WELLINGTON (Reuters) - New Zealand’s economy, which surged in 2016’s third quarter, likely cooled in the final three months, as heavy spring rain cut dairy production and a deadly earthquake struck.
Economists polled by Reuters expect gross domestic product (GDP) grew 0.7 percent in the fourth quarter from the third, when output jumped 1.1 percent.
Annual growth in the economy is seen around 3.1 percent, down from 3.5 percent the previous quarter but rapid by rich world standards. [NZ/POLL]
The Reserve Bank of New Zealand (RBNZ) has been looking for a increase of around 1 percent from the previous quarter, so it might be slightly disappointed by the figure to be reported on Wednesday.
Softer-than-expected data for manufacturing and sales, published last week, is partly responsible. The net effect of the 7.8 magnitude quake centered around Kaikoura, a popular tourist area, also remains a question mark.
“Recent developments signal a little less momentum in the economy than we had previous been expecting,” Westpac bank economists said in a research note, though adding that the headwinds are seen as temporary.
Still, the central bank is unlikely to waver on its determination to keep rates at a record low of 1.75 percent when it meets next week.
The RBNZ had previously signaled it could hold the official cash rate NZINTR=ECI steady for this year and next to try to increase the inflation rate and cope with increasing offshore risks from global protectionism.
New Zealand’s economy has raced along for the past few years courtesy of an influx of migrants and tourists plus robust house construction activity.
“The wild card for the quarter will be the impact of the Kaikoura earthquake and associated disruption throughout the top of the South Island and bottom of the North Island,” said ASB senior economist Jane Turner.
A major drag on growth was reduced production of milk, the largest goods export earner, as wet spring weather curbed collection.
Data released last week showed falling volumes in dairy processing had contributed to a 1.8 percent drop in manufacturing activity in the fourth quarter.
But those factors are seen as temporary, with the migration boom expected to drive more spending on everything from education to health and rising demand for housing likely to fuel growth.
($1 = 1.4461 New Zealand dollars)
Reporting by Charlotte Greenfield and Tom Westbrook; Editing by Richard Borsuk