New Zealand's first-quarter GDP shrinks 0.1 percent, confirming country is in recession

New Zealand's economy shrunk in the first quarter of this year, confirming the country is in a technical recession.

Gross domestic product (GDP) was down 0.1 percent quarter-on-quarter - in line with analysts' expectations.

Business services, down 3.5 percent, was the largest contributor to the decline in economic growth, data released by Stats NZ showed.

"Management consulting, advertising, scientific and engineering design services drove the fall in business services," Stats NZ's Jason Attewell said.

New Zealand's foreign exports fell 2.5 percent in the March quarter, compared with a 1.7 percent shrinking in December.

Other downward drivers included transport, postal and warehousing - down 2.2 percent, education - down 1.9 percent.

"The March 2023 quarter included the initial impacts of Cyclones Hale and Gabrielle and teachers' strikes," Stats NZ said. "The adverse weather events caused by the cyclones contributed to falls in horticulture and transport support services, as well as disrupted education services.

"Fewer teaching days led to falls in primary and secondary education services," Attewell explained.

On a year-by-year basis, GDP grew 2.9 percent in the 12 months to March. 

'No cause for alarm'

New Zealand economists say there's no cause for concern over Thursday's GDP figures.

Independent economist Cameron Bagrie said there was no indication New Zealand was in a "realistic recession scenario".

"We still know the unemployment rate is very low, firms are still out there scratching for staff so, while we might satisfy the technical definition of a recession - partly induced by Cyclone Gabrielle... I still think we're a long way away from what we would call a 'real' [recession]," he told AM earlier.

Council of Trade Unions chief economist Craig Renney agreed, saying there was "no cause for alarm".

"With the data being so close to zero, we shouldn't exaggerate what the word recession means," he said. "If we were to exclude the impacts of Cyclone Gabrielle, then it is very likely that GDP would have been flat or positive.

"The annual data shows that New Zealand's economic growth is comparable to Australia, Canada and higher than the UK and Europe."

ASB economist Nathaniel Keall said the bank expected growth to remain "pretty anaemic" over the next year.

ASB had expected New Zealand's economy to grow by 0.5 percent in the next quarter but said it would now revise its forecasts.

"With global growth slowing, household balance sheets weaker and monetary policy likely to remain restrictive until the RBNZ (Reserve Bank) is confident inflation is under control, there are few silver bullets in the offing," Keall said.

The New Zealand Treasury, prior to Thursday's data, had forecast "small increases" in GDP during the second half of this year.