GDP growth records fastest upturn since Q2 2023 in the first quarter

GDP reading: GDP growth accelerated to 0.8% on a seasonally adjusted quarter on quarter basis in the first quarter, up from 0.5% in the fourth quarter of last year and marking the fastest increase since Q2 2023.

Broad expansion: Looking at expenditure components, household spending growth improved to 1.3% seasonally-adjusted quarter-on-quarter in the first quarter (Q4 2024: +0.1% s.a. qoq). Public spending growth moderated to 1.1% in Q1 (Q4 2024: +1.6% s.a. qoq). Moreover, fixed investment bounced back, growing 0.6% in Q1, contrasting the 0.3% decrease in the prior quarter. On the external front, exports of goods and services increased 0.1% on a seasonally adjusted quarterly basis in the first quarter, which was below the fourth quarter's 3.4% expansion. Finally, imports of goods and services growth waned to 0.4% in Q1 (Q4 2024: +1.1% s.a. qoq). The expansion was also broad-based when looking at industrial components, with agriculture, mining, construction, manufacturing and services activity all rising in Q1 vs Q4.

Momentum unlikely to hold: Our Consensus is currently for a slowdown in the rate of GDP growth in Q2, and available monthly data supports that picture.

Panelist insight: On the data and outlook, ANZ’s Matthew Galt said: “Today’s data suggests the economy started the year started with more growth momentum and a marginally less-negative output gap than the RBNZ has been assuming (with downward revisions to the previous quarter providing some offset). This raises the odds of a pause in the easing cycle in July, and that’s very much the market’s view. However, the New Zealand economy continues to operate with considerable spare capacity, keeping core inflation restrained. It will take a period of elevated growth to get things back to par, whereas recent weakness in some high-frequency activity indicators suggests a meaningful step-down in growth could be in store in Q2.”

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