Gross domestic product shrinks 0.6% in December quarter

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Gross domestic product (GDP) has fallen 0.6% for the December quarter, according to new figures out from Statistics New Zealand.

It comes on the back of slight economic growth in the second and third quarters last year of 1.9% and 2% respectively.

Experts had predicted growth would come to a halt, with Kiwibank senior economist Mary Jo Vergara saying the Reserve Bank's work to raise the official cash rate — with the steepest hikes on record in Q4 last year — would inevitably slow the economy.

Both the Reserve Bank and Treasury predict a recession for New Zealand in 2023 — but also tipped positive Q4 results in earlier forecasts.

In today's update, Stats NZ said nine of the 16 industries experienced a decrease in activity compared to the September 2022 quarter.

Manufacturing was the biggest driver of the decrease, down 1.9%.

"A fall in transport equipment, machinery, and equipment manufacturing correspond to lower investment in plant, machinery, and equipment; while reduced output in food, beverage, and tobacco manufacturing was reflected in a drop in dairy and meat exports," national accounts industry and production senior manager Ruvani Ratnayake said.

Other downward trends include the retail trade and accommodation sector, the arts, recreation and others services, and transport, postal and warehousing.

"We would typically see higher activity in industries linked to tourism such as accommodation, retail, and transport, in what is usually the beginning of New Zealand's peak tourist season," Ratnayake said.

"While the last of the travel restrictions were lifted in August 2022, the number of overseas visitors in December 2022 quarter was still below pre-Covid levels."

Business services was up 3.3%, offsetting the falls in other parts of the economy.

But household spending was flat, as decreased spending on durables, including audio visual equipment and furnishings, was offset by increased household spending on services.

Other drivers of the 0.8% decrease in expenditure on GDP were investment, which was down 1.9%.

Government spending also dipped, dropping 2.4%.


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