(Bloomberg) -- New Zealand's economy contracted less than economists expected in the third quarter after a nationwide lockdown was imposed to combat a community outbreak of Covid-19.
Gross domestic product fell 3.7% from the second quarter, when it jumped a revised 2.4%, Statistics New Zealand said Thursday in Wellington. Economists anticipated a 4.1% decline. From a year ago, the economy shrank 0.3%.
Today's result is less than the 7% slump the Reserve Bank projected and shouldn't prevent further interest-rate hikes as inflation pressures build. the RBNZ has raised the official cash rate twice, to 0.75%, and last month forecast a steady tightening cycle that will take the benchmark to 2.5% over the next two years.
“Given that the fall in activity was well below the RBNZ's expectations, today's data will only add fuel to market expectations of further interest rate hikes,” said Ben Udy, an economist at Capital Economics in Singapore. “With restrictions gradually easing, activity will rebound in the fourth quarter, and output will pass its pre-delta level in the first quarter of 2022.”
The New Zealand dollar was little changed on the data. It bought 67.80 U.S. cents at 11:59 a.m. in Wellington.
While New Zealand faced just a three-week lockdown in mid-August, largest city Auckland -- which accounts for a third of the economy -- was eventually shuttered for 15 weeks and only emerged from lockdown on Dec. 3. A temporary border around the city lifted yesterday, allowing residents to travel again.
Even with the prolonged Auckland shutdown, the RBNZ and bank economists expect the economy is already rebounding in the final three months of the year and will expand further in 2022. Inflation surged to 4.9% in the third quarter and is projected to get close to 6% this quarter or next, while the unemployment rate has dropped to 3.4% and is projected to fall further.
Other Details:
The third-quarter contraction was broad-based, led by services such as retailing and hospitality, the statistics agency said.
- Manufacturing output dropped 7.6% from the second quarter
- Construction fell 9.6%
- Farm output declined 3.3%, led by a decline in dairy production
- Household consumption fell 7.5%, led by fewer purchases of durable goods
- Investment fell 5.3%, led by residential construction
- Exports fell 4.8%, including a drop in tourist spending as quarantine-free travel with Australia was halted
- GDP per capita declined 3.7%
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