Upcoming GDP figures are expected to show that economic growth in New Zealand remains sluggish, but didn't continue slowing in the second quarter of this year. However, with the global backdrop looking increasingly rocky and business conditions weak, the risks for growth over the remainder of 2019 are to the downside. Against this backdrop, the RBNZ is likely to cut the cash rate again later this year in order to boost demand.


Soggy but steady growth...

We expect that the upcoming GDP report (out on 19 September) will show that the New Zealand economy expanded by 0.6% in the June quarter, matching the pace of growth seen in the previous two quarters. That wouldn't be a great result, but it would at least suggest that there hasn't been a further deceleration so far this year.

Underlying our expectations for a moderate rise in overall activity are some mixed conditions across the economy. On the upside, we've seen some better conditions in a number of service sectors after softness earlier in the year. We also expect a boost from the agricultural sector, led by a 4% rise in dairy production. Balanced against those developments, construction, mining and food manufacturing all eased back over the quarter


....as headwinds continue to build

While GDP growth appears to have held up in the June quarter, stepping back and taking a longer term look at economic activity, it's clear that the wind has come out of New Zealand's sails. Annual GDP growth appears to have slowed from rates of 3 to 4% in recent years down to just 2.5% now. And looking to the back half of the year, the risks for growth are to the downside.

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