Our take on the latest Gross domestic product (Thu 19 Mar 2026)
GDP
Household spending
Private investment
0.1%
0.1%
3.2%From Sep 2025 qtr (sa)
From Sep 2025 qtr (sa)
From Sep 2025 qtr (sa)
The key numbers...
- Economic growth for the final quarter of 2025 came in at a disappointing 0.2% (production measure, seasonally adjusted), continuing the inconsistency in activity that had dogged the economy throughout last year. Expenditure GDP increased by just 0.1%.
- The primary culprit for the softness was a 0.1% seasonally adjusted drop in private consumption spending over the quarter, the first decline in household spending volumes since September 2024. The weakness in spending was broad-based, with falls in non-durables, services, NZ resident spending overseas, food, housing and household utilities, transport, communications, and restaurants and hotels. Stats NZ noted the negative effects of reduced interisland ferry capacity on services spending by households.
- The business sector also contributed to slower growth, as private sector investment spending fell by 3.2% from September, its largest quarterly decline in over two years. Non-residential building investment fell 5.1% from September and 11% from a year ago, marking the largest annual decline since 2010 (excluding lockdowns). Spending on transport equipment dropped 11% from September, while investment in other plant, machinery, and equipment fell 4.4%. Although these latter two series are typically lumpy, they completely reversed out the strong gains recorded in the previous quarter (all quarterly changes seasonally adjusted).
- Export volumes were up just 0.1% from the previous quarter, boosted by a 7.7% lift in services, which also lifted activity in the arts and recreation services industry. However, goods exports fell 2.6%, dragged down by weakness in exports of dairy products; other food, beverages and tobacco; coal, crude petroleum and ores, minerals and gases; and wood and paper products (all figures seasonally adjusted).
- One of the few areas of strength was central government consumption, which jumped 2.5% over the quarter for its biggest lift since December 2021. Increased spending on health was the key contributor to the rise. Government investment spending was also up 3.6% over the quarter (all figures seasonally adjusted).
...and our reaction
- Last year’s patchy economic performance continued into the final quarter of 2025, with high business confidence not enough to maintain the stronger investment spending seen in the September quarter. Households remain incredibly reluctant to spend, with lower mortgage rates being outweighed by concerns about cost-of-living pressures and the relatively weak labour market.
- The fact that central government spending and an increase in inventory levels made the biggest positive contributions to growth in the December 2025 quarter highlights the economy’s static nature. Tight fiscal conditions mean that faster government spending cannot sustain growth in coming quarters, and increased manufacturing stock levels suggest that firms are producing in anticipation of better demand conditions that have yet to materialise.
- The weak construction sector continues to drag on the economy, and further falls in non-residential building are likely this year, reflecting a reduced pipeline of consents. Although residential construction in December recorded an annual increase for the first time since 2022, the stagnant housing market raises questions of how sustained any increase in activity might be.
- The Middle East conflict, and its significant effect on fuel prices, are likely to undermine consumer confidence and economic activity levels that were already fragile. Some effects are likely to show through in March quarter data, but if the conflict continues, the full effects will be more evident in the June quarter. Significantly higher inflation risks, coming when inflation was already above the Reserve Bank’s 1-3%pa target band, could also necessitate earlier interest rate rises by the Bank, further undermining economic growth prospects later this year.
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