Has GDP growth survived the dairy slump?

Surging construction has helped boost economic activity hit by an agricultural slowdown. Photo / Getty

Despite the ongoing dairy downturn New Zealand's gross domestic product is expected to have remained relatively steady in the first quarter of the year.

The official GDP numbers are due mid-morning tomorrow and are expected to show growth of about 0.5 or 0.6 per cent for the three months to March 31. That would take annual GDP growth to 2.6 or 2.7 per cent - up from 2.3 per cent.

Westpac's Michael Gordon is picking 0.6 per cent with a surge in construction activity offsetting the slow down in the agriculture sector.

That would be in line with the Reserve Bank's prediction but represents a downgrade from earlier forecasts of 0.7 per cent.

The biggest negative for the period is likely to meat processing, Gordon writes.

In the last quarter of 2015 the dairy slump and fears about an El Nino summer prompted a larger than normal cull of livestock. This boosted economic activity for the quarter - which hit 0.9 per cent.

But we were likely to see the "payback for this in the March quarter - the early cull meant fewer animals available later in the season."

At ASB economists are picking 0.5 per cent for the quarter, although it is a line ball call as their forecast at 0.53 is very close to being rounded up.

ASB expects average annual growth is still still slowing, but is likely to trough this quarter at 2.4 per cent before picking up in the second half of the year.

"We anticipate a lift in trend growth as the lagged impact of a lower NZ dollar and previous interest rates cuts help support demand. But weak business confidence and softening consumer confidence suggest some risk to our forecast and we may scale back the extent of our recovery if these persist," writes senior economist Jane Turner.

New Zealand's current account balance hit surplus in the first quarter as tourism drove up the services balance and foreigners earned less from their local investments.

The current account surplus was $1.3 billion in the first quarter, from a deficit of $2.89 billion a year earlier, Statistics New Zealand said earlier today.

Longer term the NZ Institute of Economic Research (NZIER) is picking annual average growth will pick up to 2.9 per cent in 2018 before moderating to 2.6 per cent in 2019.