Back in growth: GDP data shows economy expanded by 1.1% in third quarter
The economy grew by 1.1% in the third quarter of the year – stronger than even the most optimistic forecasts.
Economists had been picking a rise of between 0.8 and 1% for the quarter.
The result was much stronger than the Reserve Bank’s forecasts of 0.4% growth.
That could mean the chances of another official cash rate cut in February have faded further into the distance, one economist said.
The GDP figure for the second quarter was revised and was worse than previously recorded at minus 1% (from -0.9%).
“GDP rose in three of the last four quarters, but fell 0.5% over the year ended September 2025 compared with the year ended September 2024,” economic growth spokesman Jason Attewell said.
“The 1.1% rise in economic activity in the September 2025 quarter was broad-based, with increases in 14 out of 16 industries. This is in contrast to the June 2025 quarter, when GDP decreased in 10 industries.”
GDP per capita rose 0.9% for the quarter; however, that followed a 1.1% fall in the June quarter.
Dollar unchanged
The New Zealand dollar was largely unchanged following the data, as were the interest rate markets.
ANZ market strategist David Croy said the markets had expected a strong number and that’s what they got.
“My sense going into this was that the market would have needed a number quite a lot stronger to be surprised.”
ANZ economists had predicted a 1% gain in GDP for the quarter.
Growth by sector
Business services were the largest contributor to the overall increase in GDP, up 1.6% in the quarter. This was driven by a 2.1% rise in professional, scientific, and technical services, such as computer system design and related services.
Manufacturing was up 2.2% in the September 2025 quarter, driven by food, beverage, and tobacco manufacturing.
“The 2.2% increase in manufacturing this quarter follows a 3.9% fall in the June 2025 quarter, when it was the main driver of the 1% decrease in GDP,” Attewell said.
Information media and telecommunications was the largest downward contributor to GDP in the latest quarter, down 2.1%.
The expenditure measure of GDP rose 1.3% during the September 2025 quarter, following a 0.8% fall in the June 2025 quarter.
Exports were up 3.3%, with increases in travel services, dairy, and other services, including insurance.
Gross fixed capital formation, up 3.2%, also contributed to the rise in expenditure GDP.
“Businesses invested more in physical fixed assets in the September quarter. There were increases in transport equipment and plant, machinery, and equipment, supported by imports of related capital goods and motor vehicles,” Attewell said.
Household consumption expenditure rose 0.1% this quarter. Expenditure on durables rose 2%, while expenditure on services fell 0.1% and non-durables fell 0.2%.
The increased spending on durables was driven by rises in audio-visual equipment (such as televisions, computers, and mobile phones) and motor vehicles.
OCR implications
From the RBNZ’s point of view, this represents an upside, said Westpac senior economist Michael Gordon.
“This is in the end a stronger outcome than the RBNZ thought at the November Monetary Policy Statement and will imply an assessment of less excess capacity.
“However, we should remember that market pricing is well ahead of the RBNZ right now, and hence there’s likely no need to be pricing in significant additional tightening in 2026.
“Although perhaps that small chance of a further cut in 2026 is likely more remote now in the RBNZ’s eyes.”
Finance Minister upbeat
“This growth was broad-based, occurring in 14 of the 16 sectors measured by Stats NZ,” Finance Minister Nicola Willis said.
“This is what healthy growth looks like. With all the indicators pointing to further growth in the final quarter of the year, Kiwis can go into Christmas confident the economy has finally turned the corner after a tough few years.
“Treasury and the Reserve Bank are forecasting growth to accelerate next year and unemployment to fall.”
The 1.1% rise was broad-based, with 14 of 16 industries growing.
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