New Zealand’s GDP rose by 0.8% in the March quarter, slightly ahead of market forecasts. Our view remains that the RBNZ will pause to assess in July.
Key results
- Quarterly change: +0.8% (last: +0.7%, Westpac f/c: +0.7%, market f/c: +0.7%, RBNZ +0.4%)
- Annual change: -0.7% (last: -1.3%)
New Zealand’s GDP rose by 0.8% in the March quarter, slightly ahead of market forecasts which had converged on a 0.7% increase. Revisions to the recent history were largely offsetting, with December quarter growth revised down from 0.7% to 0.5%, while the June and September quarters were both shaded up from -1.1% to -1.0%.
While overall growth was above our forecast, it was less broad-based than we were expecting. The largest contribution came from professional services, with a 2.7% gain for the quarter, led by computing services. There were also large increases in machinery manufacturing (up 6.4%) and healthcare and social assistance (up 1.4%). There were modest gains sprinkled across a range of other sectors, but with some surprising declines in a range of services such as communications, finance, real estate, and arts and recreation.
The result was ahead of the 0.4% rise that the RBNZ forecast in its May Monetary Policy Statement, which was prepared before some of the recent data that prompted us and others to revise up our forecasts. With the economy regaining its footing sooner than expected after last year’s sharp downturn, we continue to expect that the RBNZ will take the opportunity to pause and assess the situation at its July OCR review.
However, that assessment will depend on how things are looking going forward. The RBNZ has already factored in a soft 0.2% rise in GDP for the June quarter – partly adjusting for the residual seasonality that has crept into the GDP figures. Our forecast currently sits at 0.6%, but we will assess this in the next couple of weeks. The details of today’s figures offered a range of surprises in both directions, but with no obvious implication for our forecast on balance.
