New Zealand avoids a technical recession – UOB

Economist at UOB Group Lee Sue Ann reviews the latest GDP figures in New Zealand.

Key Takeaways

“GDP rose by 1.7% q/q in 2Q22, in contrast to the 0.2% q/q fall in 1Q22, and higher than expectations for a print of +1.0% q/q. Compared to the same period one year ago, GDP rose by 0.4% y/y, following a revised 1.0% y/y print in 1Q22 (1.2% y/y previously), and also more than expectations of 0.0% y/y.”

“Data is still very volatile and is likely to stay that way for the next couple of months, with offsetting effects due to the normalisation and recovery from lingering COVID-19 disruptions against softer domestic demand from higher interest rates. This will set the scene for slower growth towards the end of the year and into 2023. We have thus lowered our GDP forecast for growth in 2022 to 1.8% from 2.4% previously and to 1.8% for 2023, from 3.0% previously.”

“Still, this is unlikely to deter the Reserve Bank of New Zealand (RBNZ) from further increasing borrowing costs to tackle inflation. The next RBNZ meeting is on 5 Oct, where we are pencilling in a 50bps hike in the OCR from 3.00% to 3.50%.”