Economy

New Zealand’s economy dips into recession as higher interest rates bite

Published

1 year ago

June 15, 2023

FILE – Shipping containers are moved at the Port of Lyttelton near Christchurch, New Zealand, on Sept. 17, 2020. New Zealand’s economy has dipped into recession as higher interest rates take their toll, new figures released Thursday, June 15, 2023 show. Photo by Mark Baker /THE ASSOCIATED PRESS

WELLINGTON, New Zealand (AP) — New Zealand’s economy has dipped into recession as higher interest rates take their toll, new figures released Thursday show.

Gross domestic product fell by 0.1% in the March quarter, following a revised 0.7% fall in the previous quarter, Statistics New Zealand said. That fulfils the nation’s definition of a recession, which is at least two consecutive quarters of negative growth.

The slowdown comes after New Zealand’s central bank raised its benchmark interest rate 12 straight times to 5.5% as it tries to tame inflation. The rate is at its highest level since 2008, making it more expensive for people to borrow money for homes, cars and other purchases. The Reserve Bank of New Zealand has indicated it doesn’t plan to raise the rate any further for now and that its next move will be a cut.

The downturn in growth was in line with economists’ expectations, and the currency was little changed, with one New Zealand dollar trading at around 62 U.S. cents.

Taken over the full year, the picture looked rosier. New Zealand’s economy grew by 2.9% after strong growth in the first two quarters. And with such a small dip in the March quarter, it’s possible the recession call could be reversed when the latest figures are revised next quarter.

Contributing to the drop in growth were a series of deadly weather events, including flooding in Auckland and a cyclone.

“The adverse weather and resulting flooding caused significant damage and disruption, particularly across the North Island,” Statistics New Zealand wrote in a release.

The biggest drivers of the downturn were business services, down 3.5%, and transport, postal and warehousing, down 2.2%. Going against the trend, media and telecommunications rose 2.7%.

One of the most notable affects of higher interest rates has been on the housing market. Since peaking 18 months ago, average house prices in New Zealand have fallen by about 18%. However, there are signs the market might have reached a low point. Statistics released Thursday showed prices were flat when compared with the previous month and sales volumes were rising in some areas.

Kiwibank economists Jarrod Kerr and Mary Jo Vergara said the central bank had raised rates too high and they expect the economy will contract more over the year ahead.

“If households spend less, which is what we are seeing, then the economy will contract harder,” they wrote in an analysis. “If businesses pull back on their hiring and investment, which is what we’re hearing, then the economy will contract harder.”

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Economy

September merchandise trade deficit narrows to $1.3 billion: Statistics Canada

Published

1 day ago

November 5, 2024

Anne Joseph

OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.

The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.

Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.

Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.

Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.

In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.

This report by The Canadian Press was first published Nov. 5, 2024.

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