New Zealand economy surges as housing and retail boost post-COVID recovery

A sailboat can be seen outside Wellington’s Central Business District (CBD) in New Zealand, July 2, 2017. REUTERS / David Gray

  • New Zealand’s first quarter GDP grew 1.6%, beats all estimates
  • Annual GDP up by 2.4%, well ahead of forecast
  • Economists forecast past rate hikes

WELLINGTON, June 17 (Reuters) – New Zealand’s economic growth swept away expectations in the first quarter due to a real estate boom and strong retail spending, averting a second recession and raising expectations of a tightening monetary policy.

Gross domestic product (GDP) grew 1.6% in the three months to March, Statistics New Zealand said Thursday, well ahead of a Reuters poll forecast of 0.5% growth and the Reserve Bank of New Zealand (RBNZ) estimate of 0.6%. grave.

New Zealand’s success in virtually eliminating the coronavirus in the country has allowed it to reopen its national economy ahead of other advanced countries, boosting employment and consumer spending.

Westpac Bank said economic growth is estimated to be around 0.8% above levels before the global coronavirus outbreak.

The rapid recovery follows better-than-expected readings of key indicators such as employment and retail spending in recent months, which have prompted the central bank to move away from the stimulating monetary policy parameters adopted during the COVID-19 pandemic, one of the first in the world to do so.

ANZ Bank said it was advancing its forecast that the central bank would increase its official cash rate until February 2022, saying “a year from now it seems too far away.”

“First quarter data confirms that New Zealand’s economic recovery has been dramatic compared to expectations of an early pandemic. And while there are still pockets of weakness, they are becoming difficult to identify at the aggregate level.” , said ANZ chief economist Sharon Zollner.

Better-than-expected GDP figures pushed the Kiwi dollar up 0.3% to around $ 0.7073.

Growth was largely driven by a booming real estate sector amid historically low interest rates and cheap mortgages, although concerns over housing affordability led the government and the RBNZ to introduce measures to try to cool the market.

Finance Minister Grant Robertson said in a statement that confidence in the recovery has also led to increased spending on retail, restaurants and vacation accommodation, offsetting the loss in overseas tourism, but he has warned that there were still uncertainties.

The vaccine rollout in New Zealand has been slower than in other countries, and the country’s border is expected to remain closed until 2022.

The rebound in GDP comes after New Zealand announced a 1.0% drop in economic growth in the last quarter of 2020.

The country had rebounded from the recession with revised GDP growth of 14.1% quarter-on-quarter in the three months leading up to the end of September last year. This more than reversed an 11% drop in the previous quarter as the country observed strict lockdown measures.

Annual GDP rose 2.4% in the first quarter, Statistics New Zealand said, compared to analysts’ expectations for an increase of 0.9%.

Reporting by Praveen Menon; Editing by Leslie Adler

Our standards: Thomson Reuters Trust Principles.

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