21 Jun 2010

Forecasts for economic growth diverge

2:52 pm on 21 June 2010

Economists diverge their estimates for how much the economy grew in the first three months of this year.

Official figures for Gross Domestic Product - a broad measure of the health of the economy - for the first quarter will be published on Thursday.

The Reserve Bank is picking the economy to have expanded by 0.8%, the same as the previous quarter.

This is higher than the market consensus forecast of 0.5%.

Economists at Infometrics are the most pessimistic, believing the economy grew by just 0.2% in the first quarter.

Managing director Gareth Kiernan says the economy is improving, but growth has hit several speed bumps.

He says manufacturing activity was still weak in the March quarter, as was the agricultural sector.

Mr Kiernan says construction and parts of the service sector, finance and real estate sector also made a soft contribution.

Westpac senior economist Dominick Stephens is pencilling in economic growth of 0.7% in the first quarter, as he believes the economy will have received a huge boost from both the export and resources sectors.

He says the mining industry could be experiencing a 10% jump in activity.

Mr Stephens says consumer spending is down early in 2010, the housing market has gone flat and consumption and spending have been slow, but goods-producing industries are doing well and export prices are high.

Separately, official figures for the country's balance of payments in the March quarter are also released this week.

Economists are expecting it to continue to improve thanks to strong growth in exports.

The consensus forecast is for the current account deficit to narrow to 2.7% of GDP for the year ending march.