New Zealand’s economy — dubbed rockstar by some commentators given its impressive track record — hasn’t lived up to that reputation in early 2017.
It’s been wallowing in recent quarters, struggling to find traction despite strong population growth, strong export incomes and record-low interest rates, all factors that should, in usual circumstances, act to support economic growth.
It’s confounded many an economist.
However, like a true rockstar, it looks like the Kiwi economy may be about to make a comeback.
According to Capital Economics’ latest New Zealand Activity Proxy (NZAP) for May — a measure of economic activity utilising nine individual indicators to provide a timely guide to changes in activity levels — economic growth looks set to rebound strongly when the June quarter GDP report is released in a little under two months time.
Here’s a chart of the NZAP overlaid against the nation’s official GDP growth rate released by Statistics New Zealand.
Katie Hickie, Australia and New Zealand economist at Capital Economics, says that seven of the nine components in the NZAP improved during the month, an outcome that in her opinion points to a broad-based lift in momentum across the New Zealand economy.
“There are signs that activity in some of the key areas of weakness at the start of the year has improved. In addition, it appears that some of the main areas of strength earlier in the year have continued to provide support,” she said in a note today.
“The pick-up in the NZAP in May is consistent with a bounce back in the second quarter. At this stage, we expect that GDP growth accelerated from 0.5% in the first quarter to around 1.0%.”
Something to consider, especially with the debate surrounding the timing a rate hike from the Reserve Bank of New Zealand (RBNZ) continuing to bubble away underneath the surface.