It's official: New Zealand recession is over - just

Wednesday 23rd September 2009

New Zealand’s recession has ended, with the economy chalking up its first tentative expansion in six quarters. The kiwi dollar surged to its highest level in 13 months.

Gross domestic product rose 0.1% in the second quarter, following a revised 0.8% slump in the first three months of the year, according to Statistics New Zealand. Economists had expected a 0.2% contraction, according to a Reuters survey.

The economy has resumed growth sooner than Reserve Bank Governor Alan Bollard had projected, after he said a patchy recovery probably began in the current quarter. He’s kept the official cash rate at a record low 2.5%, helping buffer New Zealand from the global downturn, while a pick-up in net migration and increased government spending limited the extent of the slump.

“Sentiment globally has continued to improve, share markets have done well and confidence has continued to improve – things are not as dire as maybe we thought six months ago,” said Andrew Michl, who helps manage $3 billion in fixed interest and cash at ING New Zealand.

Michl said while people are starting to speculate that the RBNZ may bring forwards its interest rate increases, as evidenced by the pick-up in swap rates, ING believes Bollard is “probably quite realistic” in predicting rates won’t pick up until the second half of 2010.

The growth figures come after data yesterday showed the current account deficit shrank to just 5.9% of GDP in the second quarter, while Fonterra Cooperative Group raised its forecast payment to dairy farmers, citing a pick-up in global demand for dairy products.

The New Zealand dollar jumped to 72.82 US cents after the GDP report, from 71.89 cents immediately before the figures were released.

The kiwi has soared 48% since sinking below 50 cents in March. In the same period, the benchmark NZX 50 Index has climbed 30%.

House prices posted their first gains in six quarters in the three months through June 30 while consumer confidence charted an 18 month high in June.New Zealanders may be showing more willingness to spend again.

Household spending climbed 0.4% in the second quarter, the first pick-up since the recession kicked in.Exports of goods and services jumped 4.7% as New Zealand sent more dairy products, meat and logs overseas, while import volumes weakened 3.8%. Dairy exports surged 21%.

“This won't be sustained into Q3, but we expect stock-building to add to growth this quarter,” said Bernard Doyle, New Zealand strategist at Goldman Sachs JBWere.

Business investment rose 1.3% while inventories tumbled by $1.1 billion.

Businesswire.co.nz

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