New Zealand is almost certainly back in recession, with the December quarter GDP slump of 1 per cent expected to be followed by another contraction in this current quarter.
That doesn't mean we need to panic about the economic recovery but we do need to be realistic about the challenge we face this year.
Given the scale of the pandemic, a double-dip recession shouldn't be a huge surprise.
But it may feel like one regardless.
After months of economic news coming in "better than expected", we now have data that is "worse than expected".
KiwiBank chief economist Jarrod Kerr described the data as "turbulence".
"Imagine a plane that has completed a stalled nosedive recovery manoeuvre. After nose diving in the second quarter, the plane pulled up sharply in the third, and is now hitting a bit of turbulence," he said.
"Three of the plane's four engines are humming. It's the fourth engine that exports services, such as tourism and education, that remains without power."
The fall in economic activity was mainly related to an 8.7 per cent fall in construction work completed, said Westpac senior economist Satish Ranchhod.
Non-residential construction activity fell 4.5 per cent and infrastructure spending was down 7.5 per cent.
Those falls followed large increases in the September quarter which were in part due to catch-up activity after the economy exited lockdown. In contrast, residential construction activity rose by 1.9 per cent.
But compounding the fall in December quarter growth was continued weakness in the services sector, reflecting the ongoing drag from Covid-19 and the closure of New Zealand's borders, he said.
December saw a 5 per cent fall in the retail, accommodation and restaurant sectors.
"Tourism flows are highly seasonal," he said.
"Consequently, although the borders have been shut since March of last year, the absence of international tourists has been felt more acutely over the peak summer months than when we first went into lockdown."
The fall reflected the fading of pent up demand and meant that New Zealand's second recession was imminent, said Capital Economics economist Bed Udy.
"Electronic card transactions fell in January and February. And the week-long lockdown in Auckland in March means a decline in consumption is all but confirmed."
The tone of the recovery discussion has changed.
We are into what BNZ chief economist Paul Conway this week called the "gritty" phase of the recovery.
New Zealand had done a good job managing the first phase of the pandemic and that had enabled the economy to perform better than many expected, he told The Economy Hub.
But the coming year would be tough as the country got into "the grit of the structural change", he said.
"Businesses are going to the wall, people are losing their jobs, we're really in the throes of that difficult period."
The GDP figure was worse than the consensus of economists - a rise of 0.2 per cent - and the RBNZ's February estimate of 0.0.
It will, however, reaffirm the central bank's cautious approach and its resistance to calls that it should pull back on monetary policy stimulus and lift interest rates sooner.
Bright spots in the outlook remain prices for New Zealand's commodity exports have been strong and that will flow through the economy in coming months.
The Government still has scope to deliver billions of dollars more in fiscal stimulus.
And the vaccine rollout should mean a progressive reopening of borders through the year - with a transtasman bubble due soon.
Today's number shouldn't change the overall recovery narrative, said ANZ senior economist Miles Workman.
"Overall, while economic resilience remains a key theme across the New Zealand data, today's data go to show positive surprises can't last forever," he said.
"The absolute story remains that this has been a very significant shock, but the recovery thus far has been impressive. Policy makers will need to remain patient and see how things evolve from here."
Finance Minister Grant Robertson said the economy remained strong.
"It is not surprising that these numbers are jumping around. The world is dealing with the ongoing impact of Covid-19 and there will be volatility for some time," Robertson said.
The economy was 0.9 per cent below where it was in the December quarter last year.
"Nevertheless, we outperformed the countries we compare ourselves to on this measure," he said.
Australia dropped by 1.1 per cent, United States by 2.4 per cent, the United Kingdom by 7.8 per cent and Japan by 1.3 per cent.
While New GDP growth over 2021 was likely to remain muted, the prospects for 2022 had improved, said ASB senior economist Jane Turner.
That was largely due to the early signs of success in global vaccinations to date and clarity around NZ's own vaccination timetable, she said.
"From this point on, businesses should become more confident on the outlook and look to take action on employment and investment plans over the coming year."