The strength of the economy will be judged tomorrow and Thursday when Statistics New Zealand releases economic growth and the quarterly balance of payments data.
After a lacklustre end to 2016, economists are forecasting a rebound in economic activity with gross domestic product (GDP) growth of 0.8% for the three months ended March and 2.6% for the year.
ANZ senior economist Philip Borkin said primary goods-producing and services industries were all expected to have contributed to growth in varying degrees during the quarter.
The balance of payments are released tomorrow but most attention will be on economic growth on Thursday.
The seasonally adjusted current account deficit was likely to be largely unchanged. However, the annual deficit was expected to narrow to 2.6% of GDP, he said.
"In what has now become a common occurrence in March quarters, we expect the unadjusted current account to show a surplus of $1.4billion."
That should be enough to narrow the deficit to 2.6% of GDP, the smallest deficit in more than two and a-half years, well below its historical average of 3.7% of GDP, Mr Borkin said.
The Government’s books are well in the black with a recent $2.5billion surplus, although some of that is timing-related corporate tax payments.
If forecasts are correct, Opposition parties will have to pick apart some other areas of the economy to score points with voters. With the prospect of more money arriving in back pockets through tax adjustments next year, immigration, housing and health will be the main thrusts for Labour.
No Opposition party last week commented on the Crown accounts.
Westpac acting chief economist Michael Gordon said the 0.8% rise in GDP would be slightly less than the Reserve Bank forecast of 0.9%. However, it was likely to be at the higher end of market forecasts.
Recent indicators had pointed to strong gains in transport, retail, wholesaling and non-food manufacturing.
On the weaker side, food manufacturing was weighed down by lower meat production as dairy farmers shifted to herd rebuilding. Wood harvesting fell further, despite a sustained period of high prices, and real estate services fell as house sales continued to slow, he said.
The biggest weak spot for the March quarter was in the construction sector. In particular, there was a sharp drop in non-residential building, concentrated in Auckland.
Activity in the segment tended to be lumpy and the pipeline of work remained strong. Residential building was running up against capacity constraints, slowing the pace of growth in recent quarters, Mr Gordon said.
"It’s worth noting the Kaikoura earthquake does not appear to have weighed on growth over the December quarter. If anything, it may have done the opposite. Stats NZ has noted transport activity was up in the South Island due to the need to take alternative routes.
"Civil construction — roading, earthmoving — was boosted over the quarter, suggesting we’re unlikely to see a quake-related rebound in activity in this or coming quarters."
At a glance
• Strong economic growth expected for March year.
• Quarterly growth of 0.8% and annual growth of 2.6% expected.
• Current account deficit to be lowest in more than two and a-half years.
• Kaikoura earthquake effect negligible on economic growth.
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Comments
This is reading like a good news story but given the population growth we're hearing about, isn't GDP per capita a more realistic view of growth? Would it still be considered success if the per capita GDP is in decline?