This week’s Gross Domestic Product (GDP) figures show a historic increase over the previous year – but there is a warning that the current lockdown will cut next quarter’s growth.
Data for the June quarter will be released on Thursday.
Economists predict a quarterly increase of 1.1% (in Kiwi Bank) to 1.5% (in ASB).
This means an increase of about 16% in annual GDP.
“This is probably the highest number we’ve ever seen, but it’s because we were in lockdown at Q2 12 months ago,” said Sharon Zulner, ANZ’s chief economist.
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Although the June result will outperform this quarter’s events, it is still useful to estimate the starting point of the economy, Zulner said.
“For its value, we see very large-scale growth beyond the sectors that are directly affected by the closed border.”
He said the current lockdown would be reduced by about 66% from next quarter’s results.
But the figures show that there is more economic activity at Level 4 this time around than in 2020.
“Of course, 60% of the country is now at Level 2, even though it wasn’t that Level 2. We were all very prepared for it this time. I would say maybe a fair number of people at their door. Surprisingly, they don’t think it will be delivered until after the lockdown.
On the other hand, the supply chain challenges the rest of the country, while Auckland remains at the level of 4, which is significant.
The key to the economy, he said, was how businesses changed their investment plans, employment plans and any increase in bankruptcy. He said that production would be more important than reduction in GDP.
At Informatics, Gareth Kernan expects the lockdown to knock out about 7% of GDP in the first quarter. “But it’s important to understand how strong the economy is.”
Nick Tuffley, chief economist at ASB, said retail spending, housing, manufacturing, logistics and various services helped boost momentum in the first half of the year.
“But Auckland has a long history of severe lockdowns, and the economy is likely to suffer,” he said.
ASB expects a decline of 6.5% in Q3 and 7.8% in Q4.
“We still expect to be 0.8% ahead of where we were in the middle of the year by the end of 2021.”
“There will be an important activity that will restore the lost activities, but some will not be able to regain,” he said.
“If you’re missing out on coffee for a month, you’re not going to go out every morning for two next month.
New Level 2 hospitality rules have made it difficult for some of these businesses to break, he said.
Kiwi Bank economists say they expect a 7% drop in GDP due to the lockdown, followed by a return of 8.5 at the end of the year.
“[We are] The economy contracted 7% in the September quarter. That’s a big drop, but not as severe as last year’s 11% drop. Businesses have adapted to the lockdown as much as possible, and sanctions outside Auckland have eased faster than last year.
The solid pace of the economy moving towards lockdown should be helped as we come out from the other side. Also, recent experience tells us that activity is restored faster when the lockdown is removed. Paint-up demand is issued as a return to freedom. We are opting for a faster 8.5% quarterly return in Q4 – a forecast that relies on further hurting sanctions in the coming weeks. Shutting down the economy is priceless. As we have seen from last year’s blockade, closing borders and closing a country causes economic ruin. If we didn’t have covid, the output of the economy would be more than 1%.