New Zealand's economy contracted for the second consecutive quarter in the three months to March, suggesting that ongoing policy tightening by the Reserve Bank of New Zealand is continuing to weigh on activity. GDP fell 0.1 percent on the quarter after a decline of 0.7 percent in the three months to December, while year-over-year growth eased from 2.3 percent to 2.2 percent. Natural disasters and adverse weather severely disrupted economic activity in parts of the country during the quarter, with recovery and rebuilding efforts expected to provide some boost to activity in the current quarter.

The smaller quarter-over-quarter decline in headline GDP growth in the three months to March reflected a rebound in consumer spending, up 2.4 percent on the quarter after no change previously, with government spending also picking up. Investment spending, however, fell 3.0 percent after a previous decline of 0.4 percent, while exports also fell at a sharper pace. Weakness was broad-based on a sectoral basis.

The RBNZ increased its official cash rate by 25 basis points to 5.50 percent at its most recent policy meeting last month, taking the cumulative amount of rate increases since October 2021 to 525 basis points. Officials argued that further policy tightening would increase confidence that inflation will return to its target range and advised"that interest rates will need to remain at a restrictive level for the foreseeable future".

Consensus for first-quarter GDP is quarter-to-quarter contraction of 0.1 percent versus 0.6 percent contraction in the fourth quarter. The year-over-year comparison, by contrast, is expected to rise to 2.6 from 2.2 percent.

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.