New Zealand GDP growth stabilizes

GDP growth in New Zealand was a little firmer than expected in 3Q at 0.9%q/q (JPM and consensus: 0.8%). This represents a rebound from a soft 1% annualized in the first half, and helps arrest the drop in the annual growth rate from 3.3% last year, allowing stabilization in the low 2s (2.3%), as per the forecasts for the remainder of 2015 and 2016. 

Consumption outcomes were decent (0.6%q/q) as expected, while capex was firm, particularly in transport equipment, which spiked 30%q/q after three quarters of declines, and plant and equipment (up 6.1%q/q). P&E capex is an important bellwether, and viewed the slump in 1Q as a one-off. The last two quarters have seen solid double-digit gains, indicating domestic demand remains on a relatively stable footing. Trade and inventories were a wash, netting out to a near-zero growth contribution overall. 

Nothing seen in the GDP breakdown that really challenges the prevailing themes: trade was tracking a bounce-back in 3Q, but dairy weakness, in both volumes and prices, has yet to really hit the GDP data, while significant challenges loom from El Niño. Also consumption growth is holding up despite the terms of trade shock, which, combined with weaker net trade and soft wage growth, is lowering the savings rate and will widen the current account deficit. And of course, stabilization of growth in the low 2s, which is only slightly above the estimate of potential (1.9%), makes it hard for the RBNZ to generate a compelling rise in inflation back toward target.