Westpac economists are picking the economy flat-lined in the last quarter of 2018 — a gloomier forecast than others are making for Thursday's GDP data release.

Market expectations — and Treasury's pick — for fourth quarter GDP is 0.6 per cent. That would be a bounce back from 0.3 per cent in the September quarter.

But Westpac economists believe growth flat-lined in the last three months of the year.

"We expect a 0.3 per cent increase in the production measure of GDP, following a 0.3 per cent increase in the September quarter," Westpac senior economist Michael Gordon wrote.


"This would see growth for the 2018 calendar year drop to 2.7 per cent, compared to 3.1 per cent in 2017 and a peak of 3.9 per cent in 2016."

While the slowdown in growth was genuine, for the December quarter this was likely exacerbated by some temporary factors, Gordon said.

These included disruptions in the energy sector — electricity generation was affected by both low hydro lake levels and reduced gas supplies, which led to a temporary surge in wholesale electricity prices.

"This in turn may have prompted some manufacturers to scale back," Gordon said.

"Altogether, we think that these disruptions will knock between 0.1 per cent and 0.2 per cent off growth for the December quarter.

"We also expect declines in other primary industries, but this is more a matter of coming off a very strong base."

Gordon said there was also softness in business and personal services. On the positive side, there was a lift in retail spending, he said.

BNZ economists are picking 0.5 per cent growth — down from an earlier estimate of 0.7 per cent. The Reserve Bank had forecast 0.8 per cent in February. ANZ has stuck with 0.6 per cent.


Meanwhile, figures out last week showed New Zealand's manufacturing activity expanded in February, although a build-up in inventories may indicate slower production in the future, Bank of New Zealand economist Craig Ebert says.

The BNZ-Business NZ performance of manufacturing index increased 0.7 of a point to a seasonally-adjusted 53.7 in February, up from a 53.5 reading in the same month a year earlier. The production sub-index climbed 2.6 points to 53.9 and new orders were up 2.5 points at 54.7. Both of those readings were in line with February 2018.

BNZ's Ebert said the increased production supported the view that manufacturing activity is still expanding, but other data sets suggest producers were leaning on their inventories to meet demand rather than making more goods.

"Inventory dynamics will thus bear monitoring, lest they continue to warn about slower production down the track," Ebert said in a note. "The net effect still indicates a cloud around the strength of demand, relative to recent production trends."

- Additional reporting: BusinessDesk