GDP contracts steeply in the third quarter

GDP reading: GDP contracted 1.0% on a seasonally adjusted quarter on quarter basis in the third quarter, above the 1.1% contraction recorded in the second quarter; past data was revised significantly. On an annual basis, GDP contracted 1.5% in Q3, following the previous period's 0.5% decrease and marking the sharpest contraction since Q2 2020.

Broad-based decline: Private consumption slid 0.3% seasonally-adjusted quarter-on-quarter in Q3 following a 0.1% contraction in Q2. Public consumption dropped 1.9% (Q2: -0.4% s.a. qoq). Meanwhile, fixed investment contracted 2.9% in Q3 (Q2: -0.7% s.a. qoq). On the external front, exports of goods and services contracted 2.1% in Q3 (Q2: +1.7% s.a. qoq). Conversely, imports of goods and services fell at a slower pace of 0.4% in Q3 (Q2: -1.2% s.a. qoq).

GDP outlook: Our panelists expect the economy to return to growth in Q4 2024 and beyond, aided by lower interest rates.

Panelist insight: On the monetary policy implications, Goldman Sachs analysts said: “From a policy perspective, the data raise dovish risks to our view that the RBNZ will maintain a 50bp pace of cuts at its next meeting on 19 February, with a larger 75bp cut possible given sequential growth momentum does not look to be improving. That said, the upward revisions to the prior quarters, as well as the improvement in higher-frequency alternative measures of activity complicate the read-through for inflation pressures in New Zealand.”

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