Economy 'a lot stronger' than forecasters predicted after GDP increase, but experts warn of boom before the bust

"Stupendously strong". That's how one of our largest banks, ASB, has described the economy after Stats NZ announced a 2 percent lift in GDP, exceeding market expectations.

This rise was driven by the services industries, up 2 percent. The transport, postal, and warehousing industry was the biggest contributor to growth, up 9.7 percent. 

There's also been a significant rise in both domestic and international air travel.

But economists said it's getting hot in here, beware the boom before the bust, and with Christmas less than two weeks away, Auckland's Sylvia Park mall is humming.

Shoppers made the most of free wrapping services after spending up large.

"Spending a lot more this year," said one shopper.

"I've been told to keep it careful," said another. 

Sylvia Park asset manager Helen Ronald told Newshub she's stoked.

"This year it's going really well, we're doing better than we did last year, but we're actually over what we did in 2019 which is fantastic."

All that festive optimism is reflected in Stats NZ's latest GDP update, considered a measure of how well the economy is performing.

GDP rose 2 percent in the September quarter, following a 1.9 percent rise in June.

Infometrics Chief Economist Brand Olsen told Newshub it is "a lot stronger than what forecasters were picking". 

Aotearoa's GDP has been a bit all over the place since COVID arrived in 2020. It was reasonably steady in the years prior and then bang, seismic spikes and falls thanks to lockdowns.

But with COVID restrictions now far behind us, the cash is flowing, and Stats NZ said the biggest contributor to growth this quarter was the transport, postal and warehousing industry, up 9.7 percent.

And with the border fully open there's been a rise in spending on domestic and international travel.

But Olsen told Newshub all of that demand will just keep pushing up already inflated prices. 

"Increasingly, there is a much greater level of competition for a much more limited pool of talent and limited pool of materials," he said. 

"We've got to slow down harder and faster in order to get that inflation back under control."

That means more interest rate hikes.

ASB chief economist Nick Tuffley told Newshub: "People should look ahead and go, 'OK, if I've got a mortgage, what are my future payments going to look like?'"

The Reserve Bank's admitted it's "deliberately engineering a recession" to bring down inflation. It's expected to hit next year.

"The Reserve Bank is intending for that squeeze to go on because collectively we've been spending more than what we can deliver at a reasonable price," said Tuffley. 

Despite the doom and gloom, the malls are lapping up the spending boom.

"A whole flood of happy shoppers," said Ronald. 

A spending party - but one that could come with a real hangover.