A rebound in business activity alongside strong building approvals data is not enough for TD Securities to change its mind about New Zealand’s immediate economic future.

“We have been flagging the notion of a triple dip recession for some time, with a necessary and sufficient condition that Sept qtr GDP contracts.  Indeed GDP fell -0.4%, very close to our below-consensus forecast,” TD Securities head of Asia Pacific Research Annette Beacher said.

"On our preliminary calculations, [the] December quarter isn’t looking much healthier, outside of the Canterbury reconstruction effort, hence another 'recession' for New Zealand remains a strong possibility."

Nevertheless, she said, this morning two pieces of “good news” were released, with a rebound in activity reported for the December quarter by New Zealand businesses in NZIER’s Quarterly Survey of Business Opinion and a “welcome rebound” in building approvals for November.

“November building approvals rose a healthy 8.8%, skewed entirely towards apartments (increasing threefold to +200 approvals).  While any sort of building activity is welcome news for an economy that is flat-lining at best, building approvals have averaged 1300/mth for the last year now with no real discernable upward trend,” Ms Beacher said.

She added that her view remains that the Reserve Bank can hold official interest rates steady at 3% until July and called for RBNZ governor Alan Bollard to “just say 'monetary policy is appropriate' rather than leave the tightening bias on the table, no matter how watered down.“

The RBNZ will next review the official cash rate on January 27.

(Source National Business Review)