2009 finished on a positive note in NZ, with GDP data confirming that the recession is now behind us and current account data revealing a stunning improvement in the annual deficit. As the growth stars continue to align, we look forward to a strong rebound in economic activity through 2010.
Third quarter GDP figures released late last year confirmed that New Zealand crawled its way out of recession through the middle of 2009. Economic activity expanded by 0.2% in both the June and September quarters (the June quarter was revised up from the previously reported 0.1%). Even so, economic and business conditions probably ‘felt’ worse than at anytime during the recession, as we estimate that the level of activity hit its lowest point relative to its trend in the September quarter.
As we head into 2010, our positive outlook for growth remains unchanged. If anything, we have gained more confidence in our view. The healing process in the global environment has continued over the past few months, as reflected in the continued upward revisions to growth for our major trading partners. While the risks and uncertainties remain large, particularly amongst the developed world, the good news for NZ is that China is now the global growth powerhouse, pulling South-East Asia, Australia and the resource economies with it. So after contracting by an estimated 0.8% in calendar 2009, we expect world GDP growth to expand by 3%+ in 2010.
Domestically, the economic indicators are also telling a convincing story of recovery. The very low level of construction activity in the September quarter and the gains in building consents to date (up 45% since January) suggest the construction sector, along with the goods producing sector, will make a strong contribution to economic growth in 2010. Indeed, the impending return to double-digit house price inflation is likely to be an additional shot in the arm developers and builders need to dive back in.
