New Zealand dips into recession, putting rate hikes in doubt

According to figures released on Thursday, New Zealand’s economy contracted in the first quarter, resulting in a recession. This decreased the likelihood that the central bank would have to raise interest rates further, but it also presented a fresh challenge to the government’s chances of winning reelection.

The March quarter’s gross domestic product (GDP) fell by 0.1%, as predicted by experts, but significantly less than the 0.3% rise predicted by the Reserve Bank of New Zealand (RBNZ). Additionally, the GDP contraction for the fourth quarter was changed from a 0.6% fall to a 0.7% loss.

Because the data met market expectations and supported the central bank’s stance that no more interest rate rises would be necessary, the New Zealand dollar fell 0.2% to $0.6197 on the release of the data.

Based on figures from Statistics New Zealand, the economy was weak overall, with output declining in half of the nation’s industries. The effects of two powerful cyclones and flash floods in Auckland in January and February hindered growth.