Our take on the latest Gross domestic product (Thu 19 Mar 2020)
Economic growth slowed to 2.3%pa in December
Household spending growth at a seven-year low
Severe recession to come during 2020 due to COVID-19
The key numbers...
- Economic activity expanded 0.5% (seasonally adjusted) over the December 2019 quarter, in line with market expectations. Both annual growth (1.8%) and year-end growth (2.3%) were the weakest since 2013.
- The sense from late last year that the economy was brightening a bit seems to have been misplaced, with household spending growing just 0.3% over the quarter, leaving annual spending growth languishing at a seven-year low of 2.1%.
- Total investment spending also recorded its third consecutive (small) quarterly contraction, dragged down by falling non-residential building and transport equipment purchases.
- Other key areas of weakness showing through in the numbers included annual falls in activity for forestry and logging, and accommodation and food services. These industries are two that are subsequently being most heavily affected by the COVID-19 pandemic.
- Government consumption spending surged 2.1% over the quarter (seasonally adjusted). Growth in government spending has not been faster since 2008.
- December was the 36th consecutive quarter of positive growth, representing New Zealand’s longest run of uninterrupted growth in at least 50 years.
Household spending and total economic activity
Annual % changes
...and our reaction
- No one’s too concerned with how the economy performed in the December quarter, with our economic fortunes having been rapidly overtaken by the effects of COVID-19, especially in the last week.
- Nevertheless, these numbers suggest the economy’s stuttering performance throughout much of 2019 continued into the final quarter of the year, with growth largely being propped up by the public sector.
- Our assumptions about the economic effects of COVID have evolved rapidly over the last week as increasingly strict controls have been implemented by the government. Last Thursday, we were guessing that economic growth could slow to 1%pa this year, but our current working assumption is for growth to dip to -2.5%pa by March 2021.
- In terms of magnitude, the economic effects of the pandemic are likely to be larger than the Global Financial Crisis, given inadequate responses across much of Europe and North America, and the consequent need for restrictions on people’s movements and activity.
- The next point of reference for an economic transmission is the Great Depression in the 1930s. The NZ economy contracted by an estimated 12% between March 1930 and March 1932.
Latest updates
Premium
Gross domestic product
NZ economy picking up before fuel price spike
Thu 18 Jun 2026
Quarterly
0.8% GDP in Mar 2026 qtr (sa)2.5% Business investment from Dec 2025 qtr (sa)
0.5% Household spending from Dec 2025 qtr (sa)Premium
Gross domestic product
No momentum in recovery, even before Iran
Thu 19 Mar 2026
Quarterly
0.1% GDP from Sep 2025 qtr (sa)0.1% Household spending from Sep 2025 qtr (sa)
3.2% Private investment from Sep 2025 qtr (sa)Gross domestic product
Economy bounces back 1.1% from June’s dip
Thu 18 Dec 2025
Quarterly
1.1% rise in GDP in September quarter from JuneInvestment spending up 3.2% from June 2025Manufacturing activity up 2.2% from June 2025Gross domestic product
Economy contracts 0.9% as international uncertainty bites
Thu 18 Sept 2025
Quarterly
0.9% fall in GDP in June quarterHousehold spending up 0.4% from Mar 2025Manufacturing activity declines 3.5% from Mar 2025