NZ GDP: A softer underbelly - ANZ

Miles Workman, senior economist at ANZ, points out that the New Zealand economy expanded 0.6% q/q in Q1, which was in line with market expectations, but stronger than the 0.4% we were expecting.

Key Quotes

“The New Zealand economy grew 0.6% q/q in the first three months of 2019, a touch stronger than the 0.4% we had pencilled in but in line with market expectations. Revisions to history mean annual growth has been running a little stronger than previously thought, but the story of slowing momentum remains intact. That said, annual growth at 2.5% was unchanged from Q4.”

“Today’s print was also stronger than the RBNZ’s May MPS forecast for growth of 0.4% q/q, which at the time was a significant downward revision from their previous estimate. However, despite the slight positive surprise (including the fact annual growth was stable in Q1), the real test for the RBNZ’s outlook won’t occur until the forward-looking indicators for growth in the second half of the year begin to roll in. That’s because the RBNZ are forecasting quite a strong pickup in economic momentum that we think is on the optimistic side.”

“The details of today’s release were not as strong as the headline number suggests. In particular, services industries posted a very weak 0.2% q/q lift, following Q4’s robust 0.9% increase.”

“It’s become increasingly clear that momentum in the services industries has softened, with annual growth of 2.5% in Q1 a decent cooldown versus 3.6% this time last year.”

“The nominal economy grew 1.2%, a little faster than its real counterpart owing to lifting prices, including a lift in the terms of trade.”