New Zealand‘s economy grew at a slightly slower pace in April-June from the previous quarter, doing little to shift expectations of a further cut in interest rates later this year, although growth was faster than analysts’ expectations.
The statistics office said on Thursday that New Zealand’s gross domestic product (GDP) grew by 0.5 percent quarter-on-quarter in the three months to June, slightly weaker than the 0.6 percent pace recorded in the first quarter but higher than 0.4 percent in a Reuters poll of analysts. The data was also in line with the central bank’s forecast.
The year-on-year growth slowed to 2.1 percent, the lowest since 2013, and compared with 2.5 percent in the previous period, but was faster than the two percent forecast.
The GDP numbers had little impact on the kiwi dollar, which was mostly flat at $0.6323.
New Zealand’s economy has been sluggish this year with business confidence at record lows and headwinds from international trade tensions, a slowing Chinese economy and Brexit.
The Reserve Bank of New Zealand (RBNZ) stunned markets last month with a steep 50 basis point interest rate cut, aimed at jolting the economy out of a sharp slowdown.
The RBNZ is widely seen keeping rates on hold at its policy meeting new week, although several economists expect an easing in November. On Wednesday, the US Federal Reserve cut interest rates again to sustain a record-long economic expansion and fend off risks such as weak global growth and resurgent trade tensions.
Westpac analyst Michael Gordon said the GDP data on its own is unlikely to shift the dial on the likelihood of further Official Cash Rate (OCR) cuts.
“We’re expecting no change at next Wednesday’s OCR review, but a further 25 basis point cut in November,” said Gordon.
Service industries, which represent about two-thirds of the economy, were the main contributor to GDP growth in the quarter, rising 0.7 percent, Statistics NZ said in a statement.
But food manufacturing, mining and construction eased.
Goods-producing industries fell 0.2 percent in the June quarter, driven by declines in manufacturing and construction, it said.
The size of New Zealand’s economy in annual current price terms hit a record $300bn in the June quarter.