The contraction was better than predicted by the Reserve Bank of New Zealand, which had forecast a fall of 0.5 percent.
New Zealand’s gross domestic product (GDP) fell 0.2 percent in the June 2024 quarter, allowing the country to narrowly avoid a technical recession following a downward revision to the March quarter.
The Reserve Bank of New Zealand (RBNZ) had predicted a contraction of 0.5 percent, while Westpac had it at 0.4 percent and ANZ proved overly optimistic with its forecast of a 0.1 percent fall.
The March quarter figure, originally set at 0.2 percent growth, was revised downward to 0.1 percent. However, that was enough to preclude the result from being called a recession, traditionally defined as two-quarters of contraction in a row.
New Zealand’s economic activity was the weakest of all its major trading partners.
Most economists attribute the June result to high interest rates restricting spending. The retail trade and accommodation; agriculture, forestry, and fishing; and wholesale trade sectors all fell.
Forestry and logging drove the fall in the agriculture, forestry, and fishing sector, off the back of a fall in exports of forestry primary products.
Earlier this month Winstone announced the closure of its two North Island pulp and paper mills, citing rising electricity costs and devastating the regional communities that relied on them for jobs.
“Activity in retail trade and wholesale trade has been in steady decline since 2022,” Statistics New Zealand’s National Accounts Industry and Production Senior Manager Ruvani Ratnayake said.Despite the overall fall in GDP, seven out of 16 sectors increased. The largest rise was in manufacturing, up 1.9 percent.
“A rise in transport equipment, machinery, and equipment manufacturing drove the increase in manufacturing. This was the largest rise in manufacturing activity since the December 2021 quarter,” Ratnayake said.
Household spending was up 0.4 percent, driven by increased spending on non-durable items including fruit and vegetables and services.
Government spending was also up, despite the National-led Coalition government having pledged to reduce it.
Spending on durables fell for the fourth consecutive quarter, driven by reduced buying of new motor vehicles and telecommunication equipment such as mobile phones.
New Zealand’s GDP has continued to go backwards on a per capita basis, decreasing by 0.5 percent in the June 2024 quarter.
The last time GDP per capita increased was in the September 2022 quarter. On an annual basis, to the year ended June 2024, GDP per capita fell 2.7 percent.
The country remains a services-based economy, with primary produce accounting for just 7 percent of GDP, the production of goods another 20 percent, and the remaining 73 percent being accounted for by various services.
Forecasts by the Institute of Economic Research predict little or no growth economic growth in the coming year.