New Zealand has successfully emerged from a technical recession, according to the latest Gross Domestic Product (GDP) report from Stats NZ, released March 20, 2025. This is a significant milestone, but one that sends mixed messages about the economy’s status.
Understanding a Technical Recession
First, let’s break down what a technical recession is. It occurs when an economy experiences two consecutive quarters (or more) of negative GDP growth. It’s a sign that things have been tough, but it doesn’t necessarily mean we’re in a full-blown economic crisis. The good news is that New Zealand’s GDP has grown in the most recent quarter, signalling that we’re on the path to recovery. It is the first time since 2022 that the GDP has been in growth territory.
Key Factors Driving the Recovery
The GDP report highlights several key factors contributing to this turnaround. One of the main drivers has been the resilience of our export sector. Despite global challenges, New Zealand’s exports have remained strong, particularly in the agriculture and technology sectors. This has provided a solid foundation for economic growth.
Additionally, with interest rates dropping, consumer spending has picked up, which is a positive sign of confidence in the economy. When people feel secure in their jobs and finances, they’re more likely to spend, which in turn stimulates further economic activity. The government’s fiscal policies and support measures have also played a crucial role in stabilising the economy and fostering growth.
Underwhelming Earnings Releases
However, it’s important to note that not all economic indicators have been positive. February saw a series of underwhelming earnings releases from several major companies. These disappointing results raised concerns about the overall health of the corporate sector. Factors such as rising costs and cautious consumer spending have contributed to these lacklustre earnings.
Prices and Inflation Edge Upward
Unexpectedly, inflation has edged higher on the back of more expensive petrol, rents, housing, and tertiary fees, but remains in the Reserve Bank’s target band and unlikely to prevent further rate cuts. The annual rate rose to 2.5% from 2.2%, the highest since June last year.
Stats NZ said the consumer price index rose 0.9% in the three months ended March, the biggest quarterly increase since the September quarter of 2023.
What This Means for Investors
Exiting a technical recession marks progress for New Zealand’s economy. Future GDP reports are worth watching, especially with Trump tariffs affecting key recovery sectors.
We expect positive earnings releases from companies as consumer confidence and spending increase, with lenders lowering borrowing rates following the Reserve Bank’s April cut of the Official Cash Rate by another 25 basis points to 3.50%.
The recovery phase is optimistic, presenting new opportunities for investors.
28 April 2025
Sources:
Stats NZ Gross Domestic Product December 2024
Consumers price index review: 2024
