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NZ economy suffers first annual decline since 1992

New Zealand’s economy shrank by 1% over the first quarter of the year and 1`% for the year – the largest annual drop since march 1992, when the economy contracted 1.3%, according to GDP figures released by Statistics New Zealand this morning.

The slump in manufacturing was the main cause – activity declined 7.2% for the quarter and 5.4% for the year.

Construction, which has been in the doldrums for over a year, showed a minor increase of 0.4%.

Household spending also declined by 1.4% - the largest quarterly decline since June 1991, mostly due to a fall in purchases of major appliances and vehicles. National disposable income also dropped 0.8% for the year.

Food beverage and tobacco manufacturing shrank 4.8%, machinery and equipment shrank by 11.9% and metal products fell 16%.

Primary industry activity was flat, with all sectors recording either a nil increase in activity or a small contraction. That follows a 0.8% increase in the December 2008 quarter and a 5% increase the previous year.

Service industries activity showed a minor contraction of 0.1% for the quarter, mostly due to a 4.5% decrease in transport and communications activity.

The main contributor to this was a cutback in demand for postal and courier services. There was also a drop of 3.8% in wholesale trade.

The only significant increase was in finance insurance and businesses services (up 2.3%).

The figures also showed the seventh quarter of decline for residential building.

More by Rob Hosking

Comments and questions
6

Today belongs to Michael Jackson.

Dec 08 YOY GDP -2.1%
Sep 08 YOY GDP -0.2%

How do we get this being the first annual decline since 1992?

AndyB ,

'year on year ' (YOY) means comparison with the March quarter a year ago. It isn't the annual figure.

r' is comparison with the last March quarter, not with the full year.

AndyB ,

'year on year ' (YOY) means comparison with the March quarter a year ago. It isn't the annual figure.

Welcome to NZ under National!

Rob, you are almost correct. YoY is comparing the level of GDP to March last year. As per above, its negative.

But so too was the annual period from Dec07 to Dec 08. And Sep 07 to Sep 08. Annual periods showing a decline in GDP.

If you prefer, the index levels over those times:

Q109 33086
Q408 33418
Q308 33755
Q208 33929
Q108 34010
Q407 34117
Q307 33816

We have had annual declines for a few quarters now.