NZIER Consensus Forecasts show a mixed growth outlook amidst higher inflation, NZD/USD sellers attack 0.6900

These revisions reflect recent activity indicators, suggesting that while the New Zealand economy weathered the latest lockdown reasonably well, there is more caution about the longer-term outlook.

With the latest Omicron surge widespread across the country, fears of infection or having to self-isolate has seen people limit their movements even though restrictions were relaxed in December last year.

Annual growth in the Consumers Price Index (CPI) picked up sharply to 5.9 percent for the year to December 2021 – well above the Reserve Bank’s 1 to 3 percent inflation target band. Annual inflation is expected to pick up further, particularly as higher global crude oil prices drive up petrol prices here at the pump.

Consensus Forecasts for GDP have been revised higher in the near term, as the negative impact of the latest lockdown appears milder than initially expected. However, heightened uncertainty over what the accelerating spread of Omicron would mean for economic activity as people limit their movements for fear of infection or self -isolation has reduced growth forecast for the subsequent year.