New Zealand’s gross domestic product (GDP) for the first quarter of this year is expected to rise 0.6 percent, a similar pace to previous quarters, according to the latest report from Westpac Research.
A burst of building activity will account for about half of the growth over the quarter. Agriculture and manufacturing were soft, and service sector growth has continued to slow. The recent growth in building consents had already made it clear that there was a substantial amount of work in the pipeline for the coming year, but the 6.2 percent jump in building activity for the quarter was much stronger than expected.
The recent slowdown in growth has been particularly noticeable in the service industries, a trend that is expected to continue in the March quarter figures. The Quarterly Employment Survey showed a fall in hours worked for most personal and professional services, except for healthcare.
Retail was weighed down by a fall in hospitality spending, reflecting a drop in overseas visitor numbers over the quarter. Rental, hiring and real estate services are expected to be soft on the back of a sharp drop in house sales.
In addition, next week’s national accounts are expected to show only a little change in the direction of the New Zealand economy in the early part of 2019, the report added.
The goods trade deficit for the March quarter is expected to show a marginal improvement, with a strong lift in export volumes helping to offset lower dairy export prices and higher oil import prices.
"Our view remains that GDP growth will gradually pick up over 2019 and peak in 2020, supported by higher government spending, a strong pipeline of construction work, and a lift in labour incomes. Where we are more upbeat than most is our view on housing. We expect the recent sharp fall in mortgage rates and the ruling-out of a capital gains tax to provide fresh stimulus to the housing market, which in turn will boost consumer spending over the coming year," the report added in its comments.
Meanwhile, the CAD is still a long way from the blowout that was seen in the years before the Global Financial Crisis. But it is starting to reach levels that would be associated with a worsening in New Zealand’s net overseas debt position, after a decade-long trend of improvement.