Stats NZ says the economy contracted 0.1% in the March quarter - the second quarter in a row of contraction
Article and photo by Dan Brunskill, Interest.co.nz
New Zealand's economic activity fell 0.1% in the March 2023 quarter, putting the country into a technical recession as measured by gross domestic product.
The decline follows a 0.7% drop in the December quarter (revised from an earlier announced 0.6% drop) and meets the recession definition of two quarters of negative growth.
For many people, economic conditions have already felt recessionary and this data release is just technical confirmation of what has already been experienced in the first half of the year.
In a note prior to the release, BNZ chief economist Mike Jones said recording two consecutive negative quarters didn't really matter in the context of "generally recessionary conditions".
Sectors that are particularly sensitive to higher interest rates, such as residential construction and retailers, have already been in recession for sometime. Meanwhile, sectors such as tourism are experiencing growth as they bounce back from Covid.
"The net of all this still adds up to flat-lining economic growth, but the point is that everyone’s perception of the recession will be different depending on where you live and in which sort of industry you work".
Stats NZ said there were a range of results in different industries over the March quarter, with just over half in decline.
Business services, such as consultants and engineering services, was the biggest downward driver with a 3.5% fall in activity.
That was partly offset by a 2.7% increase in information media and telecommunications, such as publishing and film/sound recording.
The quarter was impacted by two cyclones and a teachers' strike, the latter had a negative impact on education services which declined 1.9%.
"The adverse weather events caused by the cyclones contributed to falls in horticulture and transport support services, as well as disrupted education services," said Jason Attewell, an economic insights manager at Stats NZ.
Primary industries have declined half a percent in each of the past two quarters and has fallen 3.2% in the year ended March.
Economic expenditure dropped 0.2% during the quarter, driven by businesses selling down existing inventory and a fall in export services.
Household consumption increased 2.4% and investment in fixed assets was up 2%, which partially offset expenditure declines.
Annual GDP growth in the year ended March was 2.9% and economists are forecasting approximately 1% growth across 2023, despite the technical recession.
New Zealand's real purchasing power fell 0.9% per capita, meaning consumers might feel worse off than the 0.1% GDP measure might suggest. The Reserve Bank of New Zealand had forecast a 0.3% increase in GDP during the March quarter as part of its May Monetary Policy Statement.
This story was originally published on Interest.co.nz and has been republished here with permission.