New Zealand economic outlook strong but uneven in 2016

The New Zealand economy expanded strongly in H2 2015, but has a mixed outlook for 2016, according to Westpac. The economy faces considerable headwinds from the external sector, particularly weakness in dairy export earnings. Meanwhile, demand is increasing with the help of strong activity in service sector and a major pipeline of construction work. Thus the New Zealand economy is performing unevenly, noted Westpac.

Several surveys have emphasized the different outlook of New Zealand’s economy throughout sectors and regions. New Zealand’s business sentiment has dropped in different areas of the economy, which are susceptible to external conditions, especially the agricultural sector. This definitely indicates the considerable headwinds faced by these sectors of the economy.

Economic regions with dairy farms are being weighed on by the issues faced by dairy sector. A total of 38% of consumers in Southland have a negative perspective towards the economic outlook. Other dairy regions in the country have also recorded pessimism regarding economic outlook. But, apart from the dairy regions, stronger conditions are evident elsewhere, especially in the urban areas. This is mainly due to the major pipeline of construction work, particularly in Canterbury and Auckland.

Overall, the economic outlook for New Zealand seems to be strong but uneven in the coming year, according to Westpac. Businesses throughout the nation are being weighed on by the woes of dairy sectors. According to the most recent Quarterly Survey of Business Opinion, businesses are not much positive regarding the near-term outlook. Recent surveys also indicated the environment of weak inflation and pressure on businesses’ margins.

“Overall, we continue to expect that CPI inflation will remain weak through the early part of 2016. The lingering strength in the NZD is reinforcing this outlook”, says Westpac.