How low did it go? New data to give us economic snapshot

GDP growth has slowed but a recent run of strong data suggests it's not as bad as expected. Photo / File

New Zealand's economic growth figures for the September quarter may mark a low-tide mark in the current economic cycle, or show we are close to it, depending on the degree of optimism offered in a range of forecasts.

Bank economists are picking GDP for the third quarter to come in at between 0.5 per cent and 0.7 per cent when it is released on Thursday morning.

That would see growth running at an annual rate of 2.3-2.5 per cent.

The forecasts are all more bullish than the Reserve Bank which is currently picking just 0.3 per cent for the quarter - although that likely reflects the flexibility the market economists have to revise forecasts upwards in the past few weeks.

A run of key data since November has come in stronger than expected - including manufacturing output, consumer spending, house prices and business confidence.

"We did expect GDP growth to peter to 0.3 per cent [in Q3], before it resumed a trend-like pace after that, of around 0.5/0.6 per cent per quarter," said BNZ head of research Stephen Toplis.

"However, we are now of the view Q3 GDP will expand 0.5 per cent for an annual increase of 2.3 per cent."

This had been aided by the September quarter manufacturing sales and inventory statistics released last week, he said.

"These inferred a decent increase in the industry's output, when we had been looking for a moderate decline."

ASB economists are even more bullish, picking a quarterly result of 0.7 per cent.

"The early, yet typically-reliable sentiment-based measures implied very little (if any) economic growth over the quarter," said senior economist Jane Turner.

"However, data released in recent weeks, used as inputs into StatsNZ's GDP estimate, have been surprisingly robust. All up we are expecting reasonable Q3 GDP growth of 0.7 per cent, with annual GDP growth lifting to 2.5 per cent from 2.1 per cent."

The pace of growth had slowed over the course of this year, as the economy has faced a range of headwinds, said Westpac chief economist Dominick Stephens.

"We've been saying for some time that we expect the September quarter will mark the low point for growth. While we think that will still be the case, the trough is shaping up to be not quite as deep as we expected."

"We now expect GDP growth to exceed the 0.3 per cent that the Reserve Bank predicted in its November Monetary Policy Statement. Other market forecasters, with the benefit of the most up-to-date information, have been revising up their estimates as well."

ANZ's Miles Workman is also picking 0.5 per cent for the quarter.

"We think the recent slowdown in economic momentum is finding a floor," he said. "Annual growth is looking set to bottom out in the second half of 2020 before gradually lifting as previous monetary stimulus provides support."

"Households remain heavily indebted but in good heart, with unemployment low and income growth decent. Any bump in Government spending on the infrastructure front,
although unlikely to be timely, will support the medium-term outlook."

That was not to say New Zealand was out of the woods yet, Workman said.

"The global backdrop is still looking highly uncertain, with growth among our key trading partners continuing to slow and policymakers running low on ammo," he said. "Just how long New Zealand can swim against the global tide remains a key question. History suggests not long."