New Zealand: GDP contraction softens in Q1
GDP dropped 0.1% in Q1 on a seasonally adjusted quarter-on-quarter basis, following the previous quarter’s 0.7% fall.
Private consumption increased 2.4% in the first quarter, which was above the fourth quarter’s flat reading. Public consumption rebounded, growing 0.1% in Q1 (Q4 2022: -2.4% s.a. qoq). Meanwhile, fixed investment bounced back, growing 2.0% in Q1, contrasting the 1.0% decrease in the prior quarter.
Exports of goods and services contracted 2.5% in Q1, marking the worst reading since Q1 2022 (Q4 2022: -1.7% s.a. qoq). In addition, imports of goods and services deteriorated, contracting 1.6% in Q1 (Q4 2022: +2.5% s.a. qoq).
In year-on-year terms, growth moderated to 2.2% in the first quarter, from 2.3% in the fourth quarter of last year.
Commenting on the release, Lee Sue Ann, economist at UOB, stated:
“Overall, there is a high degree of uncertainty surrounding the latest GDP figure, as the COVID-19 pandemic has significantly disrupted the usual seasonal patterns in the data. […] The Reserve Bank of New Zealand’s forecasts show the economy will not slow as much as it previously expected, with a very mild recession projected for the second and third quarters of this year.”
Momentum is expected to remain subdued during the second quarter of this year. Retail payment card spending shrank, on average, in month-on-month terms in April-May. This, coupled with downbeat consumer and business sentiment, points to subdued domestic demand amid stubbornly high price pressures and rising interest rates. On a more positive note, tourist arrivals continued to increase at a strong annual pace in April.