New Zealand Q4 GDP misses expectations, momentum faded into year-end

Summary:

• Q4 GDP undershoots expectations on both quarterly and annual measures

• Growth slows sharply from prior quarter, signalling fading momentum

• Production-based GDP +0.2% q/q vs +1.1% prior

• Annual growth holds at 1.3% y/y, missing forecasts

• Expenditure-based GDP weaker at +0.1% q/q

• NZD briefly volatile, then edged lower on softer data

• Reinforces fragile recovery backdrop and mixed domestic demand signals

New Zealand’s economy lost momentum into the end of 2025, with fourth-quarter GDP data coming in below expectations and reinforcing a softening growth profile that is likely to keep the policy outlook finely balanced.

Headline growth rose just 0.2% quarter-on-quarter, undershooting the 0.4% consensus forecast and slowing sharply from the 1.1% expansion recorded in Q3. On an annual basis, GDP held at 1.3% year-on-year, also missing expectations for a stronger 1.7% outcome and sitting at the lower end of analyst estimates.

Details of the release pointed to a lacklustre domestic demand backdrop. Expenditure-based GDP increased by only 0.1% in the quarter, well below the 0.5% expected, highlighting subdued household consumption and investment trends. Production-based measures painted a similarly modest picture, confirming that the growth impulse weakened materially into year-end.

The data fits with a broader narrative of uneven recovery across the New Zealand economy. While earlier quarters showed signs of stabilisation following a period of contraction, momentum appears to have faded again, suggesting that higher interest rates and cost pressures continue to weigh on activity.

From a policy perspective, the softer print complicates the outlook for the Reserve Bank of New Zealand. While inflation pressures remain a concern, the loss of growth momentum strengthens the case for caution, particularly if forward indicators fail to show a rebound in early 2026.

Market reaction was relatively contained but negative at the margin, with the New Zealand dollar initially whipsawing before drifting lower as the weaker-than-expected figures filtered through.

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Reserve Bank of New Zealand next meet April 8: