New Zealand’s economy likely expanded in Q4, goods-producing sectors to be strongest performers

New Zealand's Q4 national accounts to be released next week are likely to indicate that the economy is in reasonable shape. The economic growth momentum picked up in H2 2015 after a slowdown in H1. New Zealand's economy is expected to have grown 0.7% after expanding 0.9% in Q3. Meanwhile, the current account deficit is expected to remain stable in spite of the current decline in diary export earnings.

The population growth led by migration is flattening the nation's growth figures increasingly.  Population growth is currently running at more than 2% per year. This indicates that per capita growth over 2015 slowed to only 0.5%. Per-capita growth is expected to rebound slightly in the coming few years with tourism and construction giving some momentum. However, the growth pace is expected to be well past its peak for this cycle.

"We expect a 0.7% increase in the production measure of GDP, with the goods-producing sectors shaping up as the strongest performers this time", says Westpac.

The recent manufacturing survey indicated a fall in food manufacturing after a solid Q3; however, strong gains were recorded throughout the non-food categories. Construction is expected to have grown 2%. Meanwhile, retailing also had a solid quarter, especially in the hospitality sector.

The mining sector is expected to have been boosted by oil extraction, offsetting the expected weakness in exploration activity. Agricultural output is likely to have grown moderately, particularly because of a seasonal adjusted increase in milk production, as compared with the poor start to the season in Q3. Business services in Q4 are expected to have been relatively weak. Mainly, real estate services is likely to decline, with a sharp drop in house sales after the new property investment regulations was introduced in October.