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New Zealand GDP Q3 2023

New Zealand: GDP records sharpest contraction since Q4 2022 in Q3

GDP dropped 0.3% on a seasonally adjusted quarter-on-quarter basis in the third quarter, below the 0.5% expansion tallied in the second quarter. Q3’s reading marked the worst result since Q4 2022. On an annual basis, economic activity declined 0.6% in Q3, contrasting the previous quarter’s 1.5% increase. Q3’s annual reading marked the largest contraction since Q3 2021.

The downturn was broad-based, with private consumption, public spending, fixed investment and exports all contracting. Household spending fell 0.6% in the third quarter, which was below the second quarter’s flat reading. Public consumption dropped at the sharpest pace since Q2 2022, contracting 1.8% (Q2: +3.4% s.a. qoq). Meanwhile, fixed investment contracted 3.4% in Q3, marking the worst reading since Q2 2022 (Q2: +0.3% s.a. qoq). On the external front, exports of goods and services contracted 2.6% in Q3, marking the worst reading since Q1 2022 (Q2: +4.6% s.a. qoq). Conversely, imports of goods and services declined at a softer rate of 0.3% in Q3 (Q2: -0.8% s.a. qoq).

Momentum likely remains subdued in Q4, according to our panel. However, a post-election surge in business confidence in October-November and rising consumer sentiment pose upside risks to activity. Looking further ahead, the economy should expand at a faster clip in 2024 compared to this year, underpinned by a further recovery in tourism and falling inflation and interest rates. Feebler export growth will limit the pace of expansion, however. Pro-market policies from the new center-right government pose an upside risk. The economic performance of China is a key factor to monitor.

Commenting on the outlook, Lee Sue Ann, economist at UOB, stated:

“A challenging economic backdrop remains. Our GDP growth forecasts are now at 1.0% in 2024, from a projected 0.9% in 2023. Positive factors include a turning around of the housing market, surging net migration, and expansionary fiscal policy; while negative factors include contractionary monetary conditions, softer global demand, and heightened geopolitical tensions.”

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