New Zealand's economy grew by 0.2 percent in the June quarter, according to new Stats NZ data, a result that suggests the country largely avoided serious economic damage from the fuel price spike triggered by the US-Iran war earlier this year.
That brings annual growth to 2.6 percent compared with a year ago, with the economy expanding 1.7 percent on an annual average basis over the year.
A Genuinely Mixed Result
Stats NZ spokesperson Jason Attewell was careful to note the overall figure masks considerable variation across different parts of the economy.
"The 0.2 percent growth in economic activity reflects mixed results, with increases in nine of 16 industries," Attewell said.
That's a fairly even split, and it points to an economy where certain sectors are genuinely thriving while others are clearly struggling under the weight of higher fuel costs.
What Actually Drove the Growth
House building emerged as the standout contributor this quarter, helping offset weakness elsewhere.
| Sector | Change |
|---|---|
| Construction | +2.7% |
| Government services | +2.0% |
| Wholesale trade (machinery and equipment) | +1.3% |
BNZ senior economist Doug Steel described the overall result as showing a stronger than expected economic pulse, given the circumstances the quarter presented.
Where the Pain Actually Showed Up
Unsurprisingly, the sectors most exposed to fuel costs bore the brunt of the disruption.
| Sector | Change |
|---|---|
| Road transport and support services | -1.7% |
| Accommodation and food services | -3.8% |
| Retail trade | -1.0% |
Stats NZ specifically flagged falling fuel retail volumes as a clear indicator of how higher pump prices were changing consumer behaviour, and noted that reduced spending in restaurants and hotels pointed to a genuine shift in discretionary spending during the quarter.
Services vs. Goods: A Telling Split
Given services make up close to three quarters of the entire economy, their relatively flat 0.2 percent growth for the quarter is significant. By contrast, goods-producing sectors grew a much stronger 1.3 percent overall, helping carry the headline figure despite services barely moving.
What This Means for Household Wallets
Beyond the headline growth number, a couple of figures are worth watching closely for how they affect everyday New Zealanders:
- Per capita GDP rose just 0.1 percent for the quarter
- Purchasing power, essentially disposable income, actually fell 0.4 percent for the quarter, though it remains 2.5 percent ahead of where it was a year ago
"People Still Got Out, and Did Quite a Bit"
Infometrics economist Brad Olsen said the result reflects a New Zealand economy that's becoming genuinely better at absorbing external shocks than expected.
"We really did expect not only for those higher prices to drive a lot of people to do less activity, but also for everyone to sit on their hands a whole lot more because of the uncertainty," Olsen said. "And although there was definitely a bit of a pullback in that momentum, people still got out, and did quite a bit."
He said construction's resilience was particularly notable given rising costs, with strong momentum coming through in growing consent numbers.
At the same time, Olsen said the sectors that did pull back made intuitive sense.
"The likes of accommodation and food services, so hospitality and parts of the tourism sector, not going quite as well because, of course, for a lot of Kiwi households, they were having to pay more for fuel," he said. "They then didn't want to travel around as much because they'd already spent their money on paying for the fuel and everyone went back into their shells a bit more."
What This Means for Interest Rates
Olsen flagged a genuine complication for the Reserve Bank's next move: the growth figures being discussed today are already three months old, while global oil prices remain elevated, still above US$100 a barrel.
"It's those pressures the Reserve Bank will probably be focused on more in making their assessment," Olsen said.
Financial markets are currently narrowly picking that the Reserve Bank will raise the official cash rate to 3.0 percent at its next review. The Bank last raised the OCR to 2.75 percent and has signalled further increases may be needed to combat inflation currently sitting at 4 percent, while also trying to balance that against supporting the broader economic recovery.
How New Zealand Compares Internationally
Despite avoiding the worst-case scenario many had feared, New Zealand's quarterly growth rate of 0.2 percent was actually the weakest among its key trading partners, coming in behind the US, UK, EU, Japan and Australia.
What Happens Next
Economists are broadly expecting growth to continue, but unevenly, through the remainder of the year, with momentum potentially building further into 2027. Business and consumer confidence have both shown some improvement, though a degree of caution and uncertainty still lingers heading into the next few quarters, with global events, particularly ongoing oil price pressures, remaining a significant wildcard.
This article is based on reporting by Gyles Beckford for RNZ.
