New Zealand Economic Outlook
The economy returned to growth in Q2 on a seasonally adjusted quarter-on-quarter basis, following Q1’s flat reading. Available data suggests that momentum waned in the third quarter, restrained by tight financing conditions and a less supportive external environment. However, both business and consumer confidence averaged higher in the third quarter than in Q2. A jump in business confidence in October—potentially fueled in part by the victory of right-wing parties in 14 October elections—and a pickup in consumer sentiment in the same month bodes well for activity moving into Q4. In politics, final election results show that the center-right National Party will need the support of both populist party New Zealand First and the libertarian ACT party to form a government. Talks among the three parties are ongoing.
New Zealand Inflation
Inflation declined to 5.6% in Q3 from 6.0% in Q2. Therefore, price pressures remained entrenched above the Central Bank’s 1.0–3.0% target band. Inflation will ease from Q3 levels in 2024 due to a high base of comparison and the lagged effects of monetary policy tightening. The evolution of commodity prices is a factor to watch.