New Zealand sinks into recession as Q3 GDP dives 1.0%

A consumer walks previous a jewellery retailer in Auckland. New Zealand’s economic system sank into recession within the third quarter as exercise dived way more sharply than anticipated, whereas the prior quarter was additionally revised sharply downward, a dire end result that cements the case for extra aggressive fee cuts.
| Photograph Credit score: AP

New Zealand’s economic system sank into recession within the third quarter as exercise dived way more sharply than anticipated, whereas the prior quarter was additionally revised sharply downward, a dire end result that cements the case for extra aggressive fee cuts.

The native greenback prolonged an in a single day rout to hit a contemporary two-year low of $0.5620, having already shed 2.2% within the wake of a hawkish easing from the U.S. Federal Reserve.

Markets additionally added to wagers the Reserve Financial institution of New Zealand would slash charges additional, having already reduce by 125 foundation factors to 4.25%. Swaps now implied a 91% likelihood of a 50-basis-point reduce in February, and charges have been seen declining to three.0% by the top of 2025.

Thursday’s (December 19, 2024) knowledge confirmed gross home product dived 1.0% within the September quarter from the prior quarter, dwarfing market forecasts of a 0.2% contraction.

The June quarter was revised to indicate a fall of 1.1%, and two straight quarters of decline is the technical definition of recession.

The end result was far worse than the 0.2% drop forecast by the RBNZ, and got here simply two days after New Zealand’s Treasury had predicted a fall of solely 0.1%.

The weak spot was unfold throughout industries and significantly sizeable in manufacturing, utilities and development. Family and authorities spending dropped within the quarter, whereas funding and exports additionally dragged.

For the yr to September, output was down a steep 1.5%, the sharpest fall for the reason that pandemic and properly outdoors forecasts of a 0.4% dip.

Setting apart the pandemic, this was the biggest two-quarter decline for the reason that painfully deep 1991 recession.

The image was difficult by substantial revisions from the statistics bureau, which revised up GDP progress over the 2 fiscal years to March 2024 by virtually 2 proportion factors.

That made the start line for this yr stronger than first thought. It additionally erased a recession and a protracted interval of stagnant progress that had contributed to the autumn of the previous Labour authorities.