Data on Wednesday and Thursday is expected to provide more
indications of the strength of the New Zealand economy, with
the expectation of economic growth of 3.8% for the year ended
On Wednesday, Statistics NZ will release its current account
data, followed on Thursday by GDP, or gross domestic product,
the measure of economic growth for a country.
Westpac senior economist Michael Gordon says it had been
clear for some time the New Zealand economy started the year
with a great deal of momentum.
The national accounts published this week should provide
final confirmation of the growth.
''We expect a 1.2% increase in GDP for the March quarter, led
by a sharp upward burst in construction.''
Record-high commodity export prices, and a rebound in
volumes, had greatly improved the trade balance over the last
year and Westpac expected the current account deficit to
narrow further to 2.8% of GDP, he said.
Economic growth was measured at 1.2% in December and 0.9%
last September. Barring any downward revisions to recent
history, the New Zealand economy's annual average growth rate
would top 3% for the first time since 2007, before the Global
Financial Crisis hit.
An upturn in building activity in both earthquake-hit
Canterbury and elsewhere had long been a key theme in growth
forecasts, Mr Gordon said.
''This theme came through with a vengeance in the March
quarter, with a record 16% rise in building work - perhaps,
in part, a catch-up after some surprisingly soft results for
construction sector GDP in the previous two quarters.''
Mr Gordon had assumed a more modest increase and estimated
the construction sector accounted for about half of the rise
in the March quarter.
The rest of the gains were expected to be widely dispersed,
as was typically the case in an economic upswing.
Even areas where a decline was expected - such as wholesale
trade, food and beverage manufacturing and mining - largely
reflected a reversal of outsized gains in the December
quarter, rather than any signs of emerging weakness, he said.
The notable exception was real estate and hiring services,
reflecting the slowdown in house sales since the Reserve Bank
introduced limits on low-equity mortgage lending last
The current account deficit was expected to narrow to 2.8% of
GDP for the year to March from 3.4% in December and 4.1% in
By the March quarter of this year, export volumes had fully
recovered from last year's drought and commodity export
prices were at or near record highs, Mr Gordon said.
At the same time, the high New Zealand dollar depressed the
prices of imported goods, keeping the dollar value of imports
flat, even as volumes rose.
''Given the current account balance is reported on an annual
basis . . . we expect the deficit to narrow further to 2.3%
of GDP by the June quarter,'' he said.
At a glance
• Economic growth of 3.8% expected for March
• Construction playing a major role
• Current account deficit to narrow
• Commodity prices at record levels