Economists tip GDP growth of 0.75 per cent for quarter

The economy probably continued to expand in the fourth quarter of 2016, bolstered by the ongoing surge in migration, but weaker output in the primary and manufacturing sectors is tipped to weigh on growth.

Gross domestic product is likely to have grown 0.75 per cent for the quarter, according to the median result from eight economists surveyed by BusinessDesk, slower than the Reserve Bank's 1 per cent prediction. The economy expanded 1.1 per cent in the third quarter. Annual growth was probably 3.2 per cent versus 3.5 in the third quarter, according to the poll.

Given the Reserve Bank is already tipping relatively strong growth, economists don’t expect the GDP numbers to have much impact on its assessment of monetary conditions.

In its February monetary policy statement, the Reserve Bank indicated the official cash rate is on hold at a record low 1.75 per cent until the middle of 2019. Weaker GDP would only solidify its on- hold position. Most economists expect the bank to make a move in late 2018.

According to ASB Bank, initial estimates are pointing to another “quarter of robust growth”. It is tipping 0.9 per cent quarterly growth, bringing annual growth to 3.4 per cent. Construction and the services sector probably drove growth although the impact of the November Kaikoura earthquake was the key uncertainty for the quarter, it said.

Westpac Banking Corp is tipping quarterly growth of 0.5 per cent and annual growth of 3.0 per cent. It expects construction to be one of the main contributors and said increased demand from a rising population was expected to show through in some of the services categories.

“The two notable drags on growth for the quarter come from primary production and manufacturing,” it said, noting that damp spring weather had weighed on milk production and a slow start to the slaughter season weighed on manufacturing. Earlier this week, data showed manufacturing volumes fell 1.8 per cent in the fourth quarter.

The Bank of New Zealand is also less optimistic about growth in the quarter. It expects the economy expanded by 0.4 per cent in the final three months of 2016.