New Zealand Q1 GDP Growth Below Forecasts

The economy of New Zealand advanced 0.8% quarter-on-quarter in Q1 2026, accelerating from an upwardly revised 0.5% growth in Q4 2025 but falling slightly short of forecasts of 0.9%. GDP growth was mainly driven by service industries, which rose 0.5%, supported by wholesale trade (2.4%), retail trade and accommodation (1.2%), professional, scientific, technical, administrative, and support services (1.1%), and transport, postal, and warehousing services (1.0%). Meanwhile, goods-producing industries grew 0.4%, due to higher activity in the manufacturing sector (1.9%). In contrast, primary industries contracted 0.5%, weighed down by mining activities (-11.6%). On the expenditure side, private consumption and gross fixed capital formation each grew 0.8%, while government spending expanded by 0.4%. Meanwhile, exports and imports rose 4.3% and 4.6%, respectively. Year-on-year, GDP expanded 1.5%, matching the revised figure in Q4 and surpassing market estimates of 1.1% growth.

New Zealand’s economy remains closely tied to Middle East developments, Reserve Bank Governor Anna Breman said, adding that a quicker resolution to the conflict could unlock stronger growth this year. After holding the cash rate at 2.25%, she noted that earlier cuts continue to filter through, supporting activity. With early-year momentum, the economy is well-positioned, if external risks ease. Data showed a pickup in January and February, though tensions weighed on sentiment in March and are expected to dampen April. Breman stressed that uncertainty remains high, with the conflict’s duration and severity the key swing factor. Beyond oil prices, supply disruptions will shape near-term growth and inflation. A swift de-escalation could lower fuel costs and boost confidence, while a prolonged conflict risks sustaining strains and elevated inflation. The RBNZ’s pause reflects this balance, giving policymakers time to assess global risks while keeping a bias to act if pressures intensify.

The economy of New Zealand expanded 0.2% on quarter in Q4 2025, slowing from a 0.9% rise in Q3 but remaining below forecasts of 0.4%. Rental, hiring, and real estate services rose 0.8% and made the largest upward contribution to growth, driven by rental and hiring services and non-residential property operators. Also, retail trade and accommodation was up 1.3%, driven by accommodation and pharmaceutical retailing. On the other hand, construction was the largest downward contributor, down 1.4%. On the expenditure side, exports were up 0.1%, with increases seen in goods and services. Gross fixed capital formation fell 2.2%, as businesses invested less in physical fixed assets, including plant, machinery, and equipment and transport equipment, despite a rise in imports of intermediate goods. Household consumption expenditure edged down 0.1%. Year-on-year, the GDP expanded 1.3%, maintaining the same growth rate seen in Q3.