NZ economy to remain sluggish - Moody's

Tuesday 21st December 2010 2 Comments

New Zealand's economy is barely growing and may have actually shrunk in the third quarter, Moody's Analytics said in a report today.

Hopes of a recovery in economic growth in the three months ended September 30 had been dashed and the economy is expected to remain sluggish well into next year, Moody's Analytics associate economist Katrina Ell said.

Third quarter gross domestic product (GDP) data is released on Thursday, and economists polled by Reuters forecast a quarterly rise of 0.2%, with an annual rise of 1.8%.

Moody's Analytics expected growth to have been a "mediocre" 0.3% for the third quarter, after GDP growth slowed to 0.2% in the second quarter.

"Yet a contraction would not be completely surprising, such is the anaemic state of the Kiwi recovery," Ell said.

Household spending remained weak, unemployment was high, and house price growth was soft, all of which was eating into confidence.

"The housing market is not expected to pick up until the latter stages of 2011, meaning consumer sentiment will remain subdued and retail spending weak," she said.

A strong New Zealand dollar was boosting imports despite an accompanying growth in exports to meet commodity demand from Asia.

The currency was also undermining exporters' competitiveness and keeping business investment in check.

The Reserve Bank of New Zealand would keep interest rates low to help stimulate the economy, but the Government was highly unlikely to offer any further stimulus, and would instead be looking for ways to cut costs, she said.

"Consumer and business sentiment will therefore remain downbeat for some time and the New Zealand recovery story will be a sluggish one."

NZPA

Comments from our readers

On 21 December 2010 at 10:59 pm Owen said:

The December quarter 2010 will be slower than the September one. Not sure what indicators Dr Bollard and economists are looking at but the real world is not as rosy as they believe. OCR increase in 2011, I don't think so.

On 22 December 2010 at 2:33 pm marky mark said:

I think the Reserve bank is so out of touch to the real world, they like to lock themselves in their climate controled office and reply on numbers to tell them what to do... guys ! go out do some shopping and talk to people and you will see what's really going on!