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An increase in traffic on New Zealand's roads is a good sign for the economy, ANZ's latest Truckometer suggests.
After rising 3.8% in April, the ANZ Heavy Traffic Index jumped another 4.7% in May (seasonally adjusted). Heavy traffic flows increased during the month on eight of the 11 roads measured.
According to ANZ this bodes well for GDP in the second quarter, although drought impacts could cause some volatility in GDP numbers.
Meanwhile, the ANZ Light Traffic Index increased by 2.2% after dropping 1.2% in April.
"The trend in this index is finally definitively upwards, predicting a marked lift in economic momentum from mid-year," ANZ says in its report.
"Overall sluggishness in heavy traffic volumes in the first four months of this year likely captured some drought impacts. Beyond that, the traffic indexes suggest the stars are aligning for a period of above-trend growth in the second half of the year, but our concerns are centred around the sustainability or otherwise of the domestic-centric mix of activity."
ANZ says its Heavy Traffic Index is a good marker for GDP growth. The index suggests a weak first quarter followed by a very strong second quarter.
However, ANZ says the indicators for the first quarter are "unusually mixed". The Heavy Traffic Index has been fairly flat for the past 12 months but has now turned decidedly upwards.
ANZ says its Light Traffic Index has a six-month lead to GDP growth. It agrees with the Heavy Traffic Index that the first quarter will be considerably weaker.
"It is more positive about the rest of the year, however, suggesting three positive quarters of growth averaging a 3.2% annual pace."
However, ANZ says drought impacts will need to be added on to its signals, with the second quarter likely to be hit hardest while the first quarter could actually be boosted by early slaughter.
"Despite strengthening momentum, the first half of the year could feature some bumpy data."