New Zealand’s economy probably expanded last year at the fastest annual pace since the 2008 global financial crisis as a tourism boost from the Rugby World Cup outweighed weakness in manufacturing.
Gross domestic product rose 2.2 percent in the fourth quarter from a year earlier, the fastest annual pace in almost four years, according to the median of 16 estimates in a Bloomberg News survey before a government report tomorrow at 10:45 a.m. in Wellington. The economy grew 1.9 percent in the 12 months through September.
Spending by locals and about 133,000 foreign rugby fans who visited New Zealand from July to October helped stoke retail sales, and construction rebounded last quarter after earthquakes caused a five-quarter slump. Economists’ median forecast matched the prediction of the central bank, where Reserve Bank Governor Alan Bollard has signaled he may extend a 12-month pause and keep the official cash rate at a record-low 2.5 percent until later this year.
“The New Zealand recovery is gaining a firmer footing,” Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland, said in a research note. “Nevertheless, the pace of underlying growth remains gradual. We continue to expect the RBNZ will leave the cash rate on hold until December.”
Tomorrow’s report may also show GDP expanded by 0.6 percent in the fourth quarter from the July-to-September period, when it increased 0.8 percent.
The fifth consecutive quarter of growth helped the re-election of Prime Minister John Key, whose National party increased its share of the vote at a general election held in November.
“The domestic economy is showing signs of recovery,” Bollard said in a March 8 statement announcing no rate change. “Household spending appears to have picked up over the past few months and a recovery in building activity appears to be under way.”
The Canterbury region of New Zealand’s South Island was struck by quakes in September 2010 and another in February 2011 that killed 185, making the latter the nation’s deadliest temblor in eight decades. Bollard has held the nation’s benchmark borrowing cost since lowering it a half percentage point in March 2011.
Twelve of 14 economists expect no change in interest rates until the fourth quarter, according to a separate Bloomberg survey. There is a better-than 50 percent likelihood he will leave rates unchanged until December, according to swaps prices from Westpac Banking Corp.
Bollard on March 8 forecast fourth-quarter growth of 0.6 percent and signaled he may leave the benchmark rate unchanged until the end of the year because modest growth and the New Zealand dollar’s 13 percent gain in the past year were curbing inflation.
Retail sales rose 2.2 percent in the final three months of 2011 from the third quarter, when they gained 2.4 percent, according to a government report last month. Spending was boosted by rugby fans and the reopening of two large department stores in central Christchurch, more than six months after they were closed by a devastating earthquake, the statistics agency said.
Construction rose in the final three months of the year, the first gain in six quarters, according to a report published March 5. The pickup in rebuilding of damaged Christchurch property is taking longer than expected because of continuing aftershocks, Bollard said this month.
Farm production was boosted late last year by favorable weather. Fonterra Cooperative Group Ltd., the world’s biggest dairy producer, said in December that milk collection was 8.4 percent higher than a year earlier. The Auckland-based company later said it loaded a record volume of product for overseas shipment in December.
Exports surged 2.9 percent in the fourth quarter, outpacing imports, a government report showed on March 1. Exports make up 30 percent of the New Zealand economy, with commodities such as milk powder, meat and lumber accounting for about two-thirds of all sales.
The current-account deficit narrowed to 4 percent of GDP in the year ended Dec. 31 from 4.3 percent in the 12 months through September on rising exports and rugby fan spending, the statistics agency said today.
A decline in manufacturing may have curbed GDP growth in the fourth quarter, Tuffley said. Meat processing contracted because animals were kept on the farm for longer rather than being sent to slaughter, he said.