New Zealand’s GDP rose by 0.7% in the December quarter, ahead of market forecasts. Seasonal issues are overstating the strength of the rebound, but there’s some genuine growth in there as well.
Key results
- Quarterly change: +0.7% (last: -1.1%, Westpac f/c: +0.5%, market f/c: +0.4%, RBNZ +0.3%)
- Annual change: -1.1% (last: -1.6%)
New Zealand’s GDP rose by 0.7% in the December quarter of 2024, providing some relief after steep consecutive declines of 1.1% in the two previous quarters. Revisions to recent history were minimal, with the September quarter being revised down slightly from -1.0%.
The December quarter result was ahead of our forecast of +0.5%, which in turn was at the higher end of the range of market forecasts (median +0.4%). We’d call this a genuine upside surprise, in the sense that the growth was driven more by real activity and less by the seasonal issues that we identified in our preview.
Sector-by-sector growth added up to around 0.3%, with better-than-expected contributions from a range of service sectors including healthcare, professional services, and art and recreation. The non-additive component remains an issue for the interpretation of this data though, adding 0.4% to the growth rate for the quarter.
On an annual basis, GDP was down 1.1% on the same time a year ago. Again, that was better than the -1.3% that we expected, and was an improvement on the -1.6% in the September quarter.
Implications
While the result was ahead of the RBNZ’s forecast, they have tended to downweight the GDP figures in recent times, due to the difficulty of interpreting its volatility and the extent of revisions – instead focusing on a range of higher-frequency indicators. That said, with the RBNZ’s most recent projections sitting somewhere between two and three more OCR cuts this year, these figures favour our view that it’s more likely to be two.
