Understanding New Zealand’s Quarterly GDP Data
The volatility of New Zealand’s quarterly GDP data has led economists at ASB to closely monitor other ‘high frequency data’ to get a more accurate picture of the economy. The most recent GDP figures showed a rise of 1.1% in the September quarter, while the June quarter saw a drop of 1.0%. This volatility makes it challenging to gauge the economy’s performance.
The Issue with GDP Data in New Zealand
One of the downsides of GDP data in New Zealand is the long lag between the release date and the specified quarter. For example, the next release of GDP for the 2025 December quarter is on March 19, 2026 – almost 12 weeks after the December quarter ended. In contrast, the United States publishes preliminary GDP estimates approximately four weeks after the quarter, providing a more timely gauge of economic activity.
Causes of Volatility in GDP Data
According to ASB economist Wesley Tanuvasa, the idea behind the longer lag is to provide more time for accurate readings with less volatile revisions or quarterly movements. However, this has not been the case recently. Part of the issue is due to how seasonal adjustments are handled. Additionally, the "granular data" that underlies GDP is becoming less reliable, reflecting declining survey response rates. This is particularly true following the Covid-19 pandemic period.
Implications of Volatile GDP Data
The implications of ‘worse’ GDP data for policymakers are significant. The data is not only lagged but also less reliable, making it challenging to make informed decisions. This heightens the need to weight high-frequency indicators of economic activity. The Reserve Bank (RBNZ) has been transparent about using timely but partial activity indicators to inform their decisions.
High-Frequency Data to Track
Tanuvasa suggests tracking the following high-frequency data:
- REINZ monthly sales figures
- BNZ-Business NZ Performance of Manufacturing and Performance of Services (PMI and PSI) Indexes
- Stats NZ’s monthly electronic card transactions (ECT) data
- Stats NZ’s monthly migration figures
These indicators can provide a more timely and accurate picture of the economy, despite having a lower signal-to-noise ratio.
Recent Trends in High-Frequency Data
Since the September quarter GDP figures were released, there has been a variety of high-frequency data that has shown improvement. The more recent data indicates a tailwind rather than a headwind for the economy. This suggests that the economy is in a better spot relative to the RBNZ’s November Monetary Policy Statement (MPS) projections.
Inflation and Interest Rates
With CPI inflation now outside of the RBNZ’s 1% to 3% target band at 3.1%, there is evidence that the downwards trend in "stickier" inflation segments is slower than previously assumed. This suggests that the speed limit of the NZ economy is lower than currently thought. An appreciation in the value of the New Zealand currency may work to lower tradables (imported) inflation, but this is contingent on a volatile US policymaking environment maintaining USD weakness.
Conclusion
In conclusion, the volatility of New Zealand’s quarterly GDP data makes it essential to track high-frequency indicators to get a more accurate picture of the economy. The recent trends in high-frequency data suggest that the economy is in a better spot, and with inflation outside of the target band, the RBNZ may need to reconsider its policy settings. The timing of the hiking cycle depends on whether the RBNZ prefers to use its interest rate tool or jawbone the market to tighten financial conditions. Ultimately, a stronger economy and higher inflation may move forward the timing of policy normalisation.
