New Zealand’s economy shrank for a fifth consecutive quarter in the three months to March and recorded its first annual decline in economic activity since 1992. Figures published by Statistics New Zealand (SNZ) today show gross domestic product fell 1 per cent in the March quarter, following a revised fall of 1 per cent in the December quarter.
On an annual basis, GDP was down 1 per cent for the year ended March. It is the first time since the series started in 1986 that GDP has declined for five straight quarters, while the 1 per cent declines of the December and March quarters were the largest for 18 years.
The largest contributors to the annual fall were an 8.9 per cent drop in construction and a 5.4 per cent fall in manufacturing, SNZ said. The main contributor to the fall in the March quarter was manufacturing, which dropped 7.2 per cent.
Bernard Doyle, New Zealand strategist at Goldman Sachs JB Were, said the GDP data was historic and, particularly in the case of this March quarter, “confirms what we already knew – the world was a hostile environment for growth over that time”. He expected one more quarter of economic contraction – a 0.4 per cent fall – with residential construction “likely to be a significant drag”. After that ‘modest sequential growth’ will return to the economy in the second half of this year.
- Economic activity decreased 1.0 percent in the March 2009 quarter, the fifth consecutive decrease.
- Manufacturing activity declined 7.2 percent in the March 2009 quarter.
- Annual gross domestic product was down 1.0 percent for the year ended March 2009.
- Household consumption expenditure declined 1.4 percent in the March 2009 quarter.
- Gross fixed capital formation was down 6.1 percent in the latest quarter.
- Real gross national disposable income decreased 0.8 percent for the year ended March 2009.
The size of the quarterly decline in GDP could be something of an embarrassment for Prime Minister John Key and also caught many economists by surprise, although the Reserve Bank was bang on with its prediction of the size of the contraction. At a post-cabinet press conference this week, Key said he believed the economy had performed more strongly than some thought, while on radio he said his advice was that the size of the quarterly decline in GDP would be lower than predicted by the Reserve Bank.
Meanwhile, the median forecast among economists in a Reuters poll was for a quarterly decline of 0.7 per cent.
In the latest quarter primary industry activity was largely flat, with agriculture down 0.1 per cent, and fishing, forestry and mining up 0.2 per cent, SNZ said. Construction was up 0.4 per cent, following four quarters of contraction. The rise in construction activity was mainly due to a rise in the other construction category which includes non-building areas such as roads, bridges, railway maintenance and power plants.
Non-residential building was down 1.4 per cent in the March quarter, while residential building was down 0.8 per cent. Service industries were down 0.1 per cent in the latest quarter, with transport and communication down 4.5 per cent, and wholesale trade down 3.8 per cent.
Partly offsetting the overall fall in service industries, the finance, insurance and business services industry rose 2.3 per cent, mainly driven by real estate and business services, SNZ said. The expenditure measure of GDP fell 0.7 per cent in the quarter, with household final consumption expenditure falling 1.4 per cent, the largest fall in household spending since 1991.
Household spending on durables fell 2.5 per cent in the March quarter, with lower household spending on retail furniture and major appliances, and new vehicles the main contributors to the fall. Gross fixed capital formation, which measures investment in fixed assets, fell 6.1 per cent in the March quarter. Falls in investment in non-residential buildings, transport equipment, and plant machinery and equipment all contributed to the decline.
RECESSION SO FAR
New Zealand’s GDP:
- * March quarter 2008-0.3 per cent
* June quarter 2008-0.2 per cent
* September quarter 2008-0.5 per cent
* December quarter 2008-0.9 per cent
* March quarter 2009 -1.0 per cent