New Zealand economy plunges into unexpected contraction…

Bloomberg — New Zealand's economy unexpectedly shrank in the final three months of last year, cementing a recession in the second half of the year and Sends the coin down Traders stepped up calls for interest rate cuts.

Gross Domestic Product (GDP) It fell 0.1% in the fourth quarter after falling 0.3% in the previous three monthsStatistics New Zealand in Wellington said on Thursday. Economists were expecting 0.1% growth. GDP shrank by 0.3% compared to the same quarter a year earlier, worse than estimates for zero growth.

The economy has fallen into a double-dip recession In the face of RBI's aggressively restrictive monetary policy While trying to control inflation. Weaker growth will increase pressure on policymakers to consider rate cuts sooner than previously thought.

Bets on rate cuts increased after the report, with the yield on policy-sensitive two-year bonds falling 10 basis points to 4.5%, the lowest since Jan. 16. The New Zealand dollar fell 0.4% to 60.60 cents The value of the US dollar continues to decline by up to 4% from the previous year.

The Reserve Bank of New Zealand has set the official interest rate at 5.5%. May and last month did not want to cut rates until 2025, citing record immigration and stable inflation.

Most economists expect the first cut in the final months of 2024 and investors see the official interest rate falling below 5% by November, based on pre-report swap rates.

Only four of 16 economists surveyed by Bloomberg expected contraction, while the rest expected growth or stagnation. The Reserve Bank of New Zealand has forecast GDP to be unchanged this quarter.

The economy contracted in the last quarter of 2022 as well and the first three months of 2023.

The statistics agency said the main factors behind the fourth-quarter contraction were declines in manufacturing, retail sales and machinery sales. Net exports have increased, he said.

Gross domestic product per capita shrank 0.7% from the third quarter, its fifth consecutive quarterly decline.

— with assistance from Tomoko Sato.

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