By Lucy Craymer
WELLINGTON (Reuters) – New Zealand’s economy grew less than expected in the fourth quarter, instead contracting 0.6 percent, official data showed on Thursday, sending markets on the back of optimism. It is hoped that the central bank will scale back its interest rate hike plan. Gross domestic product (GDP) missed analysts’ expectations for a 0.2% contraction in the December quarter and was well below the 0.7% growth forecast by the Reserve Bank of New Zealand (RBNZ). This was in contrast to a revised 1.7% growth rate in the third quarter. Annual growth slowed to 2.2 percent as the primary sector and manufacturing contracted.
Michael Gordon, acting chief economist at Westpac Bank of New Zealand, said the data showed the economy was “much less strained than the RBNZ thought” and that “this has implications for how much a slowdown is needed to bring inflation back to lows.” The level is important to control”.
The New Zealand dollar fell ahead of the data, but extended losses to trade down 0.6% at $0. 6145. The two-year swap rate was near a two-month low of 4.925%, having fallen sharply overnight as global bond yields fell on bank worries.
Bank of New Zealand bill futures surged as markets priced in a lower peak in RBNZ rates. The market is now 25-25 Regarding whether the New Zealand Federal Reserve will raise interest rates 50 basis points in April, while the final rate is expected to be 5.% instead of the 5.5% forecast by the bank.
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RBNZ embarked on the most aggressive policy tightening since 2021 when the official cash rate was introduced, raising it to 50 ) basis points 2021 to 4.75% since October.
RBNZ Governor Adrian Orr has said he is trying to create a mild recession to keep inflation in check, with the central bank forecasting a 5.5% rate peak at 6145.
The central bank and the Treasury forecast the country to enter a recession ahead of the Q4 GDP data 2023 Q2.
Now likely to happen in the first quarter, assuming GDP growth remains in a negative sector when severe weather events in January and February hurt the services sector.
