N.Z.’s Economy May Have Accelerated on Rugby Cup Spending
December 21, 2011, 2:52 PM ESTBy Tracy Withers and Daniel Petrie
(Updates with current-account gap in 10th paragraph.)
Dec. 21 (Bloomberg) -- New Zealand’s economic growth likely accelerated in the third quarter as the nation hosted the Rugby World Cup, helping bolster a recovery restrained by earthquake rebuilding delays and weaker exports.
Gross domestic product rose 0.6 percent in the three months through September from the prior quarter, according to the median of 14 estimates in a Bloomberg News survey before a government report tomorrow at 10:45 a.m. in Wellington. The economy grew 0.1 percent in the second quarter.
About 133,000 rugby fans visited New Zealand from July to October, stoking spending on everything from transportation to hotels to souvenirs. Investors are betting Reserve Bank Governor Alan Bollard will see the influx as a temporary lift and hold the official cash rate at a record-low 2.5 percent until late next year on signs of weaker consumer confidence.
“The Reserve Bank will be more focused on the pace of underlying growth,” Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland, said in a research note. “We still see a gradual underlying recovery in place. The looming risk to the outlook is the euro-zone situation.”
New Zealand’s currency has fallen 7.9 percent in the past three months against the U.S. dollar, making it the biggest decliner among the Group of 10 currencies. In the three months through Sept. 30, it fell 8.2 percent, the steepest quarterly drop since the fourth quarter of 2008. The currency today traded at 76.74 U.S. cents at 12 p.m. in Wellington, little changed from yesterday in New York.
Annual Growth
Tomorrow’s report may also show GDP expanded by 2.2 percent in the third quarter from a year earlier, compared with a 1.5 percent annual rise in the second quarter.
Bollard on Dec. 8 forecast third-quarter growth of 0.6 percent, down from 0.8 percent in his September projections. He signaled he would leave the benchmark rate unchanged until the middle of the year, saying domestic activity was “modest” and there is a risk global economic conditions deteriorate.
Eleven of 16 economists surveyed by Bloomberg News expect Bollard will keep borrowing costs unchanged until at least September. None expect an increase before June. There is a 22 percent chance of a quarter-point rate cut next month, according to a Credit Suisse AG index based on swaps trading.
The Organization for Economic Cooperation and Development last month cut forecasts for global economic growth in 2012 amid concern that the European debt crisis may damp global demand. Australia last week lowered its forecast for agricultural-export earnings, also citing Europe.
Current Account
A government report earlier today showed New Zealand’s current-account deficit in the year ended Sept. 30 was 4.3 percent of GDP, more than the 3.9 percent median forecast in a Bloomberg survey of economists. The gap in the third quarter was NZ$4.6 billion ($3.5 billion), compared with a revised NZ$844 million shortfall in the three months through June.
New Zealand’s commodity export prices fell for a sixth month in November, the longest stretch of declines since the economy contracted in 2008 and early 2009, according to an ANZ National Bank Ltd. index.
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. In the third quarter, exports fell 0.7 percent, according to a release on Dec. 1.
In the third quarter, retail sales increased 2.2 percent, the most in more than four years, boosted by spending at accommodation outlets and on food and beverage services, according to a Nov. 14 report.
Clothing Sales
Warehouse Group Ltd., the nation’s biggest discount retailer, said Nov. 11 that Rugby World Cup clothing and other merchandise contributed to a 2.2 percent rise in sales in the three months through Oct. 30.
Sky City Entertainment Group Ltd., New Zealand’s largest casino operator, last month said the sporting event boosted sales at its hotels, bars and restaurants while the gains at its gaming machines and tables was less than expected as regular customers stayed away.
Weighing on growth, construction fell to the lowest level in more than 10 years in the third quarter, according to a Dec. 5 report. Residential building was unchanged and non-residential work dropped 4.6 percent, the report showed.
Rebuilding is expected to be revived next year in the South Island city of Christchurch and in some surrounding towns in the Canterbury province after earthquakes the past 15 months wrecked homes, roads and commercial buildings.
Rebuilding Effort
The Earthquake Commission, a government-owned insurer, yesterday said it will accelerate repairs on homes with less than NZ$100,000 in damage next year. It expects to have 80 percent of properties mended by the end of 2014, according to a statement on its website.
Bollard this month said weak business confidence and investment add to the case for a slower recovery.
Business confidence sank for the fourth time in five months in December, ANZ National Bank said in a Dec. 19 report. An index of household sentiment fell to 101.3 this quarter from 112 in the three months through September, Westpac Banking Corp. and McDermott Miller Ltd. said in an e-mailed report the same day.
For news and related information: Stories on interest rates: NZOCR <Index> CN <GO> Reports on Alan Bollard: NSE ALAN BOLLARD ZEALAND <GO> Stories on New Zealand economy: NZNTGDPC <Index> CN <GO> Top New Zealand stories: TOP AU <GO>
--Editors: Brendan Murray, Garfield Reynolds
To contact the reporters on this story: Tracy Withers in Wellington at twithers@bloomberg.net; Daniel Petrie in Sydney at dpetrie5@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
