New Zealand: GDP surprised to the upside in Q1 – UOB

Lee Sue Ann, Economist at UOB Group, reviews the latest Q1 GDP figures in New Zealand.

Key Quotes

“The New Zealand economy avoided a double-dip recession as growth bounced back in 1Q21. Following the 1.0% q/q fall in the 4Q20 quarter, GDP rose 1.6% q/q, well above expectations for 0.5% q/q growth and the Reserve Bank of New Zealand (RBNZ)’s estimate of a 0.6% fall.”

“New Zealand’s economic recovery has been attributed to the country’s strict lockdown and consequent elimination of the virus. Measures on keeping workers attached to their jobs has also been a key pillar of the relatively positive economic outcomes. This is the reason why New Zealand did not see a large drop in employment as a result of lockdown. In fact, employment levels have actually increased above pre-COVID levels in recent months. We have also seen a resilience in household spending, especially on durable items. Business sector indicators are pointing to a firming in trading activity, with an increasing number of businesses looking at taking on new staff or increasing their capex. Following a contraction of 1.2% last year, we see annual GDP growth at 4.9% in 2021, followed by 3.3% in 2022.”

“We think … 1Q21 GDP data is unlikely to have much bearing on monetary policy settings, due to underlying data volatility and the lengthy path towards normalization.”