New Zealand’s gross domestic product (GDP) fell 1% in the September quarter – and the figure for the quarter before that has been revised downwards as well.
Stats NZ announced the 1% fall in the September 2024 quarter this morning.
In September, the agency said the economy shrank by 0.2% in the three months to June – but today, it said that decrease was actually 1.1%.
“The update to the June 2024 quarter growth rate reflects the incorporation of annual data, a process completed by Stats NZ each October,” Stats NZ explained.
“In this instance, while the June quarter growth rate has been revised downward, the overall level of economic activity has been revised upward over a longer period.”
The data agency’s macroeconomic growth spokesperson Jason Attewell said the structure of New Zealand’s economy can change quickly.
“The data incorporated this year shows stronger growth over the last year, followed by two significant falls in the latest quarters,” he said.
“We balance the use of timely data for quarterly GDP estimates with more detailed information to annually update the relevant importance of industries. This approach is in line with international best practice.”
It means New Zealand’s economy meets the widely accepted definition of recession, with two successive quarters of contraction.
GDP per capita fell 1.2% during the quarter, an eighth consecutive drop.
Manufacturing down
Stats NZ said that in the three months to September the largest decline was in the manufacturing industry.
Business services and construction were also among the largest falls.
“Activity declined in 11 of the 16 industries that make up the production measure of GDP,” the agency said.
“Goods-producing and service industries fell, while primary industries increased.”
Some industries did see rises, however – rental, hiring and real estate services.
“The rise in agriculture this quarter was driven by dairy farming. We also saw a rise in exports of milk powder, butter, and cheese,” Attewell said.
Household consumption and expenditure
Stats NZ said the expenditure measure of GDP fell 0.8%. It also revised the June quarter’s figure to a 0.8% fall.
“Household consumption expenditure fell 0.3% this quarter, driven by a fall in household essentials such as grocery food and electricity,” the agency said.
“Spending increased on durable goods such as motor vehicles and audio-visual equipment and phones.”
‘2025 should be a much better year’
Kiwibank said it was the weakest six-month period, excluding the Covid-19 pandemic, since 1991.
It was a bigger contraction than expected, the bank said, and it “may seem to set off immediate alarm bells” – but actually, because earlier quarters were revised upwards, “the larger falls have still not changed the overall end size of the economy”, senior economist Mary Jo Vergara said.
“The economy has been stronger than originally thought in the earlier parts of the past year. And instead, we are now facing much sharper declines,” she explained.
“Now that’s not to say that the economy is in a better place … [but] the light at the end of the tunnel is upon us.
“The September quarter should mark the final quarter of the economy in decline for this cycle.”
With further rate cuts to come, “2025 should be a much better year”, Vergara said.
Labour criticises Govt
The Labour Party’s finance spokesperson Barbara Edmonds criticised Finance Minister Nicola Willis after the announcement.
“New Zealand has tumbled into the depths of a recession of Nicola Willis’ making.
“Nicola Willis’ cuts and austerity has fed the recessionary fire, and today’s GDP figures show this,” Edmonds said.
She called it a “dire result”, noting the Government has been in power for a year.
“After talking all year about growth and productivity, the figures show that this is not the case,” Edmonds said.
Nicola Willis responds
Finance Minister Nicola Willis said the figures “highlight the importance of getting the Government’s finances back on an even keel”.
“New Zealanders have now experienced eight quarters of negative growth on a per head basis,” she said.
“The decline reflects the impact of high inflation on the economy. That led the Reserve Bank to engineer a recession which has stifled growth.”
Willis said New Zealanders could look forward to “look forward to brighter prospects next year” as treasury and some economists forecast growth to pick up in the current quarter and grow more strongly.
ACT criticises Labour
ACT leader David Seymour said “the full impact of Labour’s economic destruction wasn’t properly reported”.
“ACT was ringing alarm bells over Labour’s spending binge throughout the previous term, and the resulting recession is a vindication of what we’ve always said,” he said.
“To rise out of these economic doldrums we need to unleash the ambition and creativity of New Zealanders so families can generate for wealth for themselves and their loved ones.
“A new Government has made a good start in reining in waste, but we need the nerve to stay the course and keep winding back programmes that aren’t making the country richer.”