WELLINGTON, March 27 (Reuters) - New Zealand's economy contracted in the fourth quarter at its fastest pace since September 1992 as the global turmoil exacerbated a domestic slump, leaving the door open for more central-bank rate cuts.
Gross domestic product fell a seasonally adjusted 0.9 percent as consumers spent less, businesses cut investment and weak global markets and prices hit exports, data showed on Friday.
A Reuters poll forecast gross domestic product to shrink 1 percent on the previous quarter. The RBNZ had forecast a 0.8 percent fall.
Analysts said the data left the central bank's rate policy in the balance.
'My view is that the RBNZ has done enough and they shouldn't be cutting rates, not in the near term, but they seem to be telling us they will, so we have to see how water flows under the bridge in the next four weeks,' said Deutsche Bank chief economist Darren Gibbs.
The New Zealand dollar was a shade firmer after the data at around $0.5760/70. Interest rates were unmoved with the yield on the June bank bill contract steady at 3.1 percent.
The drop was the biggest quarterly decline since the 0.9 percent fall in the September quarter 1992. The economy contracted in all four quarters of 2008, the longest period of weakness since the current data series began in 1987.
The data was seen backing further rate cuts from the Reserve Bank of New Zealand (RBNZ), which cut interest rates to a record low 3 percent earlier this month to help stimulate the economy.
The central bank said then it expected the economy to start showing some weak growth in the second half of this year, helped by the substantial reduction in borrowing costs, fiscal stimulus and the lower New Zealand dollar.
New Zealand bond yields jumped on Thursday, prompting the central bank to deny talk it was holding an emergency meeting over a two-week debt market selloff that threatens efforts to shore up the ailing economy.
Bond yields have been surging since the central bank said on March 12 it may not cut interest rates much further for fear of deterring investment needed to finance the second-heaviest foreign debt burden in the industrialised world.
The swap rate on five-year debt stood at 4.915 percent on Friday, down from as much as 5.31 percent on Thursday.
Friday's data showed household spending was flat following three consecutive decreases, export volumes fell 3.3 percent and fixed capital investment plunged 5.3 percent.
The declines were only partly offset by higher agriculture output, mainly dairy products, and government spending.
New Zealand was last in recession during the Asian crisis in 1997-98.
Separately, New Zealand reported a trade surplus in February, the first monthly surplus in a year.
(Reporting by Mantik Kusjanto)
((mantik.kusjanto@thomsonreuters.com; +64 4 471 4232;
Reuters Messaging: mantik.kusjanto.reuters.com@reuters.net)) Keywords: NEWZEALAND ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Gross domestic product fell a seasonally adjusted 0.9 percent as consumers spent less, businesses cut investment and weak global markets and prices hit exports, data showed on Friday.
A Reuters poll forecast gross domestic product to shrink 1 percent on the previous quarter. The RBNZ had forecast a 0.8 percent fall.
Analysts said the data left the central bank's rate policy in the balance.
'My view is that the RBNZ has done enough and they shouldn't be cutting rates, not in the near term, but they seem to be telling us they will, so we have to see how water flows under the bridge in the next four weeks,' said Deutsche Bank chief economist Darren Gibbs.
The New Zealand dollar was a shade firmer after the data at around $0.5760/70. Interest rates were unmoved with the yield on the June bank bill contract steady at 3.1 percent.
The drop was the biggest quarterly decline since the 0.9 percent fall in the September quarter 1992. The economy contracted in all four quarters of 2008, the longest period of weakness since the current data series began in 1987.
The data was seen backing further rate cuts from the Reserve Bank of New Zealand (RBNZ), which cut interest rates to a record low 3 percent earlier this month to help stimulate the economy.
The central bank said then it expected the economy to start showing some weak growth in the second half of this year, helped by the substantial reduction in borrowing costs, fiscal stimulus and the lower New Zealand dollar.
New Zealand bond yields jumped on Thursday, prompting the central bank to deny talk it was holding an emergency meeting over a two-week debt market selloff that threatens efforts to shore up the ailing economy.
Bond yields have been surging since the central bank said on March 12 it may not cut interest rates much further for fear of deterring investment needed to finance the second-heaviest foreign debt burden in the industrialised world.
The swap rate on five-year debt stood at 4.915 percent on Friday, down from as much as 5.31 percent on Thursday.
Friday's data showed household spending was flat following three consecutive decreases, export volumes fell 3.3 percent and fixed capital investment plunged 5.3 percent.
The declines were only partly offset by higher agriculture output, mainly dairy products, and government spending.
New Zealand was last in recession during the Asian crisis in 1997-98.
Separately, New Zealand reported a trade surplus in February, the first monthly surplus in a year.
(Reporting by Mantik Kusjanto)
((mantik.kusjanto@thomsonreuters.com; +64 4 471 4232;
Reuters Messaging: mantik.kusjanto.reuters.com@reuters.net)) Keywords: NEWZEALAND ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.