New Zealand growth slows in Q1 amid downturn fears
New Zealand’s economic growth eased to a two-year low in the January-March quarter, official data showed Thursday, with analysts warning of worse to come as commodity prices tumble.
Gross domestic product (GDP) was 0.2 percent in the three months to March 31 — well down on market expectations of 0.6 percent — while annual growth was 3.2 percent, Statistics New Zealand (SNZ) said.
Economists said the figures meant the central bank would continue a round of rate cuts launched earlier this month, which was the first since 2011.
The quarterly figure was the lowest since early 2013, reflecting a large 2.9-percent fall in primary industries.
“Oil and gas were big factors in lower GDP growth this quarter,” SNZ accounts manager Gary Dunnet said.
“There was less extraction and exploration as international prices fell ... (and there was) lower milk production in a quarter that had drought conditions and lower dairy prices.”
The drag on growth was partially offset by a 6.1-percent rise in retail trade and accommodation, fueled by New Zealand’s cohosting of the Cricket World Cup with Australia.
But Capital Economics senior Asia economist Daniel Martin said the dairy sector was the key to New Zealand’s long-term prospects, which were not looking rosy after a 50-percent slump in prices since last year.
“The outlook remains clouded by the fall in dairy prices late last year — it will take time for the indirect impact on real GDP from the deterioration in the terms of trade to be felt,” he said.
“Meanwhile, the construction boom looks set to fade and exports are likely to be undermined by weaker growth in Australia’s economy.”