New Zealand second quarter data is set release next week. According to a Westpac research report, the economy is likely to have grown 0.6 percent. This would see annual average growth decelerate further to 2.5 percent, compared to a peak of about 4 percent growth in 2016. While growth is expected to be no faster than it was in the previous quarter, the breakdown of forecast is slightly more encouraging. Especially, the services sectors appear to be in better shape, with growth likely to have come in at 0.8 percent following a soft 0.2 percent rise in the prior quarter.
Services make up around 70 percent of the GDP. Business and personal services are likely to have contributed the most to the second quarter GDP growth. Strong gains are expected in financial services, wholesale trade, transport, and government services. However, not all services sectors performed so well, with retail spending growth just 0.2 percent.
“We put at least some of this down to the cooling housing market, which has weighed on households’ wealth and hence their willingness to spend. We expect a boost for the agricultural sector, led by a 4 percent rise in dairy production. While the June quarter is normally a lull in the dairying season, milk collections were up in seasonally adjusted terms compared to the March quarter”, stated Westpac.
The sectors with the biggest expected falls in the June quarter are all coming off sharp gains in the earlier quarter. Food manufacturing is likely to have fallen 2.6 percent, owing to volatility in fruit, beverage, and meat processing.
“We expect GDP growth to remain subdued in the second half of this year. While there is already substantial monetary and fiscal stimulus in place, we think it will take some time for this to have an impact on households’ willingness to spend”, added Westpac.