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    NZ Q1 GDP likely expanded by 0.3% (2.4% y/y) - BNZ Sandeep Kanihama

    Craig Ebert, Senior Economist at BNZ, suggests that NZ’s Q1 GDP risked being slow partly because of a big hole brewing for primary processing in the March quarter.Key Quotes“This was as a direct consequence of the outsized meat processing that occurred late last year, as farmers lightened up on stock – basically owing to the threat of drought from El Nino, but encouraged along by strong beef export prices and weak dairy prices. A hangover in pastoral production was certainly inferred in the March quarter exports data, as well as the quarter’s manufacturing and wholesaling figures from last week.Yet there has been plenty else offering support for Q1 economic activity. Building Work Put in Place, for instance, lifted with some gusto. Meanwhile, strong net immigration and booming tourism will support growth, especially across the services sector. Business investment, ex construction, is more difficult to pick, after a strong run though last year, and usual volatility in spending on transport goods.Taking all of the moving parts into account, our estimate for Q1 GDP growth has settled at 0.3% q/q ( 2.4% y/y). This is slower than the market’s estimate of 0.5% and the 0.6% integral to last week’s RBNZ Monetary Policy Statement (MPS). Underneath the headline GDP growth figures there will likely be further food for the bears, in that GDP per capita growth will be lower than the headline.However, the bulls will be able to point to real income growth, which is likely to be stronger than headline GDP growth, given a strong lift in the terms of trade in the quarter.”


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