Open for business: Shoppers return to Te Awa mall at The Base in Hamilton after changes to the covid alert system in November. New Zealand Herald Photo Mike Scott.
Open for business: Shoppers return to Te Awa mall at The Base in Hamilton after changes to the covid alert system in November. New Zealand Herald Photo Mike Scott.
Economists expect new GDP data due this week will show a strong rebound out of last year's Delta lockdown slump.
But they warn the numbers - being released at 10.45am on Thursday - will offer only temporary respite, with the rebound unlikely to last the year.
Westpac economists now expecta 3.8 per cent rise in GDP for the December quarter, almost fully reversing the drop that followed the Delta-induced lockdown last August.
KiwiBank is forecasting a 3.6 per cent bounce and ANZ is picking 3.5 per cent.
There's a consensus that the annual average change across 2021 will be a solid 5.8 per cent - still reflecting a rebound from the lockdown shock of 2020.
All the forecasts come in well above the Reserve Bank which has anticipated just 2.3 per cent growth for the fourth quarter.
The goods-producing sectors were the strongest in the fourth quarter, where Covid restrictions were less inhibiting, said Westpac chief economist Michael Gordon.
"Manufacturing (excluding food) was the biggest beneficiary of this, rebounding by around 10 per cent over the quarter," he said.
"In-person services were more subdued, again reflecting the impact of the remaining Covid restrictions. We estimate that transport was fairly flat, and areas such as hospitality and recreational services appear to have retreated further over the quarter."
While the strong end to the year will provide a solid platform for tackling inflation economists warn the rebound is unlikely to last.
"The Q4 GDP report provides us with a starting point," says Kiwibank chief economist Jarrod Kerr. "We're more concerned about growth over the first half of 2022. And it's not looking pretty."
The change in strategy from elimination to mitigation has meant a real risk of catching Covid, Kerr said.
"Demand may have softened with households limiting their outings. And adhering to self-isolation protocols would have kept many Kiwis stuck in bed, only exacerbating current labour shortages. These self-imposed lockdowns will weigh on Q1 GDP."
Rising mortgage rates were also starting to hit home for households.
"With higher rates and reduced credit availability, households are second-guessing splurging on big-ticket items. And weaker consumption points to weaker economic growth ahead," Kerr said.
With Omicron wreaking havoc and Q4 looking stronger than previously thought, further solid expansion in Q1 is looking less likely, said ANZ senior economist Miles Workman.
"Indeed, the outlook for economic activity is souring. Living cost pressures are extreme right now. And there's more inflationary pain to come, with global developments adding more petrol to the fire, and the Omicron outbreak adding to labour scarcity," he said.
"Inflation is now running laps around wage growth, meaning households are going backwards at an alarming rate."
Meanwhile, many businesses were facing reduced demand as people stayed home, and the housing market softened.
"While Omicron wobbles will hopefully be short-lived (as has been the case abroad), it's clear that economic momentum has turned," he said.
Kiwibank's Kerr said he expected the subdued RBNZ to move at a measured pace.
"That spike in inflation is certainly alarming. And that's why we see the cash rate reaching 3 per cent by 2023. But the risks aren't all one way," he said.
"Confidence remains sensitive to developments on the Covid front, and the housing market is already slowing."
Kiwibank sees the RBNZ sticking to a series of 25-basis-point hikes.
That view differs from ANZ where economists have lifted their forecast OCR peak to 3.5 per cent and argued two back-to-back hikes of 50 basis points are now required.
