Q4 Growth Disappoints Opening Possibility Of April RBNZ Pause

Q4 GDP was weaker than analysts expected and a lot more so than the RBNZ’s +0.7% q/q forecast. It fell 0.6% q/q but followed two very strong quarters of over 1.5%. This left 2022 growth at 2.4%. This disappointing result with another contraction expected in flood-affected Q1 opens the possibility of a pause in RBNZ tightening in April so it can wait for Q1 CPI data on April 19, the OIS market has a 50% chance of 25bp priced in.

• The main driver of the contraction in production-based GDP in Q4 was the manufacturing sector which fell 1.9% q/q. There was also weakness in retail, recreation, transport, accommodation and other services. Tourism disappointed in the quarter and overseas visitors were still below pre-pandemic levels.
• The expenditure measure of GDP fell 0.8% q/q after rising 1.9% in Q3, as private consumption was flat but investment fell 1.9% and government spending down 2.4%. New Zealanders had also made a shift from durable goods spending to services. Net exports detracted 0.7pp, as exports of goods fell 5.3% q/q.