Q1 GDP contracts 0.1
Q4 GDP revised to decline of 0.7
NZ dollar slips on prospect of no further rate hikes

WELLINGTON, June 15 Reuters New Zealand slipped into recession as the economy shrank in the first quarter, data showed on Thursday, reducing the risk the central bank would need to hike interest rates further but creating a new headwind for the government39;s reelection hopes.

Gross domestic product GDP matched analysts39; expectations of a 0.1 contraction in the March quarter but was well below the Reserve Bank of New Zealand39;s RBNZ forecast of 0.3 growth. Furthermore, fourthquarter GDP was revised to a contraction of 0.7 from a decline of 0.6.

The New Zealand dollar slipped 0.2 to 0.6197 after the data as it was in line with market expectations and gave traction to the central bank39;s position that no further interest rate hikes would be needed.

Weakness in the economy was broadbased with output from half of the countrys industries contracting, according to the Statistics New Zealand data. Growth was hurt by the impact of two major cyclones and flash floods in Auckland in January and February.

It39;s clear that the New Zealand economy is losing momentum, Westpac senior economist Michael Gordon said in a note. What remains to be seen is whether things have slowed enough to put us on a path back to low and stable inflation.

Employment remains strong in New Zealand, limiting the effects for many people of a recessionary environment.

However, while the…