New Zealand's recovery stumbles but should not stop

Q3 GDP, published early today, was weak and in line with our below-consensus expectation. Nevertheless, most of the softness was due to temporary factors. The upswing will probably regain traction in Q4 and in coming quarters. The Reserve Bank (RBNZ) is likely to keep the cash rate at 3.0% until mid-2011 but, we judge, will then move rates up quickly in the second half of next year.

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