Westpac, ANZ and BNZ now think March-quarter GDP figure will show zero growth

Saturday, 11 June 2022

Some banks believe Covid will have blocked economic growth in the March quarter, but reckon it may be possible to catch up lost time.

Westpac and ANZ have slashed their GDP forecasts and have joined BNZ in predicting Stats NZ will report the economy did not grow at all in the first quarter of this year.

Stats NZ is due to report the March-quarter GDP figure on Thursday morning, amid growing speculation that rising interest rates could tip New Zealand towards a recession.

Before Friday, Westpac and ANZ had both been forecasting Stats NZ would report the economy grew by a moderate 0.6% in the first quarter of this year.

But both have cut their forecast to zero-growth, with Westpac citing a new batch of weaker economic data, particularly relating to manufacturing.

* GDP data may show bounce before recession

* GDP bounced back 3 per cent in final quarter of last year

Reserve Bank governor Adrian Orr discusses the risk of a recession in May.

Westpac acting chief economist Michael Gordon said Covid had been a handbrake on the economy in the March quarter but the bank’s forecast for economic growth in 2022 overall remained “broadly unchanged”.

“What we’ve taken out of our forecast for the March quarter, we’ve added back into the June quarter,” he said.

ANZ senior economist Miles Workman said its revised GDP forecast amounted to a “decent downgrade”, but the impact of Covid meant it was hard to diagnose the trend, also suggesting that growth that did not materialise earlier in the year might show through in the June-quarter figures.

Neither bank suggested the Reserve Bank would put much weight on the quarterly figure.

“It feels like the bar is higher than normal for these data to significantly alter the Reserve Bank’s policy stance,” Workman said.

But he said that if Stats NZ did report zero-growth, markets might lean towards the view that the official cash rate would not rise as high as 4% next year, as was implied by the Reserve Bank in May.

“A weaker read will likely see markets carry a little more sympathy for our view that the OCR will peak at 3.5%,” he said.

BNZ earlier forecast a “flat quarter” but was also optimistic about the chances of a solid bounce in the June numbers, which will be released in September.

ASB was sticking to its forecast for 0.6% GDP growth on Friday, but said a “plethora of headwinds are ready to stick the knife in”.

Those included higher interest rates, “ongoing cost pressures”, slowing construction, softer agriculture production and more cautious households, economist Nat Keall said.

“The future is more important than the past and, on that front, growth is set to slow over 2022 and 2023,” he said.