NZ: Soft GDP growth of 0.4% expected in Q1 - ANZ

Analysts at ANZ expect that New Zealand’s GDP will expand 0.4% q/q, a softer print than recent performance, while annual growth is expected to moderate from 2.9% to 2.6% y/y (below where ANZ see trend), as growth momentum continues to slow from the 4½% annual pace experienced in mid-2016.

Key Quotes

Services industries are expected to make the largest contribution to growth in the quarter (increasing 0.6% q/q). Services strength is expected to be broad based, with an easing in wholesale trade (-0.4%) the only exception.”

We expect primary industries to only partially recover (+0.6% q/q), after falling 2.4% in Q4.”

Net exports are expected to drag on the expenditure-based measure of GDP, and we wouldn’t be surprised to see it undershoot its production-based equivalent. Exports are expected to decline 1.6%, while imports are expected to increase 1.7%.”

The economy is clearly facing headwinds. Quarterly GDP growth has averaged 0.9% since 2014, but we expect it will be difficult to achieve such strong rates of growth from here.”

That said, we don’t expect the cycle to completely roll-over just yet. Despite headwinds, the economy appears resilient and doesn’t have the degree of imbalances (especially external imbalances) that have often been the catalyst to tip the cycle over in the past.”

With regards to the Balance of Payments, we expect the seasonally adjusted current account deficit will widen. We have a $3.0bn seasonally adjusted deficit pencilled in, which is around $1.0bn larger than in Q4. However, the annual deficit isn’t expected to widen nearly as much due to base effects. With nominal GDP expected to lift, the annual deficit is expected to remain stable at 2.7% of GDP.”

“Our expectation for a widening seasonally adjusted current account deficit reflects a widening of the goods deficit.”

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