New Zealand: Signs of a floor - Standard Chartered

GDP expanded 0.7% q/q in Q4, exceeding both our forecast (0.5%) and the RBNZ's projection (0.3%). Services drove the rebound, growing 0.8% q/q, while construction remained a major drag (-3.1% q/q). The economy posted its first quarterly growth since Q1-2024, ending the technical recession, Standard Chartered's economist report.

Finding a foothold

"New Zealand's Q4 GDP expanded 0.7% q/q (-1.1% y/y), exceeding our forecast (0.5% q/q), the Reserve Bank of New Zealand's (RBNZ) projection (0.3% q/q), and market consensus (0.4% q/q). However, in our view, this reflects a technical rebound rather than a sustained recovery, as the economy is coming off a weak base, following a cumulative 2.2% contraction over the prior two quarters."

"While today's print confirms that New Zealand has likely passed the worst of its downturn, we believe growth remains well below potential, and output is still far from levels that would threaten inflationary stability."

"We expect the RBNZ to look through this stronger-than-expected Q4 print, as it has already placed greater weight on high-frequency indicators, which remain consistent with gradual monetary easing. In our view, the data does not challenge the RBNZ's assessment that further policy restriction is no longer warranted. We maintain our call for three additional 25bp OCR cuts over the next three meetings, bringing the rate to 3.0% by Q3-2025."