Technical Recession, Details Not As Soft Though

GDP fell 0.1% q/q in Q1 after -0.7 in Q4, which was in line with consensus but weaker than the RBNZ’s 0.3% forecast. On a year ago it rose 2.2%, which was lower than expected as Q1 2022 was revised up to +0.1% q/q from -0.5%. The other quarters of 2022 were revised down. Expenditure-based GDP fell 0.2% q/q after -0.9% to be up 1.8% y/y down from 2.4%. While this means that NZ is technically in recession, the details look better with robust Q1 domestic demand and the weakness due to a large inventory drawdown. But the economy is clearly slowing.

• It is difficult to ascertain how much of the Q1 developments are underlying trends, data volatility or due to recent weather events (regional data isn’t provided). Stats NZ said that the data “included the initial impacts of Cyclones Hale and Gabrielle and teachers’ strikes”, which drove falls in horticulture and transport support & education services.
• Private consumption rose 2.4% q/q, driven by overseas travel, after being flat in Q4 and contributed 1.5pp to quarterly growth. Investment increased 2% q/q after -1% and contributed 0.5pp, driven by GFCF in non-residential assets (possibly post-cyclone repair). Domestic demand contributed 2pp to growth after detracting 0.8pp in Q4.
• Q1 inventories detracted 1.5pp from growth, the third consecutive negative quarter. This was the largest detraction since the pandemic-impacted Q4 2021 and implies that Q2 should see a stock build.
• Net exports detracted 0.1pp after -1.2pp the previous quarter with exports down 2.5% q/q, driven by services, and imports -1.6%.
• Production GDP fell 0.06% and so given that revisions are usual, there is a chance that it could be revised to zero or even to a positive.

Source: MNI - Market News/Refinitiv