New Zealand economy grows less than forecast

by NZ Adviser17 Mar 2017
(Bloomberg) -- New Zealand’s economy grew less than economists forecast last quarter and at the slowest pace since mid-2015, adding to signs that this year’s expansion may not be as robust as the central bank expected. The currency fell.

Key Points
Gross domestic product gained 0.4% from the previous quarter, when it rose a downward revised 0.8%; economists forecast a 0.7% gain The economy expanded 2.7% from a year earlier, lower than the 3.2% estimate The kiwi dollar fell about a quarter of a U.S. cent, buying 70.17 cents as of 12:15 p.m. in Wellington

Big Picture
Annual growth slowed further despite surging immigration, record-low borrowing costs and a housing boom, casting doubt on the central bank’s Feb. 9 projection that growth would accelerate to more than 4 percent by mid-2017. Reserve Bank Governor Graeme Wheeler this month said that interest rates may remain on hold at 1.75 percent for two years if the economy were to develop in line with his forecasts, adding that the risks around the outlook are evenly balanced.

Economist Takeaways
“Some temporary weather-related influences had a clear impact so we need to be cautious about extrapolating trends,” said Philip Borkin, senior economist at ANZ Bank New Zealand. “The underlying pace of growth is better than these figures suggest.” “Today’s data suggests that the New Zealand economy is growing at or below trend, rather than convincingly above trend as had been the case in 2016,” said Zoe Wallis, economist at Kiwibank in Wellington. “The RBNZ had also forecast that growth would reach 4 percent by the middle of 2017, and based on today’s figures this now looks highly unlikely.”

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