NZ's economic output declined by 1% in the September quarter
New Zealand's economic output declined by 1% in the September quarter, following a steeper-than-initially-reported 1.1% fall in the previous quarter, according to the latest data from Stats NZ.
This marks the most severe six-month decline in GDP since 1991, excluding periods affected by COVID-19 lockdowns.
Revisions highlight broader economic weakness
The annual revision of GDP figures by Stats NZ revealed a downward adjustment in growth rates, particularly in the June quarters, while elevating figures for other quarters.
Despite the adjustments, the overall economic activity level was revised upwards, signaling a more volatile economic trajectory than previously understood.
Sectoral impacts and adjustments
Diverse industry challenges
The September quarter saw widespread declines across various sectors, including construction, electricity due to low hydro levels and gas shortages, and significant drops in professional services along with central government and healthcare sectors.
The most notable declines were seen in goods-producing industries, with significant contractions in manufacturing, construction, and utility services.
Real estate and agriculture show resilience
Despite the overall downturn, some sectors like real estate and agriculture saw improvements.
Notably, dairy farming contributed positively to agricultural outputs, which was also reflected in increased exports of dairy products.
Analyst insights and forecasts
Michael Gordon (pictured above, top left) of Westpac highlighted that the revisions and current economic indicators validate the Reserve Bank’s (RBNZ) recent decision to lower interest rates.
Gordon anticipates that the worst may be over for New Zealand's GDP, expecting some recovery driven by high-frequency data showing signs of improvement.
Kim Mundy (pictured above, top right) from ASB pointed out that the economy aligns more closely now with earlier predictions, indicating that we are near the trough of the current cycle.
Mundy expects further monetary easing in the coming months.
Similarly, Kiwibank economists, Mary Jo Vergara (pictured above, bottom left) and Sabrina Delgado (pictured above, bottom right) noted the significant impact of the downturn across many sectors, emphasising that despite the bleak current data, there is potential for economic recovery into 2025, driven by a boost in the primary sector and expected monetary policy adjustments.
Potential for further rate cuts
Both ASB and Kiwibank anticipate additional rate cuts by RBNZ in the near future to counteract the economic slowdown and support recovery.
The focus is on how quickly and effectively these adjustments can stimulate economic growth amidst ongoing global uncertainties and domestic challenges.
Access Stat NZ’s latest GDP figures here. For more insights, read the commentaries from Westpac, ASB, and Kiwibank.
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