Gross domestic product fell 0.1% from the fourth quarter, when it dropped a revised 0.7%, Statistics New Zealand said. — Bloomberg
AUCKLAND: New Zealand’s economy contracted in the first quarter, confirming that a recession began in the final three months of last year and sending the local currency lower.
Gross domestic product fell 0.1% from the fourth quarter, when it dropped a revised 0.7%, Statistics New Zealand said yesterday in Wellington.
Economists expected a 0.1% decline. From a year earlier, the economy grew 2.2%, less than the 2.6% median forecast.
The economy is cooling after the central bank hiked interest rates at a record pace to regain control of inflation, while first-quarter activity was also hampered by a damaging cyclone in February.
Confirmation of a recession comes four months before a general election on Oct 14 in which cost-of-living pressures and the economic downturn are sure to feature
New Zealand’s dollar fell after the gross domestic product release.
The Reserve Bank of New Zealand (RBNZ) predicted 0.3% growth in the first quarter and small contractions in the second and third quarters.
The Treasury Department in the May budget withdrew a forecast for three straight quarters of contraction this year, saying tourist arrivals, cyclone recovery work and government spending would support growth.
“Our economy is smaller than forecast by the RBNZ and Treasury,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “And the brunt of the slowdown is yet to come. We’re forecasting further contractions over the year ahead.”
The RBNZ has hiked its Official Cash Rate by 5.25 percentage points in the past 20 months to 5.5%, with the full impact still to be felt as many households have yet to roll mortgages onto higher interest rates.
At the same time, unemployment at 3.4% remains near a record low, tourism is recovering more rapidly than expected and immigration is surging. — Bloomberg
