Our big shopping sprees widen deficit

News of a widening balance of payments current account deficit is expected this week as New Zealanders continue to spend beyond their means, economists say. Meanwhile, a moderate rebound in economic growth is anticipated over the first quarter of 2005.

Gross domestic product (GDP) data for the quarter will show how fast the economy is growing, despite Reserve Bank efforts to contain inflation.

Market expectations were for a 0.8 per cent rise in GDP over the quarter. For the current account deficit, there is likely to be a shortfall representing 6.7 per cent of GDP.

Westpac senior economist Nick Tuffley expected GPD growth of 0.9 per cent, reflecting a mild rebound from a subdued second half of 2004, and a current account deficit equivalent to 6.8 per cent of GDP.

"That whole current account is a symptom of the fact that we have been spending far more than we earn," he said.

 

Anthony Byett, ASB Bank's economist, is at the top end of the range, with a forecast of 1.1 per cent of GDP and a $10.2 billion (6.9 per cent) current account deficit. "Both will be consistent with ongoing spending momentum," he said.

In other economic news, the Westpac-McDermott Miller Survey is due on Wednesday and economists will be looking to see if it backs up the negative sentiment expressed in other confidence surveys. US. stocks ended higher on Friday, helped by a jump in energy and mining companies' shares as oil and metals prices soared to record highs, while an index of consumer confidence rose for the first time this year.

Stock investors jumped on the commodities bandwagon, snapping up Exxon Mobil Corp and rival oil company ConocoPhillips, which helped push the broad S&P 500 into positive territory for the year, and Caterpillar Inc, which gave the biggest lift to the blue-chip Dow Jones industrial average.

The Dow ended up 44.42 points, or 0.42 per cent, at 10,623.07. For the week, the Dow was up 1.05 per cent, the S&P 500 rose 1.57 per cent and the Nasdaq climbed 1.31 per cent.

- REUTERS