Growth is likely to be weak in the near future for New Zealand as the temporary boost from the Rugby World Cup unwinds, according to Capital Economics.
The GDP grew by a seasonally-adjusted 0.3 percent q/q in Q4. Weakness in the goods producing sector was the main drag on growth, reflecting a 2.5 percent decline in the manufacturing output, points out Capital Economics. On the plus side, the output component of New Zealand’s manufacturing PMI surged to a multi-year high in February, suggesting that production was faring much better in the current quarter.
Services grew at their fastest in four years, partly due to a surge in tourists ahead of the September-October Rugby World Cup, lifting spending on retail sales, accommodation and restaurants. However, consumer confidence is at a low, suggesting that sales will weaken significantly now that the tourists have returned home, notes Capital Economics.
On the expenditure side of the national accounts, investment rose by 1.7 percent q/q, the first rise in a year. Residential investment in earthquake-hit Canterbury led the way, but a sizeable economic aftershock in December will likely hamper rebuilding efforts in the first half of this year, says Capital Economics. In contrast, business investment in new plants and machinery fell in Q4 but an improvement in business confidence suggests that spending in this area may soon rise.
In the context of a slowdown in much of the developed world in Q4 and an outright fall in the GDP in the eurozone, the fact that New Zealand is having a positive growth is a good outcome.
For 2012, Capital Economics has forecast a subdued domestic demand and below trend global growth to deliver a rise in the GDP growth of 2.0 percent, compared with 1.4 percent in 2011. Also New Zealand’s policy rate is likely to stay low to support growth. Inflation is in the middle of the central bank’s 1 to 3 percent target range and a strong currency also dampens price pressures by lowering import costs.