Weak end to 2016 could mark a cooling of NZ’s economy

Weak end to 2016 could mark a cooling of NZ’s economy

Figures out this week could show the economy ended 2016 growing only as fast as the population, amid warnings of the start of a slowdown.

On Thursday Statistics New Zealand will release gross domestic product (GDP) figures for the three months to December 31, a measure of the total economic output of the New Zealand economy.

Economists expect the economy grew by about 0.7 per cent in the December quarter, a fall from the 1.1 per cent growth in the previous quarter.

While construction continues to boom, a wet spring is likely to mean agricultural sector contracted slightly at the end of 2016.

Both Westpac and UBS warn growth may have dropped as low as 0.5 per cent in the quarter, which would mark it as the weakest quarter of growth since the start of 2015.

It would also suggest the economy was growing at around the pace of New Zealand’s annual population growth, currently about 2 per cent – a 40 year high.

New Zealand’s economy grew at 3.5 per cent in the year to September 30, making it one of the strongest economies in the OECD in that period.

However, much of the boost appeared to be driven by construction and services sector, on the back of record high net migration gains of around 70,000 people a year.

Westpac acting chief economist Michael Gordon predicted growth at the end of 2016 would have been held back by a weak start to the dairy season following a wet spring, as well as a temporary shutdown of the Maari gas field.

While both of these factors were temporary, Gordon said economic growth was largely being driven by population growth.

“The picture is still fairly robust, but a lot of it is just driven by sheer numbers of people,” Gordon said, which put pressure on the construction and services sectors.

“The underlying picture on a per person basis is more like an economy that’s growing at one to one-and-a half per cent a year, and that’s not terribly fast compared to history.”

Other economists warn the economy may be losing momentum. Other Statistics NZ figures show the tide has turned for building consents, which since reaching a record high in August, had dropped 15 per cent since.

For further read – http://www.stuff.co.nz/business/90306970/weak-end-to-2016-could-mark-a-cooling-of-the-economy

Source – stuff.co.nz/dominionpost