The economy may have been getting some traction from the building sector in the past few months, but some economists think weakness elsewhere will leave us in a growth pothole.
The September quarter gross domestic product (GDP) figures are due out on Thursday with a median forecast of 0.5 per cent growth.
While some pick growth of up to 0.6 per cent, other economists say it could be zero or even negative.
Westpac Bank economists said there was the risk of a surprise fall in GDP which could send markets back towards pricing a cut to official interest rates.
However, a step backwards in the economy was likely to be short-lived given the Canterbury rebuild, and recently strong building activity figures. That and a heating housing market, especially in Auckland, would keep the Reserve Bank on alert for an eventual rate rise, rather than a cut.
Earlier this month the Reserve Bank pencilled in a projection of growth of just 0.2 per cent, after a combined 1.6 per cent in the first half of the year, which was stronger than most expected.
Reserve Bank governor Graeme Wheeler said on December 6 that economic growth had slowed in recent months, with rising unemployment, hitting 7.3 per cent, and low inflation. That pointed to official interest rates remaining on hold till 2014, but with no hint of a rate cut.
ASB Bank economists are far more upbeat, picking growth of 0.6 per cent in the September quarter, after a strong push in the first half of the year. That earlier improvement reflected exceptionally strong dairy production because of a bumper grass-growing season.
ASB said beyond the boost from strong agriculture and food manufacturing, activity was also boosted in the first half of the year by post-earthquake rebuilding. Construction and professional services had geared up for the work ahead.
Figures out earlier this month showed building activity increased 9.6 per cent in the September quarter, the biggest three-month jump in a decade.
"We expect rebuilding will gather further momentum and underpin the recovery over the coming years," ASB said.
If the recovery gets on a firmer footing as rebuilding gathers steam, inflation pressures were likely to rise later next year, ASB said.
But Westpac Bank economists took a much dimmer view, expecting the economy to be flat in the September quarter, despite the gains earlier in the year.
The surge in building would be offset by "pervasive weakness elsewhere" especially in the services sector.
"The economy appeared to hit a pothole during the September quarter, just as it was gaining some real momentum over the last year," Westpac said.
Westpac's pick is at the bottom of the range of forecasts and also pointed to the risk of a negative number.
"While we would see any such weakness as temporary, it has the potential to rattle financial markets on the day," Westpac said.
Poor growth figures could claw back some of the recent gains in the New Zealand dollar and interest rates.
Since the start of December the New Zealand dollar has jumped from US81c to trade about US84.5c on Friday.
The kiwi took another leg up after the Federal Reserve said on Wednesday US time it would hold interest rates near zero until the US unemployment rate falls to 6.5 per cent, probably around mid-2015.
Farm production was still strong in the September quarter, but nowhere near as strong as the first half of the year.
But the service sector has been weak in recent months, with retail sales volumes down 0.4 per cent in the September quarter, and real estate sales flattened.
The services sector was largely flat in the September quarter too.
- Fairfax Media