New Zealand Economic Forecast

New Zealand Economic Outlook

December 13, 2018

Available data indicates the economy went through a softer patch in Q3 compared to Q2, which saw GDP expand at the strongest quarterly pace in two years on the back of higher public and private expenditure. Growth of retail sales was essentially flat in Q3 as higher fuel prices weighed on household budgets, hinting that consumer spending lost stride in the quarter. Furthermore, although overall construction volume reached a new high in Q3, the pace at which it rose moderated from Q2 due to stagnant building activity in the non-residential sector, likely dragging on overall investment gains. Meanwhile, electronic card spending declined on a monthly basis, on average, in October–November which, coupled with lower consumer confidence in the same two-month period, are early signs that relatively soft dynamics persist in Q4. This is further supported by weak external sector metrics, in which the third largest ever monthly goods trade deficit was recorded in October, exceeded only by the previous two months.

New Zealand Economic Growth

Economic growth is expected to remain strong next year, largely driven by robust private expenditure as household incomes benefit from a tight labor market, gradually increasing wages and rising housing prices. Low interest rates and ample fiscal space for increased stimulus are also set to support near-term growth prospects. Slower-than-anticipated growth in China, New Zealand’s most important trading partner, is a key downside risk to the outlook as it could hurt export activity. Met the why particular panelists expect the economy to expand 2.7% in 2019, which is unchanged from last month’s forecast, and 2.5% in 2020.

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New Zealand Facts

Bond Yield2.351.20 %Jan 21
Exchange Rate0.67-1.69 %Jan 21
Stock Market4,0570.11 %Jan 21

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