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Deutsche Bank Research: NZ GDP Preview

Data Flash (New Zealand) - Preview
NZ GDP Preview - Sep Q 1999
Release date: Thursday 23 December, 10.45am (NZT)

Deutsche
Bank forecasts:::::::Production GDP: +2.3% qoq; +3.7% yoy
::::::::::::::::::::::::::::::Expenditure GDP: +2.1% qoq; +4.0% yoy

Forecast risk:::::::::::::::::Modest upside risk
RBNZ forecast:::::::::::::::::Production GDP: +1.3% qoq; +2.8% yoy

Market expectations (Average):Production GDP: +1.7% qoq.
::::::::::::::::::::::::::::::Range: +1.2%/+2.3% qoq

Previous release (Jun qtr): Production GDP: -0.3% qoq; +2.0% yoy

DB GDP September Quarter Forecasts

Group (series weights) q% change a% change::::% Point Cont. to
:::::::::::::::::::::::::::::::::::::::::::::::: GDP Quarterly
::::::::::::::::::::::::::::::::::::::::::::::::::::::Outcome

Priv. Consumption (63.4%) 1.6:::::: 3.1:::::::::::: 1.0

Gov't Consumption (17.0%) 2.0:::::: 3.5:::::::::::: 0.3

Investment (16.0%)::::::::::3.5:::::: 16.5:::::::::::: 0.8

Increase in Stocks (0.1%) -2.1:::::: 0.9:::::::::::: -2.1

GNE (96.4%):::::::::::::::::0.1:::::: 6.5:::::::::::: 0.1

Exports (30.0%):::::::::::: 6.8:::::: 4.9:::::::::::: 2.2

Imports (26.5%):::::::::::: 0.4:::::: 12.3:::::::::::: -0.2

Expenditure GDP:::::::::::: 2.1:::::: 4.0:::::::::::: 2.1

Source: DB Global Markets Research, Statistics NZ

Comment

On the basis of a sharp rise in manufacturing sector sales, we have raised our estimate for September quarter production GDP from an increase of +2.1% qoq to +2.3% qoq. Within the total, we expect a strong rebound in agricultural production and primary food processing, together with a pick-up in activity in the wholesale and retailing sectors. On an expenditure basis, we expect activity over the quarter to be dominated by a sharp rise in exports and continuing consumption and investment expenditure. While significant de-stocking is anticipated over the quarter, this will merely reflect the unwinding of substantial stockbuilding over Q2.

Our GDP estimate is at the top end of analyst's projections, which average around the +1.7% qoq level. However, with some of the volatility in the GDP data attributable to unstable seasonality, there is some possibility of the Q3 outturn below 2%, accompanied by an upward revision to Q2. Nonetheless a Q3 GDP outturn around our expectations will be significantly above the RBNZ forecasts for a +1.3% qoq increase. This will suggest a faster closing of the output gap and is likely to further increase speculation that the Bank will look to raise the OCR at the 19 January review. However, at this point, despite the projected strength of Q3 activity and recent NZD weakness, we expect the RBNZ to increase the OCR by +50 bps at the 15 March MPS.

ENDS

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