New Zealand GDP up 1.7% in June quarter

New Zealand’s Gross Domestic Product (GDP) grew 1.7% in the June quarter, according to StatsNZ. This could mean that New Zealand has avoided recession, which almost seemed possible when the GDP dipped in the March quarter.

According to Stats NZ, the rise in GDP numbers in the June 2022 quarter was led by the services industries, which grew by 2.7%.

The reopening of borders, the easing of both domestic and international travel restrictions, and fewer restrictions across NZ supported the economic growth.

The travel and tourism industry picked up the pace and supported the growth. In the quarter, households and international visitors spent more on transport, accommodation, eating out, and other recreational activities.

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However, overall household spending declined 3.2% as New Zealanders spent less on motor vehicles and audio-visual equipment. There was also a fall in trade activity. The construction and manufacturing sectors saw a drop, as did the agriculture industry.

Since the beginning of the COVID-19 pandemic, the NZ economy has grown by almost 5%, with exports of goods and services up 11.3% from last year. The low unemployment rate has also added to the resilience of the economy.

New Zealand’s GDP has grown more as compared to the UK and the US, where it reportedly fell 0.1% in the second quarter. Meanwhile, Australia saw a 0.9% growth and the OECD showed a 0.4% lift.

GDP numbers according to forecasts

It may be noted that GDP figures align with the Reserve Bank of New Zealand’s (RBNZ) prediction of a 1.8% rise compared to previous quarter. Among other banks, ANZ had downgraded its forecast from 1% growth to 0.4%, while Westpac had upgraded its forecast from 1% to 1.8%.

RBNZ’s stand

The rise in GDP is reflective of a strong economy and that the country has reopened to travel and tourism. This might lead the RBNZ to raise the official cash ratio (OCR) by 50 bps in its October monetary policy review.

Stocks that gained

The NZX50 was generally in the red. However, in certain sectors, gains were seen. These included utilities, banking, and technology. Specific stocks that gained included Genesis Energy (NZX:GNE), Mercury NZ Limited  (NZX:MCY), Fletcher Building (NZX:FBU), and Eroad Limited (NZX: ERD).

Bottom Line: The New Zealand economy picked up in the second quarter ended June 2022 on the back of the services sector. After the borders opened up and travel picked up, certain sectors supported the growth of the economy.