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

 

Decent early 2019, construction can’t dig us out of slowdown

Economy builds a decent start to 2019, but construction can’t dig us out of the slowdown.


The Kiwi economy expanded 0.6%qoq to post a 2.5% annual rate. The details are a little shaky in the Isles, however.

Key Points

• The NZ economy had a respectable start to 2019, expanding 0.6%qoq. The annual rate of 2.5% was slightly above expectations. But growth will cool.

• Construction was the key driver of growth, with “higher investment in both residential and non-residential building”. We suspect the strong growth to cool from here, as capacity constraints bite.

• The primary sector was weak across the board, due to dry conditions. Retail was soft with weaker (Chinese) tourist numbers. The service sectors posted weak results, the softest since 2012.

• We expect growth to ease in 2Q 2019 to ~2.2%. The path (higher) into 2020 is dependent on the fiscal impulse. Further easing by the RBNZ and a weaker currency should assist.

View PDF


Growth at the start of 2019 was slightly ahead of forecast. The economy has posted a 0.6%qoq, on par with December quarter growth, taking annual growth to 2.5%yoy. But recent indicators of activity suggest growth will weaken. As had been already signalled, construction sector activity was a key contributor to growth at the start of 2019. However, services sector activity posted a meagre 0.2%qoq – the weakest rate since 2012. Weak tourist numbers, slowing population growth, and a quiet housing market were key reasons for this. A slowing service sector is concerning. Service sector growth tends to be a stable source of growth and makes up around two-thirds of the economy.

As we outlined in our updated forecast note last week (Fake Plastic Trees ), growth is likely to weaken. We are forecasting growth to fall to around 2%yoy in the June quarter. The economy is growing below its potential and with other central banks cutting rates or looking to add stimulus, the RBNZ has more to do to ensure inflation can get back to target. We don’t see the Bank cutting the cash rate at next week’s OCR review. We expect the RBNZ to use the full forecasting round with the new Monetary Policy Committee in August to make the next big decision. We expect the RBNZ to deliver another cut in August to 1.25%. After all, it’s only another 6 week wait. Financial markets (via a lower currency and wholesale interest rates) have done some of the work for the RBNZ in recent weeks. Although more work is required. We still believe there’s a 40% chance the RBNZ is forced to keep going to 0.75%.

To read more, please click here or open the pdf below.

View PDF


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

TradeMe: Property Prices In Every Region Hit New High For The Very First Time

Property prices experienced their hottest month on record in December, with record highs in every region, according to the latest Trade Me Property Price Index.\ Trade Me Property spokesperson Logan Mudge said the property market ended the year with ... More>>

Motor Industry Association: 2020 New Vehicle Registrations Suffer From Covid-19

Chief Executive David Crawford says that like some other sectors of the New Zealand economy, the new vehicle sector suffered from a case of Covid-19. Confirmed figures for December 2020 show registrations of 8,383 were 25% ... More>>

CTU 2021 Work Life Survey: COVID And Bullying Hit Workplaces Hard, Huge Support For Increased Sick Leave

New data from the CTU’s annual work life survey shows a snapshot of working people’s experiences and outlook heading out of 2020 and into the new year. Concerningly 42% of respondents cite workplace bullying as an issue in their workplace - a number ... More>>

Smelter: Tiwai Deal Gives Time For Managed Transition

Today’s deal between Meridian and Rio Tinto for the Tiwai smelter to remain open another four years provides time for a managed transition for Southland. “The deal provides welcome certainty to the Southland community by protecting jobs and incomes as the region plans for the future. The Government is committed to working on a managed transition with the local community,” Grant Robertson said. More>>

ALSO:

Real Estate: Auckland’s Rental Market Ends Year Near $600 Per Week Mark

The average weekly rent in Auckland reached a new high of $595 at the end of 2020, just shy of a long-anticipated $600 per week. More>>

University of Auckland: Pest-Free Goal Won’t Be Achieved Without New And Better Tools

New Zealand’s goal to become predator free by 2050 will remain an unrealised dream unless new technologies and advances in social engagement continue to be developed, researchers who first promoted it say. A team from the University of Auckland has ... More>>

OECD: Area Employment Rate Rose By 1.9 Percentage Points In The Third Quarter Of 2020

OECD area employment rate rose by 1.9 percentage points in the third quarter of 2020, but remained 2.5 percentage points below its pre-pandemic level The OECD area [1] employment rate – the share of the working-age population with jobs – rose ... More>>

Economy: Strong Job Ad Performance In Quarter Four

SEEK Quarterly Employment Report data shows a positive q/q performance with a 19% national growth in jobs advertised during Q4 2020, which includes October, November and December. Comparing quarter 4, 2020, with the same quarter in 2019 shows that job ad volumes are 7% lower...More>>