- Economists polled by Reuters had forecast New Zealand posting a contraction of 0.1% quarter-on-quarter and growth of 2.6% year-on-year.
- At its meeting in May, the Reserve Bank of New Zealand raised its benchmark interest rate to its highest level in 14 years, with 25 basis points raising the official cash rate to 5.5%.
Buildings in Auckland, New Zealand, on Monday, May 22, 2023.
bloomberg | bloomberg | Getty Images
New Zealand’s gross domestic product fell 0.1% in the first quarter, according to government data released Thursday, as the central bank embarked on one of the world’s riskiest rate hike cycles.
The latest data from Wellington points to a technical recession for the economy after that Reporting a decrease of 0.7%. In the last quarter of 2022.
A technical recession is defined as two consecutive quarters of contraction.
Compared to last year, the economy grew 2.9% in the first quarter. Economists polled by Reuters had expected New Zealand to contract by 0.1% quarter-on-quarter and grow by 2.6% year-on-year.
The New Zealand dollar fell 0.23% against the US dollar after the release. Stocks changed little – the S&P/NZX 50 rose 0.144%.
Refinitiv, Statistics New Zealand
At its May meeting, the Reserve Bank of New Zealand raised its benchmark rate to a 14-year high, with a 25 basis point hike. The official cash rate to 5.5%.
“There was a range of industry-wide results in the March 2023 quarter, with just over half of industries declining in the quarter,” said Jason Attewell, New Zealand managing director of Economic and Environmental Insights.
The contraction was driven by lower output in business services, which fell 3.5%, and transport, gates and warehousing, which fell 2.2%.
During the quarter, New Zealand also saw the “initial impacts” of hurricanes Hale and Gabriel, as well as teachers’ strikes, the data agency said.
“Adverse weather events caused by the hurricanes contributed to a decline in horticulture and transportation support services, as well as disruption to education services,” said Attewell.
Production in the media and communications and real estate sectors increased by 2.7% and 0.7%, respectively.
New Zealand also experienced a contraction in trade: export prices fell by 6.9% and import prices fell by 5.4%.
“The New Zealand economy is in the midst of a necessary policy slowdown in the wake of a strong post-pandemic recovery,” the IMF said in its mission statement on Wednesday, ahead of the GDP release.
The International Monetary Fund also warned of the central bank’s shift to monetary policy easing measures, adding that it should still leave the door open for further interest rate hikes in the future.
“With non-tradable inflation still in place, there is little room for prolonged OCR cuts,” the IMF wrote.
“A resurgence of demand, including due to insufficient fiscal consolidation and inflation stalling above target, would warrant further tightening of monetary policy,” he said.
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