New Zealand's economy contracted in the three months to December after activity had picked up in each of the two previous quarters, suggesting that ongoing policy tightening by the Reserve Bank of New Zealand has had an impact. GDP fell 0.6 percent on the quarter after an increase of 1.7 percent in the three months to September, while year-over-year growth slowed from 6.4 percent to 2.2 percent.

Weaker headline GDP growth in the three months to December was broad-based across major expenditure categories. Consumer spending was flat on the quarter after increasing 0.2 percent previously, while investment spending fell 0.4 percent after a previous increase of 1.1 percent. Government spending also declined at a sharper pace while exports fell after a strong increase previously.Weaker activity was also broad-based on a sectoral basis.

The Reserve Bank of New Zealand increased its official cash rate by 50 basis points to 4.75 percent at its most recent policy meeting mid-February, taking the cumulative amount of rate increases since October 2021 to 450 basis points. That meeting took place shortly after the Cyclone Gabrielle caused significant destruction and disruption to economic activity. Officials expect prices will be stronger and activity weaker in the near-term as a result of the cyclone but note that monetary policy will continue to be set with reference to the medium-term outlook, with fiscal policy expected to be adjusted in response. They advised that further policy rate increases are likely in coming months, though today's data showing a contraction in late 2022 may impact the extent to which rates are raised further.

Consensus for fourth-quarter GDP is quarter-to-quarter contraction of 0.2 percent versus 2.0 percent growth in the third quarter.

GDP data are a comprehensive measure of a New Zealand's overall production and consumption of goods and services. GDP serves as one of the primary measures of overall economic well-being. GDP calculates the total market value of goods and services produced in New Zealand within a given period after deducting the cost of goods and services used up in the process of production. Therefore, GDP excludes intermediate goods and services and considers final aggregates only. The New Zealand System of National Accounts (NZSNA) is a comprehensive accounting framework based on an international standard (System of National Accounts, 1993).

Gross domestic product (GDP) can be measured using three approaches, namely the production, income and expenditure approaches. The production measure of GDP is derived from firm level data and estimates the value added by all producing industries in the New Zealand economy. The income measure of GDP is derived from earnings data and estimates how the income earned from these producing industries is then distributed throughout the economy as returns to labor, capital and government. The expenditure measure of GDP is derived from data estimating spending on goods and services by final end users and includes consumption, investment and exports minus the value of imports.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.