NZ: Expect a 0.4% rise in the Q3 GDP - Westpac

Michael Gordon, Senior Economist at Westpac, expects a 0.4% rise in the production measure of New Zealand’s GDP, following a 0.8% rise in the June quarter.

Key Quotes

“Just as the June quarter result was boosted by temporary factors, we expect the September quarter to be weighed down by temporary declines in a handful of sectors.”

“Dairying had a poor start to the new season, after a strong finish to the end of last season. We estimate that milk collections were down 10% seasonally adjusted in the September quarter, the biggest one-quarter drop in over four years. Consequently, both agriculture and food processing were a significant drag on GDP for the quarter. Milk production is on track for a modest rise in the December quarter, notwithstanding the emerging risks of drought.”

“Another notable temporary influence on GDP was a decline in accommodation and hospitality, which had been boosted by the Lions rugby tour in the June quarter. The underlying upward trend in tourist arrivals looks to have continued into the December quarter. Electricity generation was down for the quarter, but this is a volatile component and has a low correlation with economic activity.”

“We expect significant positive contributions from the nonfood manufacturing sectors, particularly in machinery and equipment. Construction saw a solid gain in the September quarter, following small declines in the first half of the year when poor weather may have delayed some activity.”

“The services sectors appear to have had a mixed performance over the quarter. We expect to see strong gains in telecommunications, wholesale trade, retailing, healthcare and recreation. However, we expect business services and central government administration to show softer growth compared to what we’ve seen in recent quarters. Transport was held back by a surprising decline in rail, despite the South Island trunk line being partially reopened for the first time since the Kaikoura earthquake.”