The economy unexpectedly contracted at the start of the year as consumers controlled their spending, exports dipped, and primary industries produced less.
Gross domestic product (GDP) fell a seasonally adjusted 0.2 percent in the three months ended March, well below expectations, and compared with a 3.0 percent rise in the previous quarter, StatsNZ data showed.
Stats NZ senior manager Ruvani Ratnayake said “we saw lower output in the food, beverage, and tobacco manufacturing sub-industry; and the agriculture, forestry, and fishing industry”.
Manufacturing industry output fell offsetting continued growth in the construction sector.
Service industries, which make up about two thirds of the economy were flat with falls in retail, hospitality, transport and telecommunications, offsetting gains in education-related activity.
“Education rose as early childcare centres were able to reopen to greater capacity, while activity in retail trade and transport support services was down in what is traditionally New Zealand’s peak tourist season,” Ratnayake said.
GDP rose 1.2 percent on the same quarter a year ago, and on an annual average basis eased to 5.1 percent.
Real disposable income, which measures the real purchasing power of the country, fell 0.5 percent during the quarter.
Covid-19 ‘noise’ and global activity
ANZ senior economist Miles Workman said there was still a lot of Covid-19-related “noise” in the numbers.
“It’s a weaker read than we were expecting, but that appears to be driven by higher volatility at the industry level than we had factored in.”
Domestic economic momentum was starting to slip, he said.
“Interest rates are lifting, house prices are falling, inflation is eroding household incomes, migration is negative, and consumer confidence has tanked,” Workman said, adding that would not be reflected in the numbers until later in the year.
The Reserve Bank was not likely to see the weaker growth numbers as a sign that it was making gains in its battle with 30 year high inflation, he said.
“With labour market and inflation indicators where they currently are, the RBNZ will need to keep going.”
Minister of Finance Grant Robertson said the easing in growth reflected the volatile global environment, and chose to emphasise the relatively strong annual growth numbers.
“While the domestic economy is resilient and the annual GDP figure is strong … Exports are still 1.9 percent up on a year ago, so the March quarter fall shows just how volatile the global situation is.”
The government would continue to keep spending targeted at those in need, while controlling debt, Robertson said.
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