Gross domestic product declined 0.4 percent in the three months ended Sept. 30 from the second quarter, when it fell 0.2 percent, Statistics New Zealand said today. The median in a Bloomberg survey of 13 economists was for a 0.5 percent drop.
The highest unemployment in five years and a slumping housing market prompted consumers to cut spending as the global recession reduced demand for exports of milk, timber and meat. Central bank Governor Alan Bollard, who expected a 0.3 percent contraction, is forecast to cut rates next month to the lowest since the nation began using a benchmark in 1999.
The Reserve Bank of New Zealand has slashed the official cash rate by 3.25 percentage points since July to 5 percent.
The economy shrank 0.1 percent from a year earlier, the first annual contraction since the third quarter of 1998.
Household spending, which makes up 60 percent of the economy, fell for a third straight quarter, the worst result in the 21-year history of the series, the statistics bureau said.
Prime Minister John Key’s government, which won a Nov. 8 election on a pledge to cut income taxes by NZ$4.4 billion ($2.5 billion) from April, said last week there’s a risk the economy may not begin expanding until 2010.
New Zealand joined Japan, Europe, the U.S. and Singapore in sinking into a recession this year as the global credit crisis buffets consumer and business confidence and cools trade.
The World Bank forecasts international trade will shrink in 2009 for the first time in more than 25 years. Exports account for about 30 percent of New Zealand’s NZ$180 billion economy.
Sales of food and other so-called non-durable goods fell 0.9 percent, today’s report showed. Spending on health, travel and other services also dropped. Spending on new housing slumped 7.7 percent in the third quarter, the fourth straight decline.
New Zealanders cut spending last quarter as the cost of fuel surged to a record high in mid-July. The cost of gasoline has since fallen 35 percent from its peak. As well, 85 percent of New Zealand home loans are fixed so Bollard’s rate cuts haven’t immediately reduced finance costs for most home owners.
Business investment decreased, led by fewer purchases of plant, machinery and transport equipment.
Exports fell 3.1 percent in the quarter as meat, seafood and dairy shipments declined. Import volumes dropped 7.6 percent after one-time gains in the second quarter on capital equipment purchased for the oil industry. Excluding exports and imports, the economy shrank 1.7 percent.
Farm production surged 6 percent in the third quarter amid a recovery from a drought. Manufacturing fell 2.5 percent. Service industries also posted declines led by transport, communications and retailing.