New Zealand’s economy likely expanded at an aggregate level in the second quarter but per capita growth was probably tepid as migration runs hot.

The median in a Bloomberg poll of 12 economists forecasts for gross domestic product grew 0.8 percent in the three months ended June 30 and 2.5 percent on the year. The central bank is projecting quarterly growth of 0.9 percent in the second quarter. New Zealand’s economy grew 0.5 percent in the first quarter and annual growth was 2.5 percent.

ANZ Bank New Zealand expects quarterly growth accelerated to 0.7 percent and annual growth was steady at 2.5 percent with strong contributions from primary industries and services sectors.

However, given the temporary factors that weighed on growth in the prior two quarters – including disruptions from the Kaikoura earthquake – the bounce could have been bigger, said ANZ senior economist Phil Borkin. Also, it is “hard to put a positive spin on annual per capita growth sitting only a touch above zero,” he said. Borkin tips per capita economic growth to be 0.3 percent on the quarter. Westpac Banking Corp also expects per capita growth of 0.3 percent.

GDP per capita shrank 0.1 percent in the March quarter, its second quarterly contraction after a 0.2 percent decline in the December period. It was up 0.9 percent in the year ended March 31. Per capita growth has been held back as New Zealand’s population has lifted on the back of record net migration, which has supported aggregate gains. The latest data from Statistics New Zealand showed annual net migration reached a record 72,400 in the year to July, up 3,400 on the same period a year earlier. 

ANZ’s Borkin said some of the challenges associated with capacity and skilled labour pressures, the turn in the credit cycle, and the weaker housing market “are acting as clear growth headwinds.”

A boom in the construction sector is being hindered by capacity constraints and data earlier today showed the number of property sales across New Zealand dropped by 20 percent last month, with none of the 14 regions recording an increase, according to the Real Estate Institute of New Zealand. Activity in the market has slowed after moves by the central bank to clamp down on the level of high loan-to-value ratio mortgages in an effort to reduce the risk to the nation’s financial stability.

ASB Bank is tipping GDP growth of 0.6 percent quarter-on-quarter and 2.4 percent on the year That expansion is helped by a tourism boost, robust levels of confidence, near-record highs for the terms of trade, low interest rates and strong population growth, said ASB senior economist Mark Smith, who also noted “capacity constraints and headwinds from the slowing housing market are proving to be influential.”

Westpac predicts aggregate growth of 0.8 percent in the quarter and 2.5 percent on the year but expects to see signs of softness, with the most notable being a slowdown in construction. “Despite a large pipeline of planned work and growing demand for housing, a number of factors are providing a brake on building activity, especially in Auckland. These include rising costs, limited capacity and a tightening in credit conditions,” said Westpac senior economist Satish Ranchhod.

He also noted post-earthquake reconstruction in Canterbury is continuing its gradual wind- down and there is some softness in the manufacturing sector.

Ranchhod said the June quarter will probably be a high point for GDP if it’s boosted by temporary factors, as expected. “Looking to the remainder of 2017, we expect that growth will ease off,” he said.

– Rebecca Howard

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