WELLINGTON (Reuters) - New Zealand gross domestic product is seen slowing in the third quarter as a softening housing market and struggling dairy prices create headwinds that could endanger next year's optimistic official forecasts.
The GDP figures will be the first to come out since the centre-left Labour Party took office and point to an ongoing slow-down that the government and central bank may have to grapple with in the new year.
Ten economists polled by Reuters on average expected growth of 0.5 percent in the three months ending in September, bringing annual growth to 2.5 percent. [NZ/POLL]
"Growth's performance over the past year has been underwhelming and we have scaled back our optimism for coming years as a result," ASB economists said in a research note.
By contrast, the Treasury forecast growth of 3.3 percent in the year to June 2018 in its half-year update this month.
Economists have warned that economic growth falling short of Treasury projections could jeopardise ambitious spending plans the government unveiled in its half-year economic update this month.
Economists cautioned the third quarter figures could showcase ongoing trends that would drag on growth.
A wet spring had curbed production of dairy products, the country's largest goods export earner, while strong global supply dented prices.
Meanwhile, the hot housing market had slowed dramatically from its double digit growth at the start of the year, which was in turn weighing on consumer spending.
The expected GDP growth was also well below the 0.7 percent forecast by the Reserve Bank of New Zealand (RBNZ) in its monetary policy statement in November.
"From the Reserve Bank's point of view, it will feed through to their views on how much inflation picks up and that could mean an even later starting date for interest rate hikes (if the slow-down continued)," said Michael Gordon, Auckland-based senior economist at Westpac Bank.
The RBNZ has already signalled it will keep rates on hold at a record low of 1.75 percent until early 2020 while inflation stabilises around 2 percent.
New Zealand's economy, which had been the envy of the developed world in recent years, has started to run out of steam in the past year.
GDP had picked up in the second quarter to 0.8 percent thanks to a flurry of tourist spending from high-profile sporting events, but generally had been sluggish since late 2016.
(Reporting by Charlotte Greenfield)
