Here’s why economists are wary ahead of the GDP data
Thursday, 20 March 2025
Economists expect New Zealand GDP to rise around 0.3-0.5% in December 2024 quarter.
However, the data is being questioned by some economists due to seasonal adjustment issues.
The GDP figures could be revised in future updates due to volatility and adjustments.
On Thursday we will find out if the New Zealand economy has broken out of its weakest six-month stretch in 33 years - but the data is being questioned by economists.
On Thursday Stats NZ will be releasing Gross Domestic Product (GDP) data for the December 2024 quarter.
Westpac economist Michael Gordon said although the bank’s economist believe there will be a 0.5% rise in GDP for the December quarter, it was largely driven by technical issues, saying it was a “needlessly complicated issue”.
“This is entirely due to issues that we have identified with the seasonal adjustment of the data. Our sector-by-sector forecasts suggest effectively zero growth in activity over the quarter, as does our GDP ‘nowcast’ model.”
“We suspect that the current GDP figures don’t adequately account for the timing of activity over the year. If the existing pattern continues, it will substantially boost the reported growth rate for the December quarter.
“But it’s also possible that Stats NZ will correct its adjustment this time. In which case, we may not get any growth in the December quarter, but some of those ugly declines in previous quarters could be revised up. We’ll find out which way it goes on Thursday.”
Kiwibank economist Sabrina Delgado said there was a “great degree of uncertainty around New Zealand GDP number”.
“Since Covid, the sharp fluctuations in activity during lockdowns, coupled with the temporary loss of tourism—a highly seasonal sector—have made it difficult to pinpoint the seasonal components of the data.“
As a result, revisions to historical prints have been common with each new release, and there is a strong chance that next week’s numbers may be revised in future updates, she said.
“Stats NZ recently introduced a new method for seasonally adjusting the data, but whether the new method will prove effective is yet to be seen. We anticipate that there will still be a period of adjustments and refinements ahead. And as such, still expect to see a degree of volatility in the numbers.”
She expected the data to show a 0.3% lift over the December quarter, in line with the RBNZ’s forecasts and the economy had moved forward to recovery.
Jason Attewell of Stats NZ said it was confident that its current process for seasonally adjusting and presenting economic data is fit-for-purpose, and in line with international best practice.
“Seasonally adjusted GDP is the official measure of quarterly economic activity and is necessary to understand underlying economic growth.”
Seasonal adjustment is the process of estimating and removing the impact of things like sales increases at Christmas or annual cycles in dairy production. When the pandemic began in 2020 the shocks to some data, including GDP, required that treatments were applied to the seasonal adjustment process.
As activity returned to more stable patterns, some settings chosen during the pandemic were no longer optimal. These settings were updated for the GDP September 2024 quarter.
“It is international best practice to seasonally adjust economic time series which have a clearly identifiable seasonal pattern, such as New Zealand GDP. Seasonal adjustment means results can be more clearly compared to other quarters, which makes it easier for customers to interpret the data,” he said.
All of Stats NZ GDP data is available in both actual and seasonally adjusted terms, meaning customers are able to view series before and after seasonal adjustment has been applied.
ASB economist Wesley Tanuvasa said the bank estimated GDP expanded by 0.3%.
“We expect the economy to grow at around 0.3% quarter-on-quarter in the first half of 2025, sizeably slower than the 0.6% quarter-on-quarter growth assumed by the RBNZ in the February Statement.
“We expect this period of below trend growth to result in further deterioration of the output gap until mid-2025, contrary to the assumed narrowing of the output gap expected by the RBNZ.”