News & insights

• Gross Domestic Product (GDP) declined 0.2% in the June quarter, which was a smaller fall than most economists had penciled in. The quarterly decline resulted in GDP declining 0.2% in the year to June.

• The largest contribution to weakness in June GDP was primary industry activity and retail and wholesale trade. Residential and non-residential investment was also weak in the June quarter.

• On the positive side, manufacturing rebounded a degree from persistent weakness in previous quarters. A significant decline in imports in the quarter also helped boost GDP.

• Household consumption growth held up reasonably well in the June quarter, recording a rise of 0.4%. On an annual basis, however, consumption growth was a tepid 0.2%.

• While June quarter economic activity was less weak than many expected, including the Reserve Bank, it nevertheless was the fourth negative growth quarter in the past two years. Performance on a GDP per capital basis is abysmal, with deeply negative growth. Recent indicators do not give much hope New Zealand’s economic fortunes will turnaround in the near-term.

• With the Federal Reserve now taking a more proactive approach to its monetary policy it will be interesting to see what the Reserve Bank of New Zealand takes from this. While the Reserve Bank beat the Fed to the cutting chase with its 0.25% Official Cash Rate (OCR) cut in August, it was a timid response to an economy enduring prolonged weakness.

·         With recent indicators showing no material economic improvement and inflation continuing to decline, the chance of a 0.5% OCR cut at the Reserve Bank’s next meeting in October has increased.  

John Carran is Director, Investment Strategist and Economist, Wealth Research. The information and commentary in this article are provided for general information purposes only.  It reflects views and research available at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. It is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision or taking any action. Jarden Wealth Limited is an NZX Advisory Firm. A financial advice provider disclosure statement is available free of charge here.