ANZ: GDP: Something For Everyone

In lieu of the Q4 GDP data ANZ note that “the RBNZ know these data are not sending a clear signal regarding the degree of capacity stretch out there, because there’s a mix of demand and supply effects going on. In the final three months of each year the New Zealand economy tends to expand sharply in unadjusted terms (i.e. before seasonal adjustment) as tourist arrivals pick up, more kiwis get out and about as the weather improves, Christmas holiday spending gives retail a bump, and longer sunshine hours make it easier to get outside work done. But in a labour market this tight, it’s been hard to get the staff to meet this seasonal demand. That’s dragged on growth, alongside moderating demand.”

• “Bottom line: the noise in these data is still deafening. We didn’t take the full signal from Q3’s whopper +1.7% q/q growth rate, and we’re not taking the full signal from Q4’s payback either. That’s not to say economic momentum isn’t slowing – it most certainly is – but rather, Q4 quarterly growth overstates the pace of the slowdown. Downside surprises on the activity data are unlikely to move the dial for the OCR until they are accompanied by clear evidence that the current extreme mismatch between labour supply and labour demand has turned a corner (and the noise ceases to reverberate).”