The economy could be tapping the brakes in the June quarter, with heavy traffic flows on the country's roads dropping, possibly as logging slows down after a big dive in export prices.
The ANZ Truckometer report out yesterday shows the heavy traffic index fell a further 0.8 per cent in June, after an even bigger 2 per cent drop in May.
Anecdotally, the forestry sector was slowing dramatically, ANZ said, and that was in line with the drops in heavy traffic flows in the Truckometer report. That could be a factor that sees quarterly economic growth slow to just 0.5 per cent in the June quarter, half the pace seen in the March quarter.
The latest PF Olsen report shows overall log prices have slumped about 26 per cent since the peak in March.
The rapid deterioration in the export log market has continued recently, with the export "A" grade price falling 44 per cent since a March peak.
Log prices have plunged due to stubbornly high log stocks in China, made worse by a rising New Zealand dollar. A-grade log prices are now back to levels last seen in 2009 and are 13 per cent the 10-year average, PF Olsen says.
At the same time, harvest costs have risen in the past decade.
"This means that the price drops we have seen in the past four months are putting many harvesting jobs into a loss-making situation - something forest owners are very keen to avoid," PF Olsen chief executive Peter Clark said.
More pessimistic market watchers were expecting log prices to fall further, while others though July may mark the low point, with prices picking up in the next couple of months.
Meanwhile, the ANZ truck index suggested quarterly economic growth may be "sharply lower" than the strong 1 per cent a quarter rate seen since the middle of last year and annual growth rates may be close to topping out.
The Truckometer is seen as closely matching changes in economic growth, and the results come out just a few days after the end of the quarter. The heavy-traffic index was accurate in predicting that March-quarter growth would hit 1 per cent.
But the latest index points to June-quarter growth of about half that rate, ANZ said, with more heavy traffic on only three of eleven key roads in June.
But even 0.5 per cent economic growth for the June quarter would be "pretty respectable", the bank's latest report says. "The question is whether we've shifted down a gear or hit the brakes."
The heavy-traffic index suggested annual growth may be close to peaking, though still indicating growth of about 3 per cent, near the top end of New Zealand's potential growth rate, without sparking more inflation.
So the Reserve Bank would be glad to see growth slow towards a more sustainable rate, rather than a boom-bust dynamic, ANZ said.
The light-traffic index, which typically shows a six-month lead on GDP, was down 0.7 per cent in the June month, after rising in the three previous months.
While pointing to a dip in activity in the short-term, the light-traffic index suggested a pick-up further down the road.
ANZ said the heavy and light traffic indexes suggested economic momentum should roll on in the second half of the year "but with some bumps along the way".