New Zealand third-quarter growth expected to pick up pace to 0.6% quarter-on-quarter: Reuters survey

WELLINGTON (Reuters) - New Zealand’s economic growth is expected to have held up in the third quarter, supported by a reinvigorated housing market and recovering dairy prices, a Reuters survey of economists showed.

FILE PHOTO: Pedestrians walk past a sailing boat as it passes in front of the central business district (CBD) of Wellington in New Zealand, July 2, 2017. REUTERS/David Gray

Eight economists polled expected the economy to have expanded slightly faster on average in the third quarter at 0.6%, from 0.5% in the previous quarter.

That would see annual growth pick up to 2.4%, from 2.1% in the three months ended in June.

Growing global risks to New Zealand’s small open economy as well as sinking business and consumer sentiment had prompted the Reserve Bank of New Zealand (RBNZ) to cut the official cash rate (OCR) by a surprise 50 basis points in August.

The government has also announced a significant lift in capital spending to bolster the economy with a plan to invest more than NZ$12 billion ($7.7 billion) on infrastructure projects.

However, recent data suggesting strong retail and manufacturing sales in the third quarter alongside a buoyant performance in the housing market and prices for dairy had assuaged some jitters over slowing growth.

“Despite earlier concerns for Q3 growth, we found ourselves forecasting a reasonably robust...quarterly growth. Not too shabby at all – and more importantly miles away from a recession,” said Nick Tuffley, chief economist at ASB Bank, who has a forecast of 0.7%.

“A stronger GDP result would likely come as some relief to the RBNZ and result in the RBNZ’s OCR risk assessment becoming more balanced,” he added, in a research note.

The RBNZ surprised markets by keeping rates unchanged in November, but left the door open to a further cut which some economists thought would take place in the new year.

At the time, the RBNZ was forecasting growth of just 0.3% in the third quarter.

Statistics New Zealand will release the GDP data at 10:45 a.m. on Thursday local time (2145 GMT Wednesday).

The statistics agency will also release third quarter current account data on Wednesday with economists expecting the current account deficit to remain at 3.4% of GDP.

Reporting by Charlotte Greenfield; Editing by Jacqueline Wong