New Zealand's GDP fell 0.2 per cent in the March 2022 quarter, Stats NZ said today.
The figure was worse than most economists had forecast - expectations were for zero growth or a slight increase.
"We saw lower output in the food, beverage, and tobacco manufacturing sub-industry; and the agriculture, forestry, and fishing industry," national accounts industry and production senior manager Ruvani Ratnayake said.
"These declines corresponded to falls in related exports categories, including dairy products; meat products; agriculture and fishing products; and other food, beverage and tobacco products."
Primary industries drove the decrease in GDP, down 1.2 per cent in the quarter. Goods producing industries also experienced a slight decline, down 0.1 per cent.
In the last quarter of 2021 the economy saw a big post-Delta bounce of 3 per cent (quarter on quarter).
From the first quarter of 2021, growth is up 1.2 per cent, just half the 2.4 per cent forecasts by economists.
On an annual average basis GDP rose 5.1 per cent through the year to March 2022.
Economists at Westpac and ANZ had both downgraded their expectations to zero growth for the quarter.
ASB had stuck with its forecast for 0.6 per cent growth.
In May's Monetary Policy Statement the Reserve Bank forecast 0.7 per cent.
"Covid has continued to disrupt economic activity," Westpac chief economist Michael Gordon said.
"The December quarter was affected by ongoing Government-imposed restrictions after the Delta outbreak."
"In contrast, the March quarter restrictions were more self-imposed: as Omicron made its way through the country, people stayed away from retail spaces out of caution, and the surge in infections meant that worker absenteeism proved to be a major headache for many businesses."
The different expectations largely relate to timing for the Omicron impact.
"Covid continues to act as a handbrake on the economy. While the December quarter was
marked by ongoing government-mandated restrictions, the March quarter included the peak of the Omicron wave, with worker absenteeism being a substantial issue," said Westpac chief economist Michael Gordon.
"We expect a stronger pickup in the June quarter, and our forecast for growth in 2022
overall remains broadly unchanged."
While the result was weaker than the Reserve Bank had forecast it was unlikely to trouble the central bank, he said.
"The RBNZ's aim is to better align demand with the economy's potential in order to bring inflation pressures under control. A modest fall in activity would actually be helpful in that regard, as long as it happens in a controlled manner."
In fact it reduced the odds that the OCR would need to go as high as the 4 per cent that the RBNZ was projecting (we expect a peak of 3.5 per cent by the end of this year).