• Mon. Mar 20th, 2023

New Zealand’s Economy Contracts By Further Than Anticipated in 4Q


Mar 16, 2023

SYDNEY — New Zealand’s economy contracted by far additional than anticipated in the fourth quarter, sharply increasing the threat of a recession even though signaling that the Reserve Bank of New Zealand could possibly be closer to ending interest value increases than believed.

GDP fell by .six% in the final three months of final year, beating economists’ expectations of a far tamer contraction of .two%, Stats NZ stated Thursday. The weakness in activity follows expansion in the economy of 1.7% in the prior quarter.

The weak facts appears set to prompt some reevaluation of the trajectory for interest costs in New Zealand, with the RBNZ not as well extended ago indicating it has far additional function to do provided that inflation is nonetheless also greater.

The RBNZ had forecast GDP improvement of .7% for the fourth quarter.

The contraction in the economy could have been substantially bigger if Stats NZ had not not as well extended ago changed how it applies seasonal adjustment.

Michael Gordon, Acting Chief Economist at Westpac stated that beneath the former seasonal adjustment technique, the facts would have shown the economy contracted by 1.two% for the quarter.

“While the economy is extensively anticipated to slip into recession as higher interest costs bite, we suspect that the fourth quarter final outcomes represent far additional of an air-pocket in our descent, rather than an earlier and tougher than anticipated landing,” Mr. Gordon stated.

Some higher-frequency facts generally enhanced a tiny in the pretty very first two months of this year, and the clean-up from Cyclone Gabrielle in February will make added activity in the coming months that will add to measured GDP, he added.

“The very important issue for the RBNZ, even even though, is that the starting point for the economy is substantially considerably significantly less stretched than they believed. And that matters for how substantially of a slowdown is needed to bring inflation back beneath handle,” Mr. Gordon stated.

Nine of 16 industries seasoned a cut down in activity in the fourth quarter, with manufacturing the biggest driver of the cut down, down 1.9%, according to the facts.

New Zealand’s international borders have been reopened to vacationers simply because August final year, but the inflow of overseas guests, a significant provide of export earnings, remains below pre-Covid levels.

Household spending was flat in the quarter as spending on durables, such as audio visual gear and furnishings fell.

Activity in organization options, which tends to make up roughly a single certain-tenth of the economy, was up 3.3% for the quarter, partially offsetting falls in other elements of the economy

Build to James Glynn at James.Glynn@WSJ.com