New Zealand Economic Outlook
The economy surprised on the upside in Q3 2022 and posted a faster-than-expected sequential increase thanks to a recovering tourism sector, a rebound in investment and a milder contraction in household spending. The fourth quarter of last year should have registered a softer pace of expansion. Month-on-month retail payment card spending contracted, on average, in the period. Moreover, business and consumer sentiment weakened considerably compared to Q3. On top of this, the unemployment rate ticked up, and inflation remained notably elevated in Q4, boding poorly for household spending. In Q1 2023, there is room for hope: Business and consumer sentiment regained some ground in January—although they remained downbeat—and retail card spending rebounded.
New Zealand Inflation
Inflation was stable at Q3’s 7.2% in Q4. It remained entrenched above the Central Bank’s 1.0–3.0% target band. Inflation is poised to ease gradually this year owing to a high base of comparison and rising interest rates. That said, volatile energy prices and faster wage growth pose upside risks.