NZ: Modest rebound as Q2 GDP rose 0.8% - Westpac

New Zealand’s GDP growth rebounded modestly in the June quarter, after two quarters of relatively subdued growth, notes Michael Gordon, Senior Economist at Westpac.

Key Quotes

“The 0.8% rise for the quarter was in line with our forecast and the median market pick, but slightly below the 0.9% rise that the Treasury and the Reserve Bank forecast.”

“We think that the June quarter will prove to be the high point for growth during this year, as it benefited from both a one-off boost from tourist spending and a rebound from temporary disruptions in some sectors. In that light, a 0.8% quarterly increase is not that impressive. And growth remains very subdued once we take out population growth: per-capita GDP was up 0.3% for the quarter, and just 0.6% over the last year.”

“In some respects, the slowdown in growth reflects the fact that the economy’s upturn is now well advanced – into its seventh straight year. Still, there are some signs that the economy is underperforming its potential – the ultimate measure being the lack of any meaningful pickup in underlying inflation or wage growth.”

“We recently revised our GDP growth forecasts for the rest of this year, partly due to signs that the construction sector is struggling to make further progress. More importantly, we think that growth over the next couple of years will fall significantly short of the Reserve Bank’s forecasts. That supports our view that interest rates will need to remain low for a long time.”