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New Zealand economy slows to more than five-year low

Experts predict that an interest rate cut is likely to unfold going forward and would most likely take place in November.

Economic growth in New Zealand grew at its slowest rate in five-and-a-half-years in the second quarter, as the country deals with lacklustre growth conditions amid a broader global economic growth slowdown plagued by geopolitical issues.

For the second quarter, the New Zealand economy grew by 0.5% due to weaker mining and manufacturing activity, while annual growth to was at 2.1%, the lowest reading since the fourth quarter of 2013.

Economists in a Reuters survey had expected for a 2% annual growth. The quarterly results were in line with the Reserve Bank of New Zealand’s forecast for the country’s gross domestic product numbers.

Experts predict that an interest rate cut is likely to unfold going forward and would most likely take place in November.

Last month, the Reserve Bank of New Zealand cut its base rate 0.5 percentage points to a record low of 1.0%, in a move to prop up the economy to meet inflation targets and boost employment numbers.

Internally, the country faces domestic pressures with falling house prices and a downbeat business sentiment. To add to that, the trade-dependent economy is facing headwinds externally due to a slowdown in China – its biggest export partner – and the United States-China trade war.

The New Zealand dollar dipped 0.3% against the greenback moments after the release of the economic data.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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