Photo: RNZ
- The economy likely grew about 0.9 percent in September quarter
- Construction, primary sector, manufacturing expected to be positive
- Lower interest rates adding money and momentum to recovery
- GDP data volatile, subject to large revisions.
- Reserve Bank to stick with wait and see script
The economy is expected to emerge from its mid-year stagnation with a solid growth reading in the three months ended September, raising hopes that recovery is about to take off.
Economists expect gross domestic product (GDP) - a broad measure of economic growth - rose by between 0.8 and 1.0 percent in the three months ended September, double the Reserve Bank forecast of 0.4 percent.
ASB economist Wesley Tanuvasa said cuts to the official cash rate (OCR) would help support interest rate sensitive sectors such as construction, business services, retail and accommodation.
"Seeing interest-rate sensitive sectors come off life support will comfort the RBNZ, providing signal that monetary transmission is (finally) being supported by Tier 1 activity data."
Recent data including building work, wholesale trade, and service sector has been signalling an improving economy of late.
GDP data vulnerable to revisions
ANZ has forecast a 1 percent rise in GDP, but noted that previous figures may be markedly revised, changing the historic picture of the economy.
"Historical revisions could provide a surprise on the day. Revisions can be particularly large in the Q3 release as it is when a lot of the more comprehensive annual data is incorporated into GDP estimates," economist Matthew Galt said.
"One risk to note is that if the fall in GDP in Q2 is revised to be less deep, this could lower headline quarterly GDP growth in Q3, all else equal, as growth would be coming off a higher base."
However, Galt said a strong positive number would be an economic tonic.
"If GDP has rebounded in Q3 as we expect, it provides a good base for a meaningful economic recovery over the summer."
Reserve Bank will "stick to the script"
A strong number was seen as a possible reason for wholesale interest rates to stay elevated and for more bets that the RBNZ may start eyeing rate rises sooner than expected.
The Governor of the Reserve Bank, Anna Breman, has been at pains in recent days to calm markets and push back against rises in wholesale rates by saying another cut is a possibility, but more likely the OCR will stay at its current 2.25 percent.
ASB's Tanuvasa said the GDP numbers would probably not change the RBNZ's rate thinking for now, and it would likely remain in "wait and see" mode.
"It will be a job for next year, but the RBNZ will have to communicate its wishes carefully. The economic recovery looks to depend on it."
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