New Zealand's economy fell into a recession as a result of output being drastically reduced in the previous quarter, which ended on September. New Zealand's economic activity plummeted much more than anticipated. This disastrous outcome strengthens the argument for more aggressive rate cuts.
The shock caused the New Zealand dollar, which had already dropped 2.2 per cent in response to hawkish easing by the U.S. Federal Reserve, to drop to a new two-year low of USD 0.5614.
Market projections of a 0.2 per cent contraction were dwarfed by Thursday's data, which showed that the gross domestic product fell 1.0 per cent in the September quarter compared to the previous quarter.
New Zealand's macro data
According to data released on Thursday, the gross domestic product shrank 1.0 per cent in the September quarter compared to the previous quarter, far exceeding market projections of a 0.2 per cent contraction.
A decline of 1.1 per cent was reported for the June quarter. Here, the technical definition of recession is two consecutive quarters of decline. With the exception of the pandemic, this was the biggest two-quarter drop since the agonizingly severe 1991 decline.
Most weak sectors
The industry-wide weakness was most noticeable in manufacturing, utilities, and construction. Spending by households and the government fell during the quarter, and exports and investment also suffered.
Output fell 1.5 per cent in the year ending in September, which was the biggest decline since the pandemic and significantly more than the 0.4 per cent decline predicted.
The GDP per person fell by an even greater 2.1 per cent for the year, despite the South Pacific island nation's population growing by 1.2 per cent to 5.35 million in the year ending in September.
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