New Zealand Economic Forecast

New Zealand Economic Outlook

January 22, 2019

The latest national accounts data revealed that economic activity expanded at the slowest pace in nearly five years on a quarter-on-quarter basis in Q3 2018, dragged by weaker domestic demand and a downbeat external sector. Deteriorating fixed investment and government spending dampened growth as the Kaikoura earthquake repairs came to a conclusion, with construction activity consequently contracting in the third quarter. Furthermore, industrial production grew meagerly from the previous quarter, on a deterioration in manufacturing output. On a brighter note, private consumption supported growth in the third quarter, underpinned by low unemployment and faster wage growth. On the external front, exports decelerated from Q2’s peak, weighed on by slower-than-anticipated growth in China; falling imports, however, partly offset the slowdown. Year-end data, meanwhile, points towards a better fourth quarter, owing to a revival in business sentiment and increased tourist arrivals.

New Zealand Economic Growth

Looking ahead, growth is expected to maintain its momentum this year, on the back of healthy household spending as consumers benefit from subdued price pressures and tight labor market conditions. Low interest rates and a trailing fiscal surplus are also seen supporting economic activity in the short-term. Meanwhile, exports growth will be supported by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into effect on 30 December and slashed tariffs for agricultural products in major markets. 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 30
Exchange Rate0.69-1.69 %Jan 30
Stock Market3,9580.11 %Jan 30

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