18 Jun 2014
NZ GDP: What to expect? - BNZ
FXStreet (Bali) - BNZ Strategists share their view on today's NZ GDP release, in which growth of 1.1% in Q1 (3.7 y/y) is expected.
Key Quotes
New Zealand’s March quarter GDP report is in the pipe for this Thursday. A substantial increase would make a lot of sense, amid the strong employment and net immigration gains we know about for the quarter. However, our formal expectation has been restrained to growth of “only” 1.1% (3.7% y/y), given the range of hard information that has come to hand. Recent optimism is converting itself into real activity and spending but no more than we expected. Construction activity is likely to feature large (about time) in these latest GDP accounts, complemented by decent expansion in the services sector, still. Overall, it’s likely to look like a solid performance by the NZ economy.
Last week’s RBNZ Monetary Policy Statement (MPS) also figured on a 1.1% increase in Q1 GDP, for 3.7% on an annual basis. This, by the way, generated for the Bank a measure of excess aggregate demand in the order of 1.3% of GDP. This in the context of the 2.75% potential GDP growth rate (“speed limit”) our central bankers talked about in their MPS testimony to Parliament’s Finance and Expenditure Committee last Thursday afternoon. So, to the extent that GDP growth is running above 2.75%, inflation pressure will be increasing, according to the RBNZ.
Of course, most of New Zealand’s business and household economic surveys have, for a wee while now, been pointing to GDP expansion far in excess of 2.75%, more like 5, 6 even 7% at annual rate. The RBNZ will thus feel relieved, rather than concerned at all, that some of the most recent economic surveys have curbed their enthusiasm.
Key Quotes
New Zealand’s March quarter GDP report is in the pipe for this Thursday. A substantial increase would make a lot of sense, amid the strong employment and net immigration gains we know about for the quarter. However, our formal expectation has been restrained to growth of “only” 1.1% (3.7% y/y), given the range of hard information that has come to hand. Recent optimism is converting itself into real activity and spending but no more than we expected. Construction activity is likely to feature large (about time) in these latest GDP accounts, complemented by decent expansion in the services sector, still. Overall, it’s likely to look like a solid performance by the NZ economy.
Last week’s RBNZ Monetary Policy Statement (MPS) also figured on a 1.1% increase in Q1 GDP, for 3.7% on an annual basis. This, by the way, generated for the Bank a measure of excess aggregate demand in the order of 1.3% of GDP. This in the context of the 2.75% potential GDP growth rate (“speed limit”) our central bankers talked about in their MPS testimony to Parliament’s Finance and Expenditure Committee last Thursday afternoon. So, to the extent that GDP growth is running above 2.75%, inflation pressure will be increasing, according to the RBNZ.
Of course, most of New Zealand’s business and household economic surveys have, for a wee while now, been pointing to GDP expansion far in excess of 2.75%, more like 5, 6 even 7% at annual rate. The RBNZ will thus feel relieved, rather than concerned at all, that some of the most recent economic surveys have curbed their enthusiasm.