be bolstered d by some sizeable base effects, he said
Therefore, solid annual growth should not be interpreted as strong economic momentum.
“All in all, the GDP figures are still a while away from becoming settled, and a fair way from becoming a reliable momentum indicator. Looking forward, our revised OCR call and softer housing outlook are expected to drive weaker than-otherwise activity over 2023 and 2024,” Workman said.
“We’ll be revising our GDP forecast to reflect this when we incorporate the Q3 data late next week.
GDP data will be published by StatsNZ at 10.45am on Thursday.
