Investment in New Zealand

New Zealand - Investment

Lifting of restrictions amid massive fiscal and monetary stimulus prompts massive rebound in Q3

GDP soared 14.0% in seasonally-adjusted quarter-on-quarter terms in Q3, benefiting from the easing of lockdowns and expansionary fiscal and monetary policies. The result beat market expectations of a 13.5% increase and contrasted Q2’s 11.0% slump. Meanwhile, on an annual basis, the economy expanded 0.4% in Q3, contrasting Q2’s 11.3% plunge.

The quarterly bounce-back was largely driven by a massive rebound in domestic demand. Private consumption surged 14.8% (Q2: -12.1% s.a. qoq) amid recovering consumer confidence. In addition, fixed investment jumped (Q3: +27.1% s.a. qoq; Q2: -20.1% s.a. qoq) on the back of soaring residential building investment, thanks to the reopening of businesses and strengthening business conditions. However, government spending growth lost pace (Q3: +0.3% s.a. qoq; Q2: +1.4% s.a. qoq).

The external sector, meanwhile, dragged on the economy, as imports rebounded at a stronger pace than exports. Exports grew 4.9% in Q3 (Q2: -15.5% s.a. qoq), still weighed down by continued international travel bans, while imports expanded 10.6% in the quarter after plummeting 24.6% in Q2, mainly due to higher demand for intermediate goods.

Looking ahead, the economy is poised to rebound next year, following this year’s Covid-19-induced slump, supported by fiscal and monetary stimulus and the reopening of the global economy. That said, uncertainty over the evolution and duration of the pandemic and the distribution of vaccines clouds the outlook.

FocusEconomics panelists project the economy to grow 4.5% in 2021, which is unchanged from last month’s estimate, and 3.2% in 2022.