June 26 (Bloomberg) -- New Zealand’s economy shrank for a fifth straight quarter as consumers and businesses cut spending, extending the worst recession in more than three decades.
Gross domestic product fell 1 percent in the three months to March 31, matching the revised fourth-quarter decline, Statistics New Zealand said in Wellington today. The drop exceeds the 0.7 percent median estimate in a Bloomberg survey of 11 economists.
New Zealand’s economy began contracting in the first quarter of last year and is unlikely to grow until the final three months of 2009 as the worst global slump since the Great Depression curbs exports and damps investment, Reserve Bank Governor Alan Bollard said June 11. Interest rates may stay at record lows until late next year to kick-start spending, he said.
“The world was a hostile environment for growth,” said Bernard Doyle, economist at Goldman Sachs JBWere Ltd. in Auckland. “We doubt today’s print will markedly change the Reserve Bank’s view of where the economy sits.”
New Zealand’s dollar traded at 64.44 U.S. cents at 12.35 p.m. in Wellington from 64.55 cents before the report was released.
The currency has gained 12 percent in the past three months, which “risks derailing” the economy’s recovery because it is cutting export income, Prime Minister John Key said this week.
The 1 percent contractions in the past two quarters are the largest in 18 years, the statistics agency said.
‘Multiple Blows’
The economy shrank 2.7 percent from a year earlier. In the year ended March 31, gross domestic product declined 1 percent, the first annual-average contraction since 1992.
New Zealand’s economy began shrinking last year as Bollard raised interest rates to counter a housing boom and consumer spending that was being fanned by excessive borrowing.
The economy then faced “multiple blows” from collapsing world trade and tight credit conditions, the Organization for Economic Cooperation and Development said in a report this week.
Business investment slumped, companies began firing workers, exports slowed and tourist arrivals declined. Exports make up about 30 percent of the economy and the tourism industry contributes another 10 percent.
New Zealand’s economy will probably contract 2.9 percent this year before growing 0.6 percent in 2010, the OECD said. The jobless rate, which was 5 percent in the first quarter, may surge beyond 8 percent by next year, it said.
Household Spending
Households are constrained by high debt and workers are worried they may lose their jobs. A net 28 percent of consumers expect the economy will worsen this year, according to a Westpac Banking Corp./McDermott Miller survey published on June 24. The net figure subtracts optimists from pessimists and has fallen from 57 percent in the first quarter.
Household spending, which makes up 60 percent of the economy, fell 1.4 percent in the first quarter, the most in 18 years, today’s report showed. Purchases of durable items such as cars, furniture and home appliances dropped 2.5 percent while spending on services also decreased. Sales of food and other so- called non-durable goods gained.
Retailer Smiths City Group yesterday said net income fell 72 percent profit in the year ended April 30 as demand dropped at its appliance and furniture stores. Furniture and carpet sales have declined every month since January 2008, Chairman Craig Boyce said in a statement sent to the stock exchange.
Warehouse Group Ltd., New Zealand’s biggest discount retailer, said last month sales in the three months to April 26 dropped 2.8 percent as the recession slashed demand for office goods and the company shut liquor and food outlets.
Business Investment
Business investment plunged 7.3 percent as companies purchased fewer vehicles, plant and machinery, the statistics agency said today. Commercial construction fell.
Business confidence slumped to a record low in the first quarter, according to a survey by the New Zealand Institute of Economic Research Inc. Investment intentions fell to the lowest on record, the Wellington-based institute said.
Contact Energy Ltd., the nation’s biggest publicly traded electricity company, last month said it will delay a new geothermal power station investment amid declining demand and increased funding costs.
Total investment fell 6.1 percent led by business spending. Investment in new housing, dropped 0.3 percent in the first quarter, the seventh straight decline. Inventories decreased.
Exports of goods and services increased 0.6 percent in the quarter amid rising shipments of dairy products. Import volumes slumped 8.6 percent led by machinery and passenger cars.
Output from goods-producing industries slipped, led by a 7.2 percent drop in manufacturing. Primary production was unchanged as increased output from mining offset declines by logging and fishing. Service industries output fell 0.1 percent led by transport, while real estate activity increased.
The GDP deflator, a measure of prices, rose 2.6 percent in the year ended March 31.
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