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BNZ economists now expect a 0.8% rise in GDP for the March quarter against the Reserve Bank's expectation of a -0.6% fall. They currently forecast inflation of 3% 'but evidence is gathering to move this higher'

BNZ economists now expect a 0.8% rise in GDP for the March quarter against the Reserve Bank's expectation of a -0.6% fall. They currently forecast inflation of 3% 'but evidence is gathering to move this higher'

BNZ economists now see the economy as having grown by 0.8% in the March quarter, after earlier expecting a 'neutral' outcome.

And they say while they are currently forecasting inflation to hit 3% in coming quarters, "evidence is gathering" to move that forecast higher.

The Reserve Bank's own forecast for March quarter GDP is for a -0.6%, which, along with the -1.0% fall recorded for the December, would see New Zealand technically tipped back into recession. (The technical definition of recession being two consecutive quarters of negative GDP.)

The March quarter GDP figures will be released next Thursday (June 17).

BNZ senior economists Doug Steel and Craig Ebert said having seen the last of the main 'partial' economic indicators being released ahead of the GDP release they were now "struggling, even more", to see how first quarter GDP can have dropped like the RBNZ anticipated it would in its May Monetary Policy Statement (MPS).

"Indeed, we have gone from being neutral on March quarter economic activity, to now expecting a 0.8% gain as a central case."

They say the point is that New Zealand’s economic indicators continue to acquit themselves very well.

"These, in turn, suggest the economy is on a much stronger footing than the RBNZ appreciates. With this comes more upside potential to inflation."

They provided this list of positive economic data very recently released:

  • Retail Trade surprised all comers in jumping 2.5% in volume, and 3.2% in ex-auto terms
  • Building Work Put in Place expanded an incredible 3.7% in real terms, when its level in Q4 was already elevated
  • This morning’s Wholesale Trade posted a nominal increase of 3.7%, which inferred a similar-sized gain once inflation-adjusted
  • Manufacturing data (also published this morning) implied a decent expansion in its output overall – we’d guess 1.0%  ̶  so a bit better than the reported 0.4% increase in sales volumes
  • The relatively new Business Financial Data pointed to robustness in key aspects of the services economy 
  • Forestry harvesting activity is still going from strength to strength, to a record high level (based on our seasonally adjusted estimate of the raw series published by the Ministry for Primary Industries)
  • Imputed rent doing its usual thing, and increasing about 0.4% per quarter.

They say that upside inflation risk continues to build.

"The RBNZ forecast a peak in annual CPI inflation at 2.6% in Q2. We currently forecast 3% over coming quarters but evidence is gathering to move this higher."

In terms of the GDP release next week they say that GDP "in clearly rising not falling – to put more pressure on the Bank’s view of the real economy, and, by implication, inflation".     

ASB economists have also been looking at their inflation forecasts as well.

ASB senior economist Mark Smith expects annual headline CPI inflation to rise to around 3% by the end of 2021 "as cost shocks and demand pressures from selected pockets filter through into consumer prices".

He says annual inflation is then expected to settle "in the mid-2’s" as some transitory influences fade.

"Not only will annual CPI inflation likely peak at a higher rate than the RBNZ expects, but it also looks set to remain persistently higher. This could bring forward the timing of [Official Cash Rate] hikes," Smith says.

"We will be keeping close tabs on surveyed inflation expectations, capacity gauges and other indicators of pricing pressures.

"...It is apparent that some of the more enduring inflation drivers are increasingly pointing upwards. The improving economic outlook, increasing pressures on (truncated) productive capacity and the likelihood that higher headline inflation filters through into inflation expectations also point to the uplift in inflation persisting."

ASB economists have currently "pencilled in" a May 2022 start to RBNZ  interest rate hikes, "but acknowledge the timing is fluid and conditional on a range of factors", Smith says.

"The divergence in the ASB and RBNZ views on inflation will start to become apparent towards the end of this year, with the 2021Q3 inflation data to be published on October 18."

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I won't be surprised if GDP growth comes out positive in the next few quarters but that can be attributed to an econometric error.
Authorities are clearly underreporting inflation stats and therefore deflating GDP to a lower degree against rising costs.


Shifted from 2% to between 2% - 3% but not to worry, will again shift to 3% plus.

AND this is when they exclude or include parameters to suit their narrative. For an average Kiwi Family cost of living has gone up by much more than 10% plus.

plenty of acronyms,BNZ disagrees with RBNZ about the GDP and now call into question the CPI estimate and timing of the OCR increase due to gathering evidence from their HP(hip pocket) that the numbers could be BS.


3% CPI Inflation bad.

30% House price inflation good.

0% wage inflation good.

Living in a boomer's paradise.

Maybe Weird Al could do another parody?

As I walk through the valley where I harvest my grain
I take a look at my wife and realize she's very plain
But that's just perfect for an Amish like me
You know, I shun fancy things like electricity
At 4:30 in the morning, I'm milkin' cows
Jebediah feeds the chickens and Jacob plows, fool
And I've been milkin' and plowin' so long that
Even Ezekiel thinks that my mind is gone
I'm a man of the land, I'm into discipline
Got a Bible in my hand and a beard on my chin
But if I finish all of my chores and you finish thine
Then tonight we're gonna party like it's 1699
We been spending most our lives
Livin' in an Amish paradise
I churned butter once or twice
Livin' in an Amish paradise
It's hard work and sacrifice
Livin' in an Amish paradise
We sell quilts at discount price
Livin' in an Amish paradise

I like it


Start acknowledging reality and start doing your job properly, Orr, and raise the OCR now. Do it before it is too late and before you are forced to much steeper raises later on.
There is a point where incompetence start running thin as an excuse, and the assumption of serious negligence start getting traction. You are reaching this point pretty fast.

Short term pain for long term gain/stability if he lifts OCR. Trouble is he is afraid of Robertson and his wonky economic theories bearing down on him.

Bank employees should have to declare their interest whenever they provide an opinion on OCR / inflation. They make (even) more money when the OCR increases.

Any thoughts on the alternative deflationary view held by Jeffery Snider (link below) or Lacy Hunt?

Jeff is amazing, Jeff, Lyn Alden and Steve van meter have such a good understanding of how the deep banking system works is awesome to listen to them speak. Im still in the deflation camp.