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

 


Q3 2001 GDP Data Preview

Data Flash (New Zealand)

GDP growth of 0.1% qoq estimated in Q3 2001

Release date: Friday, 21 December, 10.45am (NZT) Deutsche Bank forecasts: 0.1% qoq / +2.6% yoy / 2.2% ann. av., balanced risk RBNZ November forecast: 0.6% qoq / +3.2% yoy

Key Points

This week saw the release of the final major partial indicators of Q3 GDP. Yesterday's manufacturing survey was particularly weak. This has led us to revise down our preliminary growth estimate to just 0.1% qoq, compared to 0.5% qoq previously.

The mid-winter electricity crisis is estimated to have subtracted 0.4pps, if not more, off growth in Q3, while lower meat production is expected to have shaved 0.1pps off growth. These impacts should reverse in Q4.

Our Q3 GDP forecast is substantially weaker than the 0.6% qoq projected by the RBNZ in its November Monetary Policy Statement. However, we expect Q4 growth to exceed the 0.0% qoq result expected by the Bank.

As a result, at this stage, we continue to think that the RBNZ's 50bps easing on 14 November was probably the last for the current cycle, with the probability of further easing put at 30%. However, a weak GDP outcome could see the market price in further easing.

Monetary Policy Implications

The RBNZ forecast growth of +0.6% qoq in its November Monetary Policy Statement. At face value, the weak outcome that we expect might suggest that further easing is likely in the New Year, especially as we also expect growth in Q2 to be revised downwards as a result of the introduction of a revised manufacturing survey. That survey saw estimates of growth in real manufacturing sales in Q2 slashed from 4.2% qoq to 1.8% qoq.

However, for two reasons, we are cautious about reaching a quick conclusion, especially ahead of next week's data. First, the Q3 GDP data will also incorporate revisions to earlier historical data stemming from the release of the full annual national accounts in early November (for the year to March 2001). This could have a bearing on the RBNZ's estimate of the output gap.

Second, we expect GDP growth in Q4 to outstrip the RBNZ's estimate of a flat quarter, in large part due to a rebound in the sectors impacted by the electricity crisis. As a result, growth of 0.6% over H2 2001 - as projected by the RBNZ in November - still seems achievable.

Therefore, at this stage, we continue to think that the RBNZ's 50bps easing on 14 November was probably the last, with the probability of further easing put at 30%. That said, the publication of a weak result could reinvigorate easing sentiment in the market, with some commentators calling for a further 50bps cut at the March MPS. By contrast the market is pricing a 30% chance of a 25bps easing - in line with our view.

Detailed Breakdown of GDP Forecasts

Our forecasts for the key components of both the production and expenditure based components of GDP are set out below (the actual forecasts are based on a considerably more detailed breakdown of the data).

Production GDP

Primary Industries: The primary industry is estimated to have made a small positive contribution to growth in Q3, largely due to stronger activity in the mining and forestry sectors.

Manufacturing: The primary component of this sector (meat and dairy) is estimated to have declined by 3% qoq following the 7% qoq rise recorded in Q2. Reflecting production cuts during the mid-winter electricity crisis, impacting the metals industry in particular, the remainder is expected to have declined by 2% qoq. As a result, overall value-added in the manufacturing sector is expected to have declined 2.3% qoq - reversing the growth recorded in Q2.

Construction: A further sharp rise in non-residential construction and a more modest rise in homebuilding is expected to contribute 0.16pps to GDP growth in Q3.

Services: The services sector is expected to have made a much more modest contribution to growth in Q3 than has been typical over the past year, partly due to weaker sales in the wholesale sector. The real estate and business services sector is expected to have been the key driver of overall growth in the services sector.

Government: A continued expansion of spending by local government - at the rate of close to 6% yoy - is expected to have contributed 0.16 pps to GDP growth in Q3.

Unallocated/Residual: This component - which captures residual seasonality and unallocated production - is expected to add 0.03pps to growth in Q3.

Expenditure GDP

Private Consumption: Private consumption is estimated to have increased by just 0.2% qoq in Q3, a little weaker than growth in retail sales (the latter includes tourist spending which is reclassified as `exports - services' for the purposes of the national accounts.

Public Consumption: Following growth of 2.8% qoq over the first half of 2001, growth of 0.5% qoq is expected to have occurred in Q3.

Investment: Our indicator model suggests that plant and machinery investment has declined by around 13% qoq in Q3, following a strong rebound in Q2. This fall is expected to have more than offset positive growth in construction activity, leading to a 2.5% qoq decline in overall investment, making a negative contribution of 0.8pps to GDP growth.

Stocks: Last quarter's unexpected stock decline in stocks is expected to have been reversed partially during Q3, adding 0.7pps to growth.

Exports: Weaker primary sector exports are expected to have led a 1.5% qoq decline in goods exports. Growth in tourist arrivals prior to 11 September suggests that services volumes will have made a partially offsetting contribution.

Imports: The Overseas Trade Indexes suggest that goods volumes fell by a little over 1% qoq in Q3, reversing the rise recorded in Q2.

A range of other indicators, not used directly in constructing our GDP estimate, support our view that GDP will post an unspectacular rise.

the number of hours worked rose 0.1% qoq on an Household Labour Force Survey (HLFS) basis and 0.3% qoq on a Quarterly Employment Survey (QES) basis;

full-time equivalent employment rose 0.1% qoq on both an HLFS and QES basis;

the NZIER's measure of capacity utilisation rose in seasonally adjusted terms while an indicator of trading activity from the same survey, although declining, remained at a reasonably robust level.

Ends


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

I Sing The Highway Electric: Charge Net NZ To Connect New Zealand

BMW is turning Middle Earth electric after today announcing a substantial contribution to the charging network Charge Net NZ. This landmark partnership will enable Kiwis to drive their electric vehicles (EVs) right across New Zealand through the installation of a fast charging highway stretching from Kaitaia to Invercargill. More>>

ALSO:

Watch This Space: Mahia Rocket Lab Launch Site Officially Opened

Economic Development Minster Steven Joyce today opened New Zealand’s first orbital launch site, Rocket Lab Launch Complex 1, on the Mahia Peninsula on the North Island’s east coast. More>>

Earlier:

Marketing Rocks!
Ig Nobel Award Winners Assess The Personality Of Rocks

A Massey University marketing lecturer has received the 2016 Ig Nobel Prize for economics for a research project that asked university students to describe the “brand personalities” of three rocks. More>>

ALSO:

Nurofen Promotion: Reckitt Benckiser To Plead Guilty To Misleading Ads

Reckitt Benckiser (New Zealand) intends to plead guilty to charges of misleading consumers over the way it promoted a range of Nurofen products, the Commerce Commission says. More>>

ALSO:

Half A Billion Accounts, Including Xtra: Yahoo Confirms Huge Data Breach

The account information may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers. More>>

ALSO:

Rural Branches: Westpac To Close 19 Branches, ANZ Looks At 7

Westpac confirms it will close nineteen branches across the country; ANZ closes its Ngaruawahia branch and is consulting on plans to close six more branches; The bank workers union says many of its members are nervous about their futures and asking ... More>>

Interest Rates: RBNZ's Wheeler Keeps OCR At 2%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2 percent and said more easing will be needed to get inflation back within the target band. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news