NZ economy surges as housing, retail drive post-COVID recovery

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

  • New Zealand’s GDP in the first quarter rose 1.6%, beating all estimates
  • Annual GDP up 2.4%, well above forecasts
  • Economists criticize earlier rate hikes

WELLINGTON, June 17 (Reuters) – New Zealand’s economic growth outperformed forecasts in the first quarter due to a housing boom and strong retail spending, avoiding a second recession and bringing forward expectations of tighter monetary policy.

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

New Zealand’s success in virtually eliminating the coronavirus in the country enabled it to reopen its domestic economy before other advanced nations, boosting employment and consumer spending.

Westpac Bank said economic growth was estimated to be around 0.8% higher than before the global coronavirus outbreak.

The rapid recovery follows better than expected levels on key indicators such as employment and retail spending over the past few months, which prompted the central bank to signal a move away from stimulating monetary policy attitudes during the COVID-19 pandemic do so.

ANZ Bank said it preferred its forecast for the central bank to raise its official cash rate through February 2022, saying that “a year in the future is too far away”.

“Data for the first quarter confirm that New Zealand’s economic recovery has been spectacular compared to early pandemic expectations. And while there are still weaknesses, they are becoming difficult to identify on an aggregated level,” said ANZ chief economist Sharon Zollner.

The better-than-expected GDP numbers pushed the kiwi dollar up 0.3% to around $ 0.7073.

Growth was mainly driven by a strong real estate sector amid historically low interest rates and cheap mortgages, although residential affordability concerns have led the government and the RBNZ to take measures to cool the market.

Treasury Secretary Grant Robertson said in a statement that confidence in the recovery has also led to spikes in retail spending, restaurants and vacation rentals, offsetting the loss of overseas tourism, but warned that uncertainties remained.

New Zealand’s adoption of vaccines has been slower than other nations, and the country’s border is expected to remain closed until 2022.

The GDP rebound comes after New Zealand reported a 1.0% decline in economic growth in the final quarter of 2020.

The country had recovered from the recession in the three months to the end of September last year with revised GDP growth of 14.1% compared to the previous quarter. That more than reversed an 11% decline in the previous quarter as the country adhered to strict lockdown measures.

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

Reporting by Praveen Menon; Editing by Leslie Adler

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