ANZ Sees NZ Economy Avoid Q2 Contraction, but External Balance Remains a Concern
New Zealand's economy has likely avoided a second-quarter contraction, according to ANZ Bank. The bank now expects output to have grown by 0.1% in the quarter, up from its previous forecast of a small decline.
The improvement is attributed to steadier activity in construction and other sectors, despite higher fuel prices crimping discretionary spending and denting confidence. This growth rate is slightly stronger than the Reserve Bank of New Zealand's (RBNZ) flat call for the quarter.
However, ANZ notes that a marginally better GDP print will not force the RBNZ to consider raising interest rates sooner. Instead, the bank expects the RBNZ to wait until December before considering another hike.
The real constraint on New Zealand's economy is its external balance, specifically the current account deficit. ANZ predicts that this gap between earnings and payments will widen by 0.3 percentage points to 3.9% of GDP in the year ahead, largely due to a higher fuel import bill.