The New Zealand economy grew by 0.5% in the June quarter, slightly more than market forecasts. The pace of growth has slowed substantially over the last year.

NZ GDP, June 2019 quarter

  • Quarterly change: 0.5% (last: 0.6%, Westpac f/c: 0.6%, market f/c: 0.4%)
  • Annual change: 2.1% (last: 2.5%)
  • Annual average change: 2.4% (last: 2.7%)

New Zealand’s GDP rose by 0.5% in the June quarter, a little less than our 0.6% forecast but above market expectations. Year-on-year growth slowed to 2.1%, the lowest since 2013 – though that was at a time when population growth was slower than it is today. In per capita terms, annual growth slowed to 0.5%, its lowest since 2011.

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The mix of growth for the quarter was broadly as expected. Food manufacturing, mining and construction eased back after large gains in the previous quarter, while agriculture and services picked up after weak March quarter results. The main surprise for us was a 0.3% drop in professional services – one of the largest components of GDP – despite the related surveys pointing to solid growth.

At a first glance, there were no one-offs or special factors that would affect our September quarter forecast. We’re expecting growth to slow a bit further over the second half of this year, based on the persistent weakness in business confidence and signs of a softening in hiring.

The result was in line with the Reserve Bank’s forecast in its August Monetary Policy Statement, and on its own is unlikely to shift the dial on the likelihood of further OCR cuts. We’re expecting no change at next Wednesday’s OCR review, but a further 25 basis point cut in November.

There was only a muted market reaction to the data.


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