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New Zealand 2018 GDP likely to bolster case for loose monetary policy: poll

[SYDNEY] New Zealand's economy likely gathered steam last quarter although annual growth is expected to have slowed further, a Reuters poll of 11 economists showed, reinforcing the case for monetary policy to remain accommodative.

Data due on Thursday is forecast to show New Zealand's gross domestic product (GDP) expanded 0.6 per cent in the three months to the end of December, double the previous quarter's 0.3 per cent. However, the expected acceleration in the quarter would still fall short of the Reserve Bank of New Zealand's (RBNZ) prediction for 0.7 per cent growth.

Singapore-based TD Securities, which is forecasting a brisk 1 per cent quarterly pace, says strong household consumption and government and investment spending likely provided a boost last quarter while trade made a small contribution.

Construction had been robust too, led by a surprising lift in non-residential activity particularly in Auckland and Waikato, economists said.

Most analysts, however, focused on an expected slowdown in annual growth, saying such an outcome would add to the case for a policy rate cut from current record lows of 1.75 per cent.

On an annual basis, New Zealand's NZ$291 billion economy (S$269 billion) likely grew just 2.4 per cent last quarter, according to the Reuters survey, from 2.6 per cent in the September quarter. Annual average growth is also seen easing to 2.8 per cent from 3.0 per cent previously.

"In this environment, we think inflationary pressures will lack the oomph required to maintain core inflation close to the RBNZ's 2 per cent target midpoint, with capacity pressures expected to wane," ANZ economists said in a note.

"We expect it will take some time before growth headwinds make themselves felt in core inflation indicators, which is why we have pencilled in the first (rate) cut for November."

Most economists pointed to soft manufacturing activity while easing net migration also played a part.

For the current quarter one possible hit to growth could come from any impact last week's mass shooting in Christchurch has on tourism in a country known as a safe destination for visitors. The attack killed 50 people in two mosques.

"I think there will probably be some immediate impact on tourist arrivals," said Sharon Zollner, Auckland-based chief economist at ANZ.

"There will be a near-term impact, it's hard to say how long that might last."

Separately, Statistics New Zealand will release fourth quarter balance of payment figures on Wednesday with seven economists expecting the current account deficit to widen further to NZ$11.35 billion.


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