New Zealand economy shrinks 0.3 percent in 1Q
Friday June 27, 12:32 am ET
New Zealand economy shrinks 0.3 percent in 1st quarter, fueling concern of recession
WELLINGTON, New Zealand (AP) -- New Zealand's government said Friday the economy shrank by 0.3 percent in the first quarter of 2008, but the country may just escape falling into recession if the central bank's forecast for minor second-quarter growth holds true.
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The decline in the three months that ended March 31 was the first since the December quarter of 2005, government organization Statistics New Zealand said.
The central bank, which correctly forecast the 0.3 percent first quarter decline, has forecast 0.2 percent growth for the second quarter, which ends Monday.
In New Zealand, the economy is officially considered to be in recession if two successive quarters of negative growth are recorded.
A 5.6 percent fall in agriculture, sparked by drought, lower output and higher production costs was the main contributor to the March quarter decline in gross domestic product, the statistics agency said.
Despite the contraction in the three months to March 31, gross domestic product for the year ended March 31 still grew 3 percent, after growth of 0.8 percent in the December quarter, the agency said.
The annual figure was well ahead of the 1.6 percent growth recorded in the year to March 31, 2007.
Household consumption spending fell 0.4 percent in the March quarter, the first decrease since the June 2004 quarter, Statistics New Zealand said, with reductions in spending on motor vehicles, furniture and major appliances the biggest contributors.
Retailers have reported rapidly slowing sales and shrinking profits. A consumer confidence survey released Wednesday showed confidence had slumped to a 17-year low.
Finance Minister Michael Cullen said the data was "a temporary disappointment driven by an unusual set of negative overseas economic developments."
Economy watchers had known since late last year that the start of 2008 was likely to be a period of disappointing growth arising from the combination of slowing global growth, rising international oil and food prices and rising credit costs, he said.
"These challenges are not of New Zealand's making, but the positive reality is that New Zealand's economic outlook is very good," he said.
New Zealand's medium-term economic and social prospects were very healthy, he added.
The New Zealand dollar fell to 75.35 U.S. cents on the release of the data, from 75.53 cents before the release. The currency then recovered to 75.46 cents.
[Harry: New Zealand being primarily a commodity based economy, their negative growth is concerning and potential a canary in the mine for the rest of the commodity based countries excluding oil producers.] |
