New Zealand Economy Continues to Contract, But Avoids Recession by Slim Margin
The contraction was better than predicted by the Reserve Bank of New Zealand, which had forecast a fall of 0.5 percent.
New Zealand’s gross domestic product (GDP) fell 0.2 percent in the June 2024 quarter, narrowly avoiding a technical recession after a revision to the March quarter figures.
The Reserve Bank of New Zealand (RBNZ) had anticipated a contraction of 0.5 percent, while Westpac forecasted 0.4 percent and ANZ with a more optimistic 0.1 percent decline.
The March quarter growth, initially reported at 0.2 percent, was adjusted downward to 0.1 percent to keep the economy from entering a recession, defined as two consecutive quarters of contraction.
New Zealand’s economic activity was the weakest among its major trading partners, with most economists attributing the June result to high interest rates constraining spending across retail, agriculture, forestry, fishing, and wholesale trade sectors.
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Earlier this month, Winstone announced the closure of its two North Island pulp and paper mills, citing rising electricity costs and impacting the regional job market.
“Activity in retail trade and wholesale trade has shown a consistent decline since 2022,” stated Statistics New Zealand’s National Accounts Industry and Production Senior Manager Ruvani Ratnayake.
Rise in Manufacturing
Despite the overall decrease in GDP, seven out of 16 sectors experienced growth, with manufacturing leading the way with a 1.9 percent increase.
“The uptick in manufacturing was fueled by transport equipment, machinery, and equipment manufacturing, marking the largest increase in manufacturing activity since the December 2021 quarter,” Ratnayake added.
Household spending rose by 0.4 percent, driven by higher expenditures on non-durable items like fruits, vegetables, and services.
Government spending also increased, despite prior promises of reduction by the National-led Coalition government.
Spending on durables continued to drop for the fourth consecutive quarter, mainly due to decreased purchases of new motor vehicles and telecommunication equipment such as mobile phones.
New Zealand’s GDP per capita fell by 0.5 percent in the June 2024 quarter, with the last positive growth reported in the September 2022 quarter. On an annual basis, GDP per capita saw a decline of 2.7 percent by the year ending June 2024.
The nation’s economy remains service-oriented, with primary produce contributing 7 percent, goods production 20 percent, and services making up the remaining 73 percent of the GDP.
Forecasts from the Institute of Economic Research suggest minimal or no economic growth in the upcoming year.
