Jump in traffic good news for economy

Traffic bounced back in July, signalling strong GDP growth for the rest of the year, according to ANZ’s latest Truckometer report.

After falling 7.8% in June, largely as a result of wild weather, the ANZ Heavy Traffic Index, measuring truck traffic, rose an impressive 9.6% in July (seasonally adjusted).

“Last month we predicted a bounce-back, as June traffic flows were negatively affected by the heavy storm that hit the country. Heavy traffic flows on all of the 11 roads in the index rose in July,” the report says.

“The Heavy Traffic Index is optimistic about economic prospects for the June quarter, and the reassertion of the upward trend is good news for GDP expectations for the September quarter, too. 

“As we have noted before, however, drought timing impacts could cause some volatility in the near-term GDP data.”

ANZ says drought effects will cause some volatility in GDP data but the overall story from the Heavy Traffic Index is one of strengthening momentum this year.

“The upward trend in the Heavy Traffic Index has now been restored, boding well for GDP over the remainder of the year, and corroborating the earlier predictions of the Light Traffic Index with its 6-month lead on GDP.”

Light traffic up
Meanwhile, the ANZ Light Traffic Index, which is made up mostly of cars and vans, rose 0.8% in July after falling 2.1% in June (seasonally adjusted).

Light traffic rose on eight roads and fell on two. This data predicts GDP six months ahead, according to the report.

“That the trend in this index remains definitively upwards implies that the lift in economic momentum we are seeing is no flash in the pan.”

Looking through the “zigzag” pattern, the trend of the index is firmly upward and is now nearly back at its pre-recession peak, ANZ says.

“It is predicting three consecutive quarters of solid GDP growth for the remainder of the year, averaging around a 3.5% annual pace. That would be the best growth New Zealand has had since the initial bounce out of the recession.

“It would look particularly impressive when compared against generally struggling OECD peers.”

However, the drought impact needs to be added, with the second quarter likely to be hit hardest.

“The rebound in the ANZ Truckometer in July, while anticipated, is very welcome,” the report says.

“It confirms that momentum in the NZ economy is increasing, with the Light Traffic Index suggesting it will persist. After several years of slog, that’s an encouraging sign.”

nkloeten@nbr.co.nz