New Zealand economy \ to have rebounded to 1 pct in Q2, growth likely to pick up just over 3 pct in 2019

Quarterly economic growth in New Zealand is likely to have rebounded to 1 percent in the second quarter, noted Westpac in a research report. Nevertheless, this is partially due to temporary factors, including a reversal of earlier weakness in the primary sector. Consequently, there is expected to be some payback in the form of a lower September quarter outturn. Smoothing through these quarter-to-quarter swings leaves with a picture of weak activity in the year to date.

“Looking ahead, we expect that the next phase of the economic cycle will be a pickup in GDP growth to just over 3 percent in 2019”, stated Westpac.

One of the main factors that would contribute to demand in the years ahead is the large rise in Government spending that is now being rolled out. That includes about NZD 1.5 billion of spending on the Government’s families package and accommodation underpin payments, which will give a significant boost to the disposable incomes of several households. The coming years is also expected to see big spending rises in other areas, including health and education.

Export sector’s strength is also expected to help strengthen New Zealand’s economic performance. Although there has been a weakening in the prices for some commodities recently, the terms of trade remain elevated. Also, continued strength is seen in services exports, supported by ongoing strength in tourism. Going forward, export returns are likely to be stimulated by the depreciation of the New Zealand dollar, with the Reserve Bank of New Zealand set to remain on hold as interest rates offshore push higher. Overall, the outlook of New Zealand’s export sector is looking positive, with export earnings set to underpin the level of national income in the years ahead.

“Beyond 2019, we expect GDP growth to cool once again, as slowing population growth and weakness in the housing market offset increases in fiscal spending”, added Westpac.

At 20:00 GMT the FxWirePro's Hourly Strength Index of New Zealand Dollar was highly bullish at 149.022, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -146.447. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex