WELLINGTON (Reuters) - New Zealand's economy was expected to rebound in the first three months of the year after the key dairy sector was disrupted by bad weather at the end of 2016.
Economists polled by Reuters expect the economy to have grown 0.7 percent in the first quarter of 2017 up from 0.4 percent in late 2016 when heavy rain hurt dairy production and exports. Gross domestic product data is due on Thursday.
Annual growth is expected to be 2.7 percent, unchanged from the fourth quarter of 2016, the poll found.
The median forecast was near the top end of the range in the Reuters poll but below the central bank's more ambitious 0.9 percent estimate of quarterly growth in January-March.
Nevertheless, the result was seen as unlikely to prompt the Reserve Bank of New Zealand (RBNZ) to change the record-low 1.75 percent official cash rate it has firmly signalled will stay in place for years as it focuses on stoking inflation.
"We expect next week's GDP figures to show a more 'normal' pace of growth over the March quarter, as some of the temporary factors that held back growth in the December quarter unwind," Westpac economists said in a research note.
They expected the current account deficit due on Wednesday to widen to 3 percent of GDP from 2.7 percent in a "reversal of some temporary factors," in contrast to economists in the Reuters poll who expect it to stay unchanged.
"Export volumes have been held back to date by the drop in milk production over late 2016, but we expect a strong rebound in export earnings over the rest of this year."
CAPACITY CONSTRAINTS
While the forecasts for economic growth in the first quarter were wide-ranging - between 0.0 percent and 0.8 percent - they were below those of the central bank, underscoring a growing discrepancy between its outlook and that of private-sector economists.
New Zealand's economy has been among the best performing in the advanced world in recent years, but rapid growth is starting to pressure the country's infrastructure.
The key question for the central bank is when any capacity constraints will lead to higher price pressure, challenging its neutral stance which sees monetary policy remaining "accommodative for a considerable period of time."
"Anecdotes suggest tourism spending and construction activity are starting to hit capacity constraints. This could mean smaller growth contributions from these industries going forward," ASB economists said in a research note, forecasting a more moderate 0.5 percent quarterly growth in the first quarter.
"An outcome close to our forecast will likely be a concern to the RBNZ."
(Reporting by Ana Nicolaci da Costa; Additional reporting by Chartlotte Greenfield; Editing by Eric Meijer)
