NZ: GDP eyed after external accounts infer higher saving, - BNZ

Doug Steel, Senior Economist at BNZ, suggests that the New Zealand economy continues to generate macroeconomic figures that are difficult to fault as growth is strong, with tomorrow’s numbers highly likely to confirm it has pushed further above trend.

Key Quotes

“This has flowed through to employment expansion and the unemployment rate has fallen to below average. Real wages are rising. The fiscal accounts are in balance. Inflation is low (although some see that as a problem). And, as today’s numbers confirm, even the nation’s usual Achilles Heel – the annual external deficit – has become somewhat less of a burden. Yes, a bit more productivity growth would be good, but, then again, wouldn’t it always?!

NZ’s current account deficit narrowed to 2.9% of GDP in the year ended June 2016 from the 3.1% (revised from 3.0%) a quarter earlier. This was a mild disappointment for the market that was anticipating the annual deficit to be 2.6% of GDP (we had 2.7%).

All this does not change our Q2 GDP estimate for tomorrow, which stays at +1.2% q/q. But the new colour on imports and exports above, does rein in our expenditure based measure that was getting very strong indeed. With today’s trade figures, our expenditure-based GDP estimate now sits at +1.3% q/q. This all suggests there is some upside rise to the +1.1% q/q market expectation for tomorrow’s Q2 GDP figure and a bit more to the RBNZ’s August MPS’s +0.8% view.”