Construction sector likely to have driven New Zealand’s growth in Q1

New Zealand’s economic growth for the first quarter of this year is expected to be considerable. However, the growth is likely to be lower than the 0.9 percent quarterly pace witnessed in the second half of 2015, said Westpac in a research report. This possibility has been affirmed by additional detailed data, especially the weak manufacturing and wholesale trade surveys.

For the first quarter, the economy is expected to have grown 0.6 percent, added Westpac. Construction sector is most likely to have contributed the most to the GDP growth.

In the second half of 2015, there was a sharp rise in permits that led to additional building activity in the beginning of this year. However, it is uncertain what the published growth rate will be as there have been some problems with seasonally adjusting the construction figures because of a change in building work survey. But the sector is expected to record a strong number.

Meanwhile, the economic growth is likely to have been weighed on by meat processing. In H2 2015, the possibility of an El Niño drought and lower dairy prices drove a larger than usual cull of cattle and sheep. This stimulated New Zealand’s GDP in the third and fourth quarters of 2015. However, the rise is expected to be reversed in the first quarter of 2016. The effect on the GDP is likely to be for a brief period of time. The meat processing level is expected to rebound in the second quarter.

Elsewhere, several primary sectors have recorded a decent growth. Production of milk, in seasonally adjusted terms, rose marginally, while, forestry, fruit and wine registered strong growth. Meanwhile, mining activity is likely to have declined in the first quarter because of the natural run-down of output from existing oil wells, according to Westpac.

Consumers are likely to have contributed modestly to the economic growth in the first quarter. Retail sales are expected to have grown 1 percent, below the average seen in the past few years, despite the boost from growing numbers of tourists.

This might be due to weak housing market in the beginning of 2016 after investor regulations introduced in 2015. However, house prices have recovered since. Consumers might seem more cheerful in the second quarter.