Economists expect March quarter GDP to top 1% with the effects of the Middle East conflict and global fuel crisis are likely to hit harder in GDP releases later this year

The first gross domestic product (GDP) figures of 2026 arrive on Thursday, June 18, and will paint a picture of the economy during the first three months of the year.

Despite New Zealand’s economy growing just 0.2% in the December 2025 quarter, well below the Reserve Bank’s projection of 0.5%, the Reserve Bank has penciled in a 1% increase in economic activity during the March quarter.

The GDP data will show how NZ’s economic activity was tracking before the conflict in the Middle East began in February. The figures aren’t expected to show much of the economic fallout from the global oil shock stemming from the conflict, as economists anticipate a much bigger impact to appear in GDP data releases later this year.

ANZ senior economist Matthew Galt said the March quarter GDP figures will signal how much momentum the economy had before the conflict in the Middle East broke out.

“Timelier data shows that momentum has slowed markedly since the period covered by Q1 GDP. Higher fuel prices and economic uncertainty have clearly had an impact. However, at this stage it is looking more like the economy has stalled than gone rapidly backwards,” Galt said.

ANZ has forecast a 1% increase in GDP during the March quarter, upping it from 0.9% and matching the Reserve Bank’s forecast.

“Industries exposed to tourism, agriculture and discretionary spending are likely to show the most growth, though construction likely went backwards, based on the work put in place data. Residual seasonality also contributes positively this quarter,” Galt said.

Westpac senior economist Michael Gordon said Westpac had raised its GDP forecast from 0.8% to 1% because of strong sectoral data that had been released this week – but the stronger forecast had two caveats.

“The first is that seasonal distortions mean that the reported result will overstate the underlying pace of growth. As we showed in our analysis last year and as Statistics NZ has expanded on recently, the methods used to calculate total GDP result in a ‘balancing item’ that in recent years has been both unusually large and strongly seasonal,” Gordon said.  

The second caveat is the expectation that the March quarter data will largely predate the US-Iran conflict. 

“We expect the effects to become more apparent in the data over the coming months – indeed, our recent Economic Overview incorporated a 0.3% fall in GDP for the June quarter, some of which is due to an unwinding of the seasonal distortion),” Gordon said.

Old news

BNZ senior economist Doug Steel said despite the GDP data having a “sense of being old news” due to it covering January to March, it will still set the “starting position” for the NZ economy.

BNZ is casting its GDP forecast slightly lower than the Reserve Bank, ANZ and Westpac, expecting GDP to rise 0.9% in the March quarter. 

“If we are right, then Q1 [first quarter] GDP will not be far away from the 1.0% that the RBNZ projected in its May Monetary Policy Statement. We also suspect the data will add upside to the Reserve Bank’s KiwiGDP nowcast that sat at 0.5% last week,” he said.  

BNZ had originally cut its quarterly forecast back to 0.7% following a fall of 3.5% in seasonally adjusted building volume during the first three months of the year. 

Steel said the weak building result put the onus on the latest business financial data out of Statistics NZ this week to deliver an indication of reasonable gains in value added across the manufacturing, wholesale trade and wider services industries. 

“Like much data recently, there was a lot of noise, but the undercurrent was a clear lift in activity in the quarter,” he said.

BNZ is expecting strong gains in manufacturing in the March quarter GDP, within meat and dairy processing, textiles, printing, metals, and transport equipment and machinery and equipment. 

“Primary sector Q1 GDP is expected to be positive, albeit with mixed detail. Milk production has been strong, but forestry and logging look to have declined in the quarter,” Steel said.

ASB expects the NZ economy to have started with “decent momentum” in the first three months of the year and to have expanded by 0.8% in the March quarter, according to senior economist Kim Mundy.

“A decent Q1 2026 print is good news from the point of view that it provides a bit of a buffer heading into a more challenging time. But once again, we are faced with the reality that this release is dated,” she said. 

“Higher-frequency data since April do point to a cooling in economic activity. Businesses are facing higher input
costs and squeezed margins at a time when consumer demand is faltering.”

Calm before the storm

Kiwibank is expecting the lowest increase from the GDP figures next week, forecasting a quarterly lift of 0.7% in the March quarter. 

“Much of that expectation is due to the softer-than-expected December quarter, rather than impacts from the war in the Middle East. Most of the disruption hadn’t hit our shores until the end of March. Even then, we didn’t really feel it in the first quarter of the year,” Kiwibank economist Alexandra Turcu said.

“There’s no longer a question of whether the oil crisis is derailing our recovery. It is. The question is by how much and for how long? This is not Covid. Kiwi disposable incomes are being eroded away by increased fuel costs, businesses are facing reduced margins and, in some cases, losses. Projects are being deferred in hopes that prices will come down again in future, if not cancelled altogether.”

Kiwibank believes the March quarter GDP will either “strengthen or weaken” the Reserve Bank’s decision to raise the Official Cash Rate (OCR) in July, but noted that the Food and Selected Price Indexes from Statistics NZ will be of more interest to the central bank. 

The Reserve Bank left the OCR unchanged at 2.25% in May, but needed Governor Anna Breman’s casting vote after a 3-3 split vote. But the central bank has signalled that the cash rate holding period is coming to an end, with  hikes to the cash rate on the horizon. 

“Both global and New Zealand growth is likely to go south from here for the foreseeable future (until the war is resolved). In that context, next week’s GDP release is not an information gold-mine. It will, however, tell us something about how hot the economy was running,” Turcu said. 

“We expect it to be a calm before the storm.”