New Zealand economy returns to growth, exiting recession
NEW Zealand’s economy exited recession with modest expansion in the first quarter.
Gross domestic product gained 0.2 per cent from the previous quarter, when it declined 0.1 per cent, Statistics New Zealand said on Thursday (Jun 20) in Wellington. Economists expected 0.1 per cent growth. GDP rose 0.3 per cent from the year-earlier quarter, beating the 0.2 per cent estimate.
The economy is struggling as the Reserve Bank of New Zealand (RBNZ) keeps its key interest rate at 5.5 per cent, the highest since 2008, to bring inflation back under control. While strong immigration and a tourism recovery are aiding activity, steep borrowing costs are curbing consumer spending and business investment.
The New Zealand dollar rose after the report, buying 61.42 US cents at 11 am in Wellington, up from 61.30 US cents beforehand.
The gross domestic product result matched the RBNZ’s forecast for 0.2 per cent growth in the quarter. The central bank last month signalled it did not intend to lower rates until the second half of 2025, citing stubborn core inflation.
RBNZ chief economist Paul Conway said on Wednesday that the economic slowdown caused by tight monetary policy is necessary to bring inflation back into the bank’s 1 to 3 per cent target band, which it expects to happen later this year.
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“We are in a slow to negative growth environment but the outlook for growth is slightly more positive going forward and the outlook for inflation is for declines to continue,” he said. “We are experiencing some short-run pain. The idea is that the gain from low and stable inflation is going to be worth it.”
Most economists are tipping the first rate cut in the final months of 2024 or early 2025. Investors have fully priced in a 25-basis-point cut to the Official Cash Rate by November, according to swaps data.
Three of 16 economists surveyed by Bloomberg had anticipated a first-quarter contraction, while two tipped nil growth and the remainder expected an expansion.
The main drivers of first-quarter growth were a lift in tourist spending and primary production, while manufacturing and construction declined, the statistics agency said.
GDP per capita shrank 0.3 per cent from the fourth quarter, its sixth straight quarterly decline. BLOOMBERG
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