New Zealand economy shrank more than forecast in second quarter; NZ dollar sinks
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New Zealand’s economy has contracted in three of the last five quarters..
PHOTO: REUTERS
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WELLINGTON - New Zealand’s economy shrank more than expected in the second quarter as construction remained in decline and global uncertainty weighed, increasing expectations of a steeper rate cut in October.
Official data out on Sept 18 showed gross domestic product fell 0.9 per cent in the second quarter of 2025 from the prior quarter, worse than analysts’ and the Reserve Bank of New Zealand’s forecasts of a 0.3 per cent fall.
New Zealand’s economy has contracted in three of the last five quarters.
Year-on-year GDP decreased 0.6 per cent, Statistics New Zealand data showed.
The market had expected it to remain unchanged.
Following the weaker-than-expected data, the New Zealand dollar slid 0.9 per cent to US$0.5912.
The kiwi also fell 0.5 per cent to 1.3195 per Singapore dollar as at 10.50am.
The market is now pricing in a further 58 basis points of cuts to the official cash rate (OCR), up from 48 basis points before the GDP data was released, and a 20 per cent chance that the central bank will cut by 50 basis points in October.
Westpac senior economist Michael Gordon said the main points of economic weakness were in the construction sector, manufacturing output and professional services.
New Zealand sank into a technical recession in the September quarter of 2024, and its economy grew slowly in the fourth quarter of 2024 and the first quarter of 2025.
In August, the central bank flagged two more rate cuts in 2025 as it pointed out that spending by households and businesses had been constrained by uncertainty, falling employment, higher prices for some essentials and declining house prices. REUTERS
