No double-dip but slow patch ahead, say economists

Economic forecasters have diverging views about how long earthquake reconstruction in Canterbury will take. Photo / Mark Mitchell

A new publication of economic forecasts from the NZIER says economists are predicting a slow patch of recovery early next year, before growth picks up again.

"The growth outlook remains positive, but a slow patch is now predicted in the March 2011 year compared to the September survey. Consequently, interest rate increases will be later and less than previous forecasts," says the NZIER Consensus Forecasts published this morning.

The forecasts are an average of New Zealand economic forecasts compiled from a survey of financial and economic agencies and are not those of the NZIER itself.

It says forecasters are continuing incorporate effects from the Canterbury earthquake into their work, but views on the size and timing of reconstruction "diverge significantly".

While the recovery has been fairly muted, economists by and large are steering away from any thoughts of a so-called "double-dip recession."

Economists on average expect positive economic growth in 2011 of 2.1 per cent, down from 2.8 per cent in the September survey.

The next GDP stats - due out on Christmas Eve and covering the September quarter - are forecast to show growth of 0.6 per cent.

Economists surveyed by NZIER also expect economic growth of 3.5 per cent growth during 2012, up from the previous forecast of 3.1 per cent.

Consumer price inflation will spike due to GST and other policy changes, peaking at 4.6 per cent in March 2011. Excluding one-off effects the inflation rate will be 1.6 per cent and 2.3 per cent in March 2011 and March 2012 respectively.

Real wages are forecast to only barely increase over the next two years, but personal tax cuts will compensate households for inflation from increased government charges.

The labour market outlook is subdued but has improved marginally, says the survey, with unemployment set to trend down from 6.2 per cent in the March 2011 year to 5.1 per cent by March 2013.

Forecasters views on the New Zealand dollar "are wildly divergent" says the report. "Forecasts range from hitting new hights to depreciating."

On average the exchange rate is expected to stabilise before dipping in 2013.

-NZ HERALD ONLINE