Recession worsens as GDP drops

New Zealand's recession worsened in the last three months of 2008, with gross domestic product declining 0.9 percent in the December quarter.

The decline was the largest since 1992, but still slightly better than expected with the median prediction of economists in a Reuters poll being a fall of 1 percent.

The data published today by Statistics New Zealand (SNZ) confirm the economy shrunk during each quarter of 2008, as a financial crisis rocked the world.

The fall in the latest quarter meant that for the year to December, GDP increased by 0.2 percent.

Despite the four quarters of decline, the economy contracted at a slower rate in 2008 than it grew in 2007. Yesterday the International Monetary Fund said it expected the New Zealand economy to contract by 2 percent in 2009.

SNZ said primary industry activity increased 1.6 percent in the December quarter, while activity in goods producing industries fell 3.6 percent.

A rise in agriculture production was mainly driven by increased dairy production. For the December year activity in primary industries increased 0.9 percent, compared to an increase of 3.6 percent for the year to December 2007.

Goods producing industries declined for a fourth consecutive quarter, with manufacturing activity down 3.8 percent in the December quarter.

Of the nine manufacturing industries only food, beverage and tobacco manufacturing recorded an increase with a rise of 1.1 percent.

Construction activity was down 4.4 percent in the quarter, driven by a fall in residential building and construction trade services.

Non-building construction -- which includes such things as bridges, communication networks, electrical transmission lines and major repairs to roading -- recorded an increase.

Service industry activity rose 0.8 percent in the December quarter, following two quarters of decline, SNZ said.

The main contributor to the rise in service industries in the latest quarter was a 2.2 percent increase in finance, insurance and business services, with a rise in a range of business services, as well as an increase in financial sector activity.

Government administration and defence was up 2.3 percent in the December quarter.

Offsetting those increases in services was a 4.9 percent fall in wholesale trade.

Household consumption spending, which measures the volume of goods and services bought by households, was flat in the latest quarter.

Household spending on durables -- including cars, furniture and appliances -- and on non-durables -- including food and beverages -- were both down, with spending on services offsetting those decreases.

Gross fixed capital formation, measuring capital investment in fixed assets, was down 5.3 percent in the December quarter.

The main categories in which investment declined were residential building, down 14 percent, and plant, machinery and equipment, down 4.8 percent, SNZ said.

Investment in residential building had decreased for five quarters in a row, reflecting a decline in new housing construction.

 

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