New Zealand’s recession deepened in the June quarter as economy activity fell 0.2% and dragged the year-on-year decline to 0.5%, according to data released by Statistics NZ.
While weak, this result was better than both the market consensus, which was for a 0.4% fall, and the Reserve Bank’s estimate of a 0.5% decline.
ANZ economists had predicted a smaller 0.1% fall. However, they warned that could not be considered a “strong” result as the economy had capacity to grow 0.6% each quarter.
“Even in the case of an upward surprise, economic momentum is likely to still be soft enough to be consistent with rising spare capacity and falling inflation,” they wrote in a preview note.
This GDP data, while slightly stronger than expected, still confirmed the RBNZ had underestimated the depth of the recession when it considering hiking interest rates in May.
Instead, the RBNZ's Monetary Policy Committee abruptly cut the Official Cash Rate to 5.25% at its August meeting after receiving updated GDP forecasts which downgraded growth outlook.
Stats NZ data showed gross domestic product, adjusted for inflation and population growth, has been flat or in decline for seven consecutive quarters -- a record last seen during the Global Financial Crisis.
However, the current recession has already outstripped the overall decline of that previous period with a 4.6% fall, compared to 4.2%.
GDP per capita fell 0.5% during the June quarter alone and was down 2.7% year-on-year, even though the headline figures were stronger with 0.2% and 0.5% declines, respectively.
Primary industries had the biggest fall during the quarter with a 1.6% drop, while manufacturing grew 1.9%.
Service industries were flat overall but with wide divergence between categories. Wholesale trade and retail were weaker, while healthcare and telecommunications were stronger.
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