Key Points:

GDP shrank 0.2 per cent in the June quarter, confirming what everyone already knew - that the country is in recession.

The smaller than expected June quarter decline followed a fall of 0.3 per cent in the three months to March, so the country now meets the common definition of recession: two consecutive quarters of economic contraction.

Tight credit conditions and high costs dented domestic spending, while drought affected agricultural production.

For the year to June, GDP rose 2.6 per cent.

Service industries decreased 0.4 per cent in the latest quarter, following an increase of 0.5 per cent in the March 2008 quarter.

The main drivers of the decline in service activity were real estate and business services (down 1.6 per cent), and retail, accommodation and restaurants (down 1.9 per cent).

In the June 2008 quarter, activity in the goods-producing industries declined 0.2 per cent. The largest drivers of this decline were construction (down 3.8 per cent), and electricity, gas and water (down 1.6 per cent).

Partly offsetting these decreases was a 1.4 per cent increase in manufacturing activity. The decline in construction activity was in both residential and non-residential building.

Household consumption expenditure dropped 0.3 per cent this quarter, following a 0.4 per cent fall in the March 2008 quarter. It's the first time since 1992 that there have been two consecutive falls in this measure.

Real gross national disposable income increased 5.0 per cent for the year ended June 2008.

The last time New Zealand was in recession was in 1997-98 following the Asian financial crisis and a drought.

A recent survey by the New Zealand Institute of Economic Research's of forecasters found they expect gross domestic product to decline 0.1 per cent in the September quarter, on top of falls of 0.3 per cent in March and June.

The Reserve Bank takes a gloomier view, forecasting another 0.3 per cent contraction in the September quarter, while the Treasury has said it is "not ruling out a further small fall".