There are expectations that the grim second-quarter figure will be revised upwards in Thursday’s update.
That could also mean that the initial third-quarter numbers are overstated (and revised in the new year).
Regardless, economists see the underlying story as one of recovery.
Most have revised their expectations up in the past few weeks as the momentum of positive news has picked up.
The Reserve Bank (RBNZ) still has a forecast of just 0.4% for the quarter.
Ultimately, the estimates didn’t really matter, given that third-quarter GDP (gross domestic product) was characterised by an annual re-benchmarking process, which caused significant revisions, ASB economist Wesley Tanuvasa said.
“What does matter is the level of economic activity – and we think that will come out stronger than the RBNZ’s starting point assumption.”
Kiwibank economists agreed.
“The story beneath the surface points to a quarter of broad-based strength,” they said.
Most industries would post gains.
Professional services were likely to rebound strongly, supported by the rise in hours worked over the quarter, the Kiwibank economists said.
Additionally, indicator data over the third quarter also pointed to some meaningful lifts across retail, manufacturing and construction.
“It all points to a strong quarter of growth. And the outlook from here is looking even brighter,” the Kiwibank economists said.
“High-frequency data for the month of November reflects activity is gathering momentum into the final stretch of the year … 2026 should be an even better year.”
ANZ economists are forecasting 1% growth for the quarter.
“The rebound we’re now expecting in reflects a combination of a bounce-back from temporary weakness in [the second quarter] and an upturn in the economic cycle,” ANZ’s Matthew Galt said.
“The partial GDP indicators for manufacturing and construction – two key volatile industries – showed bounces from their Q2 weakness. The retail trade data – which is cyclical and typically leads overall GDP – showed strong growth.”
The services industries, including professional services and wholesale trade, also showed strong growth, Galt said.
“And this data came after solid increases of about 1% each in hours worked and hours paid in the third-quarter labour market data.”
A strong GDP could add upward pressure to the long-term interest rate outlook as markets start to price in the recovery.
“If the result is in line with our view, it could exacerbate the recent surge in longer-term interest rates as the market has begun to speculate about the timing of OCR [Official Cash Rate] hikes,” Westpac senior economist Michael Gordon said.
Westpac has also picked a 0.9% increase.
“For our part, we think it’s early days to be considering pulling forward the date for when the tightening cycle begins,” Gordon said.
“We think it would pay for the RBNZ to provide some guidance on its thinking during the long summer break between policy meetings.”
However, BNZ’s Steel suggested the recent upward moves on wholesale markets suggested a strong GDP performance should already be priced in.
“So a stronger-than-bank outcome need not necessarily be an excuse to build in even earlier hikes.”
Liam Dann is business editor-at-large for the NZ Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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