NZ GDP Preview: Forecasts from three major banks, at risk of contraction

Stats NZ is set to release Gross Domestic Product (GDP) figures for the first quarter on Wednesday at 22:45 GMT and as we get closer to the release time, here are forecasts from economists and researchers at three major banks regarding the upcoming growth data. 

New Zealand’s economy is seen expanding by 0.6% in the three months to March, on a quarterly basis, after rebounding by 3% in the final quarter of 2021. Meanwhile, the country’s GDP rate is at 3.3% YoY.

Westpac

“We estimate that GDP was flat in the March quarter. This is a downgrade from our earlier forecast of a 0.6% rise, due to some softness in the final batch of sectoral data releases. Covid continues to act as a handbrake on the economy. While the December quarter was marked by ongoing Government-mandated restrictions, the March quarter included the peak of the Omicron wave, with worker absenteeism being a substantial issue. We expect a stronger pickup in the June quarter, and our forecast for growth in 2022 overall remains broadly unchanged.”

ANZ

“We’ve pencilled in a flat quarter (0% QoQ) for economic activity. That’s a decent downgrade from our previously published forecast of 0.6% and much weaker than the RBNZ’s May MPS forecast of 0.7% QoQ.”

Standard Chartered

“We expect Q1 GDP to have contracted 0.2% QoQ (1.6% YoY), versus 3% q/q growth recorded in Q4, as the Omicron wave likely weighed on the economy. Retail sales ex-inflation contracted 0.5% QoQ, milk and chicken production contracted YoY, and the manufacturing PMI contracted YoY in Q1 as well. Meanwhile, the construction sector was a bright spot for the economy, with building works put in place expanding in Q1. The central bank’s forecast is for a q/q expansion of 0.7%. Given that Q1 GDP is backward-looking and weakness can be attributed to the Omicron wave, we think it may not do much in dampening the central bank’s hawkish tone for now. However, we maintain our view that it is difficult for the central bank to hike policy rates significantly above neutral given weaker sentiment indicators.”