KEY POINTS:
Latest figures confirm New Zealand's recession has intensified in the three months to September, as the economy shrunk for the third consecutive quarter.
Statistics New Zealand (SNZ) data out today show the country's gross domestic product contracted 0.4 per cent in the September quarter.
The decline follows
falls of 0.3 per cent in the March quarter and 0.2 per cent in the June quarter.
The result was not quite as bad as expected by economists in a Reuters poll, in which the median forecast was a quarterly decline in GDP of 0.5 per cent.
For the year to September, GDP was up 1.7 per cent.
Economists see the figures as further confirmation of the need for the Reserve Bank to cut official interest rates.
JP Morgan chief economist Stephen Walters said public spending was the only part of the economy that was growing.
"The corporate sector is clearly very pessimistic," he said.
"This means that interest rates still have to come down."
JP Morgan expected the Reserve Bank to cut rates to 3.25 per cent from the current 5 per cent.
Westpac economist Doug Steel said that if there were any surprises it was that agriculture was stronger than expected.
"Very weak demand, pretty much across the board, consumers spending less, businesses investing less, less exports, flowing through to retailers, wholesale trade, manufacturing and transport," he said.
RBC Capital Markets senior economist Su-Lin Ong said he put more weight on the sharp 0.7 per cent fall in the expenditure-based measure of GDP.
"That probably paints a truer picture of how bad things are. If anything, the current quarter looks even worse, so that's the whole of 2008 down the drain."
SNZ said activity in primary industries increased 2.1 per cent in the September quarter, with agriculture up 6 per cent driven by dairy production and cattle processed for meat.
Manufacturing activity was down 2.5 per cent, with the largest falls in food, beverage and tobacco manufacturing, while construction was down 1.2 per cent.
For the first time since 1991, service industries recorded a second consecutive quarter of decline, shrinking 0.2 per cent in the September quarter, SNZ said.
Declines of 1.4 per cent in transport and communication, 1.8 per cent in wholesale trade, and 1.2 per cent in retail, accommodation and restaurants drove the decrease.
Increases of 0.5 per cent in finance, insurance and business services, and of 0.6 per cent in government administration and defence partly offset the overall service industries decrease.
The expenditure-based measure of GDP decreased 0.7 per cent in the September quarter.
Household consumption expenditure fell 0.2 per cent. It was the third consecutive fall in the volume of goods and services bought by New Zealand households, after falls of 0.5 per cent and 0.2 per cent in the March and June quarters, SNZ said.
In the latest quarter household spending on services was down 0.5 per cent and spending on non-durables was down 0.9 per cent. The fall in non-durables was mainly driven by food and beverages.
Spending on durable items was up 0.5 per cent for the quarter, mainly due to spending on retail furniture and major appliances.
Imports of plant and machinery fell 18 per cent, due in part to the importing of large-value capital goods related to the oil industry in the June quarter.
Overall business investment decreased 8.6 per cent in the September quarter, SNZ said.
Total import volumes were down 7.6 per cent in the September quarter.
Total export volumes decreased 3.1 per cent, with the largest contributor a 12.9 per cent fall in exports of agriculture and fishing primary products.
- NZPA