Westpac and ASB: NZ GDP drop less severe than feared
New Zealand’s GDP fell 0.2% in June 2024, with Westpac noting the decline was milder than expected and ASB highlighting ongoing economic weakness.
GDP contracts in June quarter
The 0.2% contraction in New Zealand’s economy followed a slight 0.1% growth in the previous quarter, according to data from Stats NZ.
The decline was driven mainly by drops in the retail trade, accommodation, agriculture, forestry, fishing, and wholesale trade sectors.
“Activity in retail trade and wholesale trade has been in steady decline since 2022,” said Ruvani Ratnayake, national accounts industry and production senior manager at Stats NZ.
Forestry and logging were significant contributors to the decline within the agriculture, forestry, and fishing industry, reflected in decreased forestry exports.
Manufacturing sector shows strength
Despite the overall GDP decline, seven out of sixteen industries experienced growth, with manufacturing seeing the most significant rise, led by increased activity in transport equipment, machinery, and equipment manufacturing, marking the largest increase since late 2021.
GDP per capita falls further
However, GDP per capita fell by 0.5%, continuing its downward trend since late 2022, and has dropped 2.7% annually by the end of June 2024.
Household spending sees modest rise
The expenditure measure of GDP remained unchanged at 0%, with household spending slightly up due to higher expenditures on non-durable goods like fruits and vegetables, while spending on durable goods such as new vehicles continued to fall.
Westpac: Economic downturn less severe than expected
Michael Gordon (pictured above left), Westpac NZ senior economist, commented on the 0.2% GDP decline, saying the result “wasn’t as weak as expected, and will ease concerns that the economy might have been taking a turn for the worse.”
Although the production-based GDP fell, the expenditure measure showed no change, and the income measure saw a slight increase. Retail, wholesale, and forestry sectors were among the most affected, whereas manufacturing and personal services like healthcare and recreation performed better than expected, Gordon said.
ASB: Ongoing weakness in the economy
ASB chief economist Nick Tuffley (pictured above right) pointed out that the latest figures indicated a broader weakness in the economy, with the June quarter marking the fourth contraction in the past seven quarters.
Revised data also suggested that the New Zealand economy has now shrunk to levels last seen in early 2023. The primary sector, particularly agriculture and forestry, was the main contributor to the decline, with a sharp 10.4% fall in forestry and logging.
Tuffley noted that GDP per capita has been weak, declining by 4.6% since its peak in the third quarter of 2022, highlighting ongoing economic challenges despite robust population growth in recent years.
RBNZ interest rate cuts expected
Looking ahead, ASB expects a modest recovery in demand from key export markets as global central banks ease interest rates, but the outlook for Chinese demand remains uncertain.
The bank foresees the Reserve Bank (RBNZ) continuing with gradual interest rate cuts, aimed at supporting growth amid ongoing economic headwinds, including a weakening labour market and subdued household spending.
Read the Stats NZ announcement as well as the ASB and Westpac reports in full.
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