Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Preview NZ Q1 GDP estimated at +1.0% qo

Data Flash (New Zealand) - Preview NZ Q1 GDP estimated at +1.0% qo

QKey Points

Release date: Monday 26 June, 10.45am (NZT)

Deutsche Bank forecasts: Production GDP: +1.0% qoq;+5.6% yoy Expenditure GDP: +1.0% qoq;+5.7% yoy

Forecast risk: Balanced

RBNZ forecast: Production GDP: +0.6% qoq;+5.1% yoy

Market expectations (Average so far): Production GDP:+0.7% qoq. Range: +0.4%/+1.1% qo

Q Comment

On the basis of indicators now available we have revised our estimate of Q1 GDP growth to +1.0% qoq (on both a production and expenditure basis).

On a production basis, we expect a modest contribution from the primary goods sector as a result of continued further growth in dairy production. Goods industries make a strong contribution, largely due to an estimated +11% qoq growth in value added in the construction sector. Value added in the manufactured sector is estimated to have grown a more modest +0.5% qoq. The service sector is expected to make its 12th consecutive positive contribution to overall growth reflecting continued strong growth in the communications sector in particular.

On an expenditure basis, investment (driven by construction) and exports make strong positive contributions to growth. Following the Y2K related build in Q4, stocks make a negative contribution to growth. The fall in public consumption in Q1 (matched by lower imports and thus a positive import contribution to growth) reflects the purchase of a naval frigate in Q4.

Our estimate is somewhat stronger than the RBNZ's May MPS forecast of +0.6% qoq, implying a slightly larger positive output gap in Q1. However, given the apparent slowing in domestic demand, we expect growth in Q2 and Q3 - at 0.2% and 0.6% respectively - to fall well short of the RBNZ's forecast of 1.1% per quarter. Therefore the output gap is likely to exert lower pressure on inflation over 2001 than the Bank thought likely when compiling its May forecasts.

However, as in Q4, last week's trade indexes revealed that the RBNZ has seriously underestimated growth in import prices in Q1. The level of import prices stands some 5% higher than expected by the Bank in May, with price rises seen in a wide range of intermediate and capital goods (not just oil). As a result, the lower output gap over 2001 is necessary to avoid the need for a further tightening in monetary conditions beyond that already signalled in May (the Bank projects 90 day rates to rise to around 7.5% by mid next year).

Production GDP: Contributions to Expenditure GDP: Contributions to %qoq %qoq Primary Industries 0.1 Private Consumption 0.3 Goods Industries 0.5 Public Consumption -2.1 Services Industries 0.4 Investment 1.1 Government 0.0 Stocks -1.7 Dwellings 0.0 GNE -2.5 Unallocated 0.0 Imports 2.6 Exports 0.9 GDP 1.0 GDP 1.0 Source: DB Global Markets Research

Darren Gibbs, Senior Economist, New Zealand, (64) 9 351-1376

© Scoop Media

Business Headlines | Sci-Tech Headlines


Voluntary Administration: Renaissance Brewing Up For Sale

Renaissance Brewing, the first local company to raise capital through equity crowdfunding, is up for sale after cash flow woes and product management issues led to the appointment of voluntary administrators. More>>


Approval: Northern Corridor Decision Released

The approval gives the green light to construction of the last link of Auckland’s Western Ring Route, providing an alternative route from South Auckland to the North Shore. More>>


Media Mega Merger: Full Steam Ahead For Appeal

New Zealand's two largest news publishers have confirmed they are committed to pursuing their appeal against the Commerce Commission's rejection of the proposal to merge their operations. More>>

Crown Accounts: $4.1 Billion Surplus

The New Zealand Government has achieved its third fiscal surplus in a row with the Crown accounts for the year ended 30 June 2017 showing an OBEGAL surplus of $4.1 billion, $2.2 billion stronger than last year, Finance Minister Steven Joyce says. More>>


Mycoplasma Bovis: One New Property Tests Positive

The newly identified property... was already under a Restricted Place notice under the Biosecurity Act. More>>

Accounting Scandal: Suspension Of Fuji Xerox From All-Of-Government Contract

General Manager of New Zealand Government Procurement John Ivil says, “FXNZ has been formally suspended from the Print Technology and Associated Services (PTAS) contract and terminated from the Office Supplies contract.” More>>