Earlier this week, Westpac tipped that New Zealand’s real GDP would decline by 0.2% in the March quarter to be 0.3% lower year-on-year.
On Thursday, Statistics New Zealand released the official national accounts for the March quarter, which showed that the economy grew by 0.2% over the quarter to be up 0.3% year-on-year.
The internals were mixed. Half of the 16 industries showed varying degrees of growth, while the other half witnessed declines.
The most significant gains were in energy (owing to a higher percentage of cheaper hydro generation throughout the quarter), food processing (reflecting increased milk production and a resurgence in beverages), and forestry.
By contrast, non-food manufacturing, construction, and professional services all posted declines.
Given ongoing strong migration-led population growth, GDP per capita still fell by 0.3% over the quarter and a hefty 2.4% year-on-year. This was the sixth straight quarterly decline in per capita GDP, as illustrated below:
Therefore, New Zealand’s economy remains very soft, held up by historically high population growth (immigration).
That said, per capita national disposable income recorded a 0.4% rise in the March quarter, which was the first quarterly increase since the September quarter of 2022:
However, New Zealand’s real gross national disposable income per capita was still down 3.5% over the past year.
Overall, the GDP result was bang in line with the Reserve Bank’s forecast of 0.2% growth so it probably won’t move the dial on interest rates one way or another.
That said, as Justin Fabo at Antipodean Macro points out, “Q1 is old news and PMI data suggest that growth in New Zealand has weakened since Q1”:
Thus, I still believe that the Reserve Bank of New Zealand will be the next Anglo central bank to cut rates.
