- Daniel Martin, Capital Economics senior Asia economist
New Zealand's economy slowed considerably in the first quarter of the year as drought hurt farming, diminishing dairy output, while low prices hit oil production and exploration, leaving the Reserve Bank of New Zealand with room for further monetary policy easing. The nation's economy grew a seasonally adjusted 0.2% in the three months through March, marking the lowest quarterly rate in two years, against economists and the central bank's forecast of 0.6%. The annual growth rate slid to 2.6% from the previous quarter's 3.5%, which was the highest level in seven years. Economists, however, had predicted a 3.0% growth. Data released by Statistics New Zealand showed agriculture declined by 2.3% during the quarter, due to lower milk and forestry exports. Mining plunged 7.8% due to decreased oil and gas exploration and extraction. On a positive side, business services rose 2.1% over the same period, while retail, trade, and accommodation grew 2.4%. The data confirmed that the nation's economy is much weaker than most economists thought, but precipitous slowing in growth was caused largely by temporary factors.
The soft data allows the RBNZ the leeway to follow up its official cash rate cut last week with another one in coming months. Economists predict a 25-basis-point rate cut to 3% with opinion divided between July and September.
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