NZ: Q1 GDP may be better than expected – Standard Chartered

Jonathan Koh, economist at Standard Chartered, expects the New Zealand economy to have expanded 0.8% q/q (2.6% y/y) in Q1, a faster pace of growth than Q4’s 0.6% q/q (2.3% y/y).

Key Quotes

“Our forecast is also higher than the Reserve Bank of New Zealand’s (RBNZ’s) Q1 GDP growth forecast of 0.4% q/q (2.2% y/y). We raise our Q1 forecast from 2.4% y/y on better-than-expected building activity.”

“The construction sector likely provided a boost to Q1 growth, with building works rising 6.2% q/q (the fastest q/q pace in three years) and 11.5% y/y (the fastest y/y pace in nine quarters), supported by increased activity in both the residential and non-residential spaces. The manufacturing sector may have supported growth, with the volume of manufacturing activity expanding 1.9% y/y, the fastest pace in four quarters.”

“Stronger-than-expected Q1 GDP growth should support our base case for RBNZ to remain on hold for the rest of the year after it cut the official cash rate by 25bps to 1.50% in May.”

“Markets are pricing in a further 35bps of cuts (as of 11 June) by end-2019. Better-than-expected data should see markets pare back their rate-cut expectations.”