Economists at ANZ are expecting an economic recovery in New Zealand to run out of steam in the first half of next year.
In ANZ's Weekly Focus newsletter, published yesterday, they said they expected the economy to record growth in the second half of this year, before "slipping into a
hole" again in the first half of 2010.
The economists said they were now formally shifting to a more explicit "W" shape for the economic cycle, from the "bathtub with waves" shape they expected previously.
"Unemployment is rising, but there is no doubting a better feel-good factor that has developed of late - both globally and domestically," ANZ said.
The key factor to watch for internationally was whether the first leg of recovery showed up in a rebound in domestic demand.
The ANZ economists said they did not believe it would.
In New Zealand, they were watching the unemployment rate, commercial property prices and rural land values.
The economists acknowledged it was possible Rugby World Cup-related activities and investment "would save" early 2010.
Increased residential construction activity was also expected early next year, and a recovering Australian economy could help pull New Zealand along.
"But the way commercial construction, the unemployment rate and dairy incomes are shaping up, there is a huge void to fill," the economists said.
"The real message in our 'W' cycle is that we do not believe recent signs of recovery are of sufficient quality (that is, it's the wrong growth mix) to be sustainable, given New Zealand's external and balance sheet position."
Having said that, the economists said they hoped they were wrong about the "W".
"But navigating through the biggest financial crisis in our lifetime just seems to have been a little too easy thus far," they said.
"At this juncture we can't stress enough how important the outlook for asset values is, and we see them under a fair degree of pressure."
- NZPA
