New Zealand economy 'trending sideways' rather than recovering says credit reporting agency boss

New Zealand economy 'trending sideways' rather than recovering says credit reporting agency boss

By Gareth Vaughan

The New Zealand economy isn't yet recovering but rather "trending sideways," according to the local boss of credit reporting agency Dun & Bradstreet.

John Scott, Dun & Bradstreet's New Zealand general manager, told in a Double Shot interview that based on what he was seeing, the economy was not yet in recovery mode.

"It (the economy) is sideways trending, (that) would be the polite way of putting it," said Scott.

"Some areas are getting growth, but it’s more those with deeper pockets and stronger balance sheets (who are) able to ride out the storms and also buy businesses that are distressed (whereby) they can buy them at a cheaper rate."

"We estimated about 2.5% GDP growth for 2010 and what we’re saying is 2011 will be about 2.4%. Then we’ll see some increase in 2012 to around 3.3%."

The Reserve Bank estimates GDP growth will rebound to almost 4% by the middle of 2012 from below 2% for most of 2011. The official 2010 GDP figure won't be released by Statistics New Zealand until March.

Deutsche Bank chief economist Darren Gibbs reckons the economy contracted 0.4% in the December quarter, which following the September quarter's 0.2% drop, means a double dip recession.

Scott noted significant challenges for the domestic economy with many of them related to imported inflation on the likes of food prices and commodity prices. The US dollar’s continued weakness and "the fact that they (the US) are just effectively pumping money into the global economy" were also concerns.

"Also because of our higher interest rates there is international money coming into New Zealand to chase the higher yields," Scott added.

"So the consequence of that is are we able to control some of those factors that are perhaps going to cause a squeeze later on?"

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