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By Wayne Cole
SYDNEY (Reuters) – New Zealand’s financial system sank into recession within the third quarter as exercise dived much more sharply than anticipated, whereas the prior quarter was additionally revised sharply downward, a dire consequence that cements the case for extra aggressive price cuts.
The native greenback prolonged an in a single day rout to hit a recent two-year low of $0.5620, having already shed 2.2% within the wake of a hawkish easing from the U.S. Federal Reserve.
Markets additionally added to wagers the Reserve Financial institution of New Zealand would slash charges additional, having already reduce by 125 foundation factors to 4.25%. Swaps now implied a 91% likelihood of a 50-basis-point reduce in February, and charges had been seen declining to three.0% by the top of 2025.
Thursday’s knowledge confirmed gross home product dived 1.0% within the September quarter from the prior quarter, dwarfing market forecasts of a 0.2% contraction.
The June quarter was revised to point out a fall of 1.1%, and two straight quarters of decline is the technical definition of recession.
The end result was far worse than the 0.2% drop forecast by the RBNZ, and got here simply two days after New Zealand’s Treasury had predicted a fall of solely 0.1%.
The weak point was unfold throughout industries and notably sizeable in manufacturing, utilities and building. Family and authorities spending dropped within the quarter, whereas funding and exports additionally dragged.
For the yr to September, output was down a steep 1.5%, the sharpest fall for the reason that pandemic and properly outdoors forecasts of a 0.4% dip.
Setting apart the pandemic, this was the most important two-quarter decline for the reason that painfully deep 1991 recession.
The image was difficult by substantial revisions from the statistics bureau, which revised up GDP progress over the 2 fiscal years to March 2024 by nearly 2 proportion factors.
That made the place to begin for this yr stronger than first thought. It additionally erased a recession and an extended interval of stagnant progress that had contributed to the autumn of the previous Labour authorities.
