June 19, 2023: On Thursday, New Zealand’s gross domestic product decreased by 0.1% in the initial quarter, according to government data published, as its central bank embarked on one of the world’s most aggressive rate hike cycles.
The latest data from Wellington marks a technical recession for the economy after reporting a fixed 0.7% plunge in the final quarter of 2022.
A technical slump is stated as two consecutive quarters of contraction.
Compared with a year ago, the economy increased by 2.9% in the first quarter. Economists surveyed and anticipated New Zealand to mark a squeeze of 0.1% quarter on quarter and growth of 2.6% year on year.
After the release, the New Zealand dollar declined 0.23% against the U.S. dollar. Stocks were little changed; the S&P/NZX 50 Index traded 0.144% higher.
In its May meeting, the Reserve Bank of New Zealand raised its benchmark rate to a 14-year high, with the 25-basis-point hike lifting its official cash rate to 5.5%.
“There was a range of results at the industry level in the March 2023 quarter, with just over half of industries declining in the quarter,” New Zealand’s economic and environmental insights general manager Jason Attewell said.
The contraction was driven by production declines in business services, which dropped 3.5%, and transport, postal, and warehousing, down 2.2%.
During the quarter, the data agency said that New Zealand also saw the “initial impacts” of Cyclones Hale and Gabrielle and teachers’ strikes.
“The adverse weather circumstances caused by the cyclones contributed to falls in horticulture and transport support services and disrupted education services,” said Attewell.
Production in the information media, telecommunications, and property sectors rose by 2.7% and 0.7%, respectively.
New Zealand saw a contraction in trade: export prices decreased by 6.9%, and import prices declined by 5.4%.
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