March quarter GDP growth could be a blip in the doldrums

Jarden analyst Grant Swanepoel has downgraded his Vulcan forecasts and 12-month target price but has lifted his investment recommendation to “buy.”

Economic growth in the March quarter was double what the Reserve Bank was expecting at 0.8%, but the economy still shrank 1.1% in the year ended March and the data for the current quarter is shaping up to be soft.

In particular, the latest BNZ-BusinessNZ performance of services (PSI) and manufacturing (PMI) indices showed both these parts of the economic picture shrinking,

The services index for May came in at 44.0, and a reading below 50 indicates a contraction, while the manufacturing index came in at 47.5, also a contraction for the month and down from 53.3 in April.

While we’re less than two weeks from the end of the June quarter, we won’t get the official GDP numbers until September and let’s hope the indicators we’ve received by then are looking more promising.