Downbeat manufacturing data is stoking concern that New Zealand’s economy in sinking into a deeper than expected trough, with economists trimming forecasts in the lead up to official figures.
On Thursday Statistics New Zealand is expected to release figures showing gross domestic product (GDP) expanded at around 0.6 per cent in the first three months of the year, which would see annual growth remain below 2.5 per cent.
Economists at BNZ had been generally more upbeat than their counterparts for growth at the start of the year, picking 0.7 per cent growth, based on expectations of a solid number in the bank-sponsored PMI index, a long running monthly picture of New Zealand’s manufacturing sectors.
But on Friday the PMI recorded the largest monthly drop since 2012, from 52.7 for the month of April to 50.2 in May. A figure above 50 represents expansion. The figures, released jointly with BusinessNZ showed a contraction in employment and production.
So not contracting, but close to it.
Kiwibank now sees New Zealand’s GDP growth dropping to 2 per cent in the middle of the year, with lower growth rates over the next two years. Growth peaked at around 4 per cent in 2017.
So the growth rate may have halved. This has consequences as it is economic growth that allows you to fund all the wellbeing stuff!