BNZ economist predicts recession in residential construction

"We believe the residential construction sector is headed for a technical recession," BNZ treasury economist Stephen Toplis said in the bank's weekly Economy Watch newsletter.

Fletcher Building shares rose 64c to a record $7.43 today after it posted a 45 per cent rise in its half year net profit to $161 million.

Citing strength in the commercial building and infrastructure markets, it raised its fully year earnings forecast by 10 per cent.

The company's shares have more than doubled in the past two years as it has cashed in on the building boom and often lifted profit forecasts.

Mr Toplis said the bank economists accepted recent indicators had proven stronger than anticipated and had given new momentum to the housing market.

"Nonetheless, we believe this simply delays the inevitable and may in fact be the catalyst that forces the Reserve Bank to push interest rates much higher."

Mr Toplis said that despite an expectation that residential activity would fall relatively sharply, the overall level of activity was expected to remain very high by historical standards.

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