Photo: Unsplash
- Economy grows 0.7 percent in December quarter, 1.1 percent lower than one year ago
- Economy out of technical recession, rebound stronger than forecast
- Primary production, tourism related, rental, sectors strongest
- Construction major drag along with telecommunications/media
- Forecasts for a slow pick up this year with much uncertainty about global outlook
The economy has rebounded more strongly than expected out of recession, on the back of improved agricultural production and tourism spending.
Stats NZ data shows gross domestic product -- the broad measure of economic growth -- rose 0.7 percent in the three months ended December, to be 1.1 percent lower than a year ago.
Expectations had been for quarterly growth of 0.3 percent, and and annual contraction of 1.3 percent, after the previous two quarters of contraction.
"Higher spending by international visitors led to increased activity in tourism related industries such as accommodation, restaurants and bars, transport and vehicle hiring," spokesperson Katrina Dewbery said.
Finance Minister Nicola Willis welcomed the confirmation of growth, although acknowledged people were still suffering the after-effects of high inflation and interest rates.
"We still have a way to go to get where we want to be, but with economic forecasters predicting further growth in the quarters ahead, things are looking up," Willis said.
David Seymour, who is the acting prime minister while both Christopher Luxon and Winston Peters were overseas, called the slight growth a "sunny tail-end of summer" and also predicted further growth.
"I suspect that news in its self will make people feel better about where the economy is," Seymour told reporters.
He said Thursday's figures show economic recovery is on the way.
"There is still a lot of economic pain but a recovery underway, and just as the sun is shining today, that's got to be good for New Zealander's future," Seymour said.
"We're not there yet. We've seen the start of the turning corner, the first green shoots of an economic recovery.
"The government must continue to contain its own spending, freeing up cash for others to spend, if this recovery is going to be strong and sustained," Seymour said.
David Seymour. Photo: RNZ/Nick Monro
Labour said it was no cause for celebration, and New Zealanders were still not better off.
Leader Chris Hipkins pointed to the continued struggles in construction as a direct consequence of government decisions.
"People who have lost their jobs are still suffering because of it. Building and construction is probably one of the greatest examples of that.
"By cancelling a whole lot of projects as soon as they became the government, they've set the entire economy backwards," Hipkins said.
Recession over
The main growth spots were agriculture, up 1.4 percent, retail up 1.9 percent, and transport up 2.4 percent.
Those were partly offset by a 3 percent fall in construction, reflecting the slow down in house building, and decreases in telecommunications and internet services.
The energy sector, which had dented the previous quarter because of the mid-winter power crunch, rebounded as conditions returned to more normal activity.
Individual shares of the economy - per capita GDP - rose 0.4 percent, the first quarterly increase in two years, but were still more than 2 percent over the year.
The country's purchasing power (disposable income) improved 1.2 percent for the quarter, after shrinking in the previous six months, although it was was still 2 percent down on a year ago.
Slow recovery
The latest GDP reading marked the turning point for the economy, which fell into its worst contraction in nearly 30 years outside of the Covid-era.
Lower interest rates are expected to give a spark to household spending and business investment.
Forecasts are for modest, positive growth this year picking up pace in the second half for an annual rate between 1.5-2.0 percent, rising towards 3 percent next year.
However, a soft labour market, with unemployment expected to nudge higher, is expected to keep a brake on household spending.
The uncertain global outlook and impact of any tariffs on world growth is expected to weigh on business activity and investing decisions.
New Zealand's quarterly growth rate was one of the stronger among our major trading partners, but the annual contraction was the weakest of any for 2024.
Crawling
Kiwibank chief economist Jarrod Kerr said the economy was still groggy after last year's six month downturn.
"We're still quite weak when you scratch beneath the surface, we are very much crawling out of recession, but I think we'll pick ourselves up and we are optimistic about the outlook."
He expected most sectors to improve through the year, such as retailing and hospitality, but the construction industry would remain in the doldrums until the property market turned around.
ASB senior economist Mark Smith said the emergence of growth would be a "sight for sore eyes" of Kiwis.
But he cautioned many parts of the economy remained fragile and there were plenty of challenges ahead.
"We do think the broader global headwinds provide a sizeable dampening over 2025 - we are not so convinced the fourth quarter breadwinners of growth can maintain their pace over the year."
However, the data was not likely to upset the prospects of further interest rate cuts by the Reserve Bank.
It's delivered 175 basis points of cuts to the official cash rate (OCR) since the middle of last year taking it to 3.75 percent.
ANZ economists forecast three more 25 basis point cuts to 3 percent by July.
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