The New Zealand economy posted a faster than expected growth through the serving quarter of the year, offering some encouraging news to the nation that had to bring back lockdowns after being one of the first to contain the spread of the pandemic a few months ago. Data released by Statistics New Zealand reveals that Q2 2021 GDP came in at 2.8% QoQ, a far higher reading than economists’ forecast for a growth by 1.3% and official estimate by RBNZ for 0.7% growth.

On an annual basis, the economy posted a 17.4% YoY growth during the period, higher than expectations for a 16.3% growth instead. While the surge is also on account of the weak base reading from the same time last year when the country and most parts of the world were in lockdown mode, the economy was also helped by the setting up of a travel bubble with Australia that helped revive the ailing tourism sector.

The stronger than forecast readings for the GDP have increased expectations among investors for the RBNZ to consider a rate hike in their upcoming meeting early next month. At its last meeting in August, the central bank held off on the decision amid the spread of fresh COVID-19 infections due to the delta variant.

The lockdown last month could send the NZ economy into contraction for the third quarter of the year but it could rebound swiftly as the rollout of COVID-19 vaccines speed up and the number of cases reduce. Economists foresee another V-shaped recovery for the economy as it will rebound from the effects of August’s lockdown.

Impact on the New Zealand Dollar

Following the release of the GDP data, the New Zealand dollar witnessed a sharp spike against the US dollar. However, the enthusiasm surrounding the new has since waned and NZD/USD has eased lower. At the time of writing, NZD/USD is trading around $0.711.