Westpac: New Zealand Economy Likely To Mark Trough In Q2

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Friday, Westpac Banking Corporation previewed New Zealand's second quarter GDP data, and commented that economic activity in the country "is likely to mark the trough" in the second quarter as a result of low interest rates, stimulus measures, rising energy output and a strong increase in net migration. New Zealand's latest GDP figures are scheduled for release next week.

Westpac estimates GDP to contract 0.2% in the second quarter compared to the previous quarter, following the 1% decrease in the first quarter. Annually, New Zealand's economy is predicted to shrink 2.7% in the second quarter, which was the same rate of decline in the preceding quarter. The firm noted that high-level gauges such as consumer confidence, electronic transaction data, production, new order and capacity utilization indicators all point to GDP coming in at a touch negative to flat, and went on to say that "wide error bounds" around their estimate meant that the economy might even show positive growth in the second quarter.

The construction, manufacturing and wholesale trade sectors are expected to remain in the negative for the second quarter. In construction, delayed investment plans and a slump in building consents will lead to a drop in residential and non-residential building activity in the second quarter. The manufacturing sector is expected to remain dire, with a sharp 16% annual decline in production forecast for the second quarter. Also, wholesale trade is expected to continue its slump as weak demand persists.

On the positive side, net exports looks set to make strong contribution to growth with an estimated 7% increase in export volume, although the firm suspects that a major share of the export volume came from existent inventory rather than new production. The real estate sector is expected to stage a recovery in the second quarter, driven by low interest rates and a strong increase in net migration. Increased energy output and large government spending is also expected to have a positive impact on the economy.

Although estimates point to economic growth in the coming months, interest rate hikes are unlikely in the near future, as it will take some time before any recovery generates significant inflationary pressure, the firm said.

Friday, Westpac Banking Corporation previewed New Zealand's second quarter GDP data, and commented that economic activity in the country "is likely to mark the trough" in the second quarter as a result of low interest rates, stimulus measures, rising energy output and a strong increase in net migration. New Zealand's latest GDP figures are scheduled for release next week. (Market News Provided by RTTNews)