GDP grew at 0.8% in the first quarter of 2025 – stronger than even the most optimistic of economists’ forecasts.

Activity increased in the March 2025 quarter across all three high-level industry groups: primary industries, goods-producing industries, and services industries, according to Stats NZ data released today.

The Reserve Bank of New Zealand (RBNZ) had forecast 0.4% for the quarter, but more recently, the consensus of economists moved to 0.7%.

There was a 0.5% rebound in growth in the last quarter of 2024, following a recessionary two quarters of contraction. That number was revised down today from 0.7%.

Economists had suggested that if GDP landed at 0.7%, it would lift the odds that the Reserve Bank would leave interest rates on hold at its next meeting in July.

Today’s number signals a hold is increasingly likely.

“With the economy regaining its footing sooner than expected after last year’s sharp downturn, we continue to expect that the RBNZ will take the opportunity to pause and assess the situation at its July OCR review,” said Westpac senior economist Michael Gordon.

“The RBNZ has already factored in a soft 0.2% rise in GDP for the June quarter – partly adjusting for the residual seasonality that has crept into the GDP figures. Our forecast currently sits at 0.6%, but we will assess this in the next couple of weeks."

ASB economists agreed but warned there were numerous risks to the outlook.

“Stronger GDP means the RBNZ has scope to pause in July,” said ASB’s Wesley Tanuvasa. “We think the Bank will. However, we must stress the risks that face the outlook.”

Geopolitical deterioration in the Middle East had pushed oil prices up around 17% since May – presenting significant upside risk to the inflation outlook, he said.

With New Zealand having just come out of a period of high inflation, the RBNZ was unlikely to be willing “to tolerate the implications of an inflation spike on pricing behaviour”.But conversely, economic activity since March looked to have “spluttered” and tariff-related ructions still presented downside risks to growth, he said.

“A risk of stagflation will require surgical policymaking by the RBNZ. For now, a stronger GDP print suggests the Bank has time – it looks like it will need it."

ANZ economist Matthew Galt noted that there was still a round of confidence surveys to come before the RBNZ’s call.

“If the RBNZ does pause in July, we expect the Monetary Policy Committee will choose to deliver a 25bp cut in August,” he said.

“We continue to expect the OCR to end up in stimulatory territory at 2.5% as the recovery disappoints, but the risks are currently tilted towards this easing arriving more slowly than we are forecasting.”

The details

“At a more detailed industry level, nine of the 16 industries increased, with the largest rises in business services and manufacturing,” said Stats NZ economic growth spokeswoman Katrina Dewbery.

The rise in manufacturing was led by an increase in the production of machinery and equipment.

This was reflected in increases for components of both investment and exports associated with this type of manufacturing output.

The largest decreases were seen in arts and recreation services, and information, media, and telecommunications.

GDP per capita rose 0.5% during the March 2025 quarter.

There was little change in the New Zealand dollar following the better-than-expected release. By late morning, the currency was trading at about US60.27c.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist and also presents and produces videos and podcasts. He joined the Herald in 2003.