New Zealand’s balance of payments and GDP figures released this week are expected to show the economy is slowing.
From here, continued growth is expected to be on trend, not above. A few more down side risks are becoming evident.
ANZ senior economist Liz Kendall said in her preview gross domestic product (GDP) economic growth was expected to expand 0.4% in the three months ending March, down from 0.6% in December.
Annual growth was expected to moderate from 2.9% to 2.6% as growth continued to slow from the 4.5% annual pace experienced in mid-2016.
There was some modest upside to the ANZ’s quarterly pick but only at the margin, she said.
Reinforcing the underlying softness, if GDP was in line with expectations, it would imply a fall in per capita GDP of 0.2% quarter on quarter to be up only 0.6% annually.
Services industries were expected to make the largest contribution to growth in the quarter. Solid growth was expected from public administration and safety, professional, scientific, administration and support, financial and insurance, healthcare and social assistance, and rental, hiring and real estate services.
Primary industries were expected to only partly recover in March, up 0.6% from December, Ms Kendall said.
Milk production had little growth during the quarter and livestock slaughtering was seasonally weak, falling 10%.
Adding to the weakness, sawn timber and log exports were down 4.9%. On the other hand, a solid performance from horticulture should provide a boost.
"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.
"In fact, the underlying pace of growth is already slowing."
Construction and net immigration — the key drivers of recent growth — were expected to have reached their peak and consumption growth was expected to cool in the face of a softer housing market, Ms Kendall said.
Businesses were facing credit and capacity constraints, margin pressure and policy uncertainty. Those pressures were flowing through to activity.
"We don’t expect the cycle to complete roll-over just yet. The economy appears resilient and doesn’t have the degree of imbalances that have often been the catalyst to tip the cycle over in the past."
BNZ senior economist Craig Ebert said although there were risks of GDP growth disappointing in the first half of the year, there was likely to be an increase in inflation regardless.
Second-quarter inflation was expected to increase by 0.6% to give annual inflation of 1.7%.
At a glance
Balance of payments Wednesday
• Current account expected to widen to a $3 billion deficit and be 2.7% of GDPGDP Thursday
• Quarterly change expected of 0.4% to 0.5% to give an annual change of 2.6% to 2.7%. Annual average change forecast at 2.8%.
