(Bloomberg) — New Zealand’s economy contracted by more than expected in the final three months of 2022, putting it on the brink of recession and prompting investors to lower bets on the pace of further interest-rate hikes.
The currency and government bond yields declined after gross domestic product fell 0.6% from the third quarter, compared with expectations for a 0.2% drop, official data showed Thursday. Should the economy fail to expand in the current cyclone-hit quarter, as some economists forecast, it would have entered a recession six months earlier than the Reserve Bank predicted.
That could prompt policymakers to further slow the pace of tightening, and money markets are pricing in just a 50% chance of a rate rise at the April 5 meeting, from 95% yesterday. Financial stress at Credit Suisse Group AG and the collapse of Silicon Valley Bank in the US further cloud the picture and are damping expectations for further hikes by the Federal Reserve.
“The crucial thing for the RBNZ is that the starting point for the economy is substantially less stretched than they thought,” said Michael Gordon, acting New Zealand chief economist at Westpac Banking Corp. “And that matters for how much of a slowdown is needed to bring inflation back under control.”
New Zealand’s dollar dropped to as low as 61.40 US cents in Wellington after the release, from 61.86 cents beforehand, before paring losses. Bond yields also slid.
The RBNZ, which is aiming to engineer a recession in 2023 to suppress demand and rein in inflation, predicted growth of 0.7% for the fourth quarter. The central bank had forecast the economy would enter recession in the second quarter of this year.
The earlier slump in growth adds to signs that higher borrowing costs are starting to curb consumption and could slow inflation faster than the central bank expects.
That suggests it won’t need to be as aggressive with rate hikes as it projected last month, when policymakers lifted the Official Cash Rate by 50 basis points to 4.75% and maintained a forecast that it will reach 5.5% this year.
Most economists expect the RBNZ will raise the OCR by 25 points next month.
ASB Bank economists today said they no longer expect a 50-point move, saying “the weaker starting point for economic activity and increased financial markets jitters overseas suggest less urgency for RBNZ rate hikes.”
Prospects of a shrinking economy will pose a headache for Prime Minister Chris Hipkins who faces an election in October. The ruling Labour Party is under pressure to deal with a cost—of-living crisis and faces a significant fiscal bill to rebuild after a recent cyclone.
Today, the Council of Trade Unions, which is aligned with Labour, said it would “question the need for further significant increases in the OCR as growth is declining more quickly than anticipated and further hikes may cause unnecessary economic pain for working people.”
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
