NZ Growth Close To RBNZ Forecasts, Unlikely To Shift Path

NZ production-based GDP fell 0.1% q/q in Q4 to be down 0.3% y/y after falling 0.3% q/q and 0.6% y/y in Q3 – meaning that the economy was in a technical recession in H2 2023 and slightly weaker than RBNZ and consensus projections. The expenditure measure was flat after falling 0.4% q/q in Q3 to be down 0.5% y/y. With GDP only 0.1pp softer than the RBNZ expected, this report is broadly in line with its thinking and unlikely to change its “high for longer” policy path.

• Economic growth slowed in 2023 to 0.6% from 2.4% in 2022 and 5.6% in 2021, which was needed to reduce inflationary pressures. Headline CPI was still well above the top of the band at 4.7% y/y in Q4. With GDP per person falling 0.7% in Q4, price pressures should continue to ease.

Source: MNI - Market News/Refinitiv

• The economy was supported by private consumption and exports in Q4. Consumption rose 0.5% q/q after falling the previous two quarters and is down 0.1% y/y. It contributed 0.3pp to quarterly growth. The increase was driven by an increase in services spending.
• Investment was soft falling 0.1% q/q due to a 1.7% q/q drop in residential construction.
• The 2.9% q/q drop in imports, fourth consecutive decline, drove a sharp rundown in inventories which resulted in a 2.8pp detraction from growth. Stocks made a negative contribution three of the four quarters in 2023 and reduced 2023’s growth of 0.6% by 1.1pp.
• Net exports contributed 1.7pp to Q4 growth as exports rose 3.2% q/q to be up 6% y/y.
• The fall in production GDP was driven by wholesale and retail trade, but 8 of the 16 sectors recorded a rise.

Source: MNI - Market News/Refinitiv