New Zealand's economy contracted in the three months to September, in line with weakness seen in the first half of the year and suggesting that conditions remain impacted by aggressive policy tightening implemented by the Reserve Bank of New Zealand over 2022 and early 2023. Officials have left rates on hold since July, including at their most recent meeting last week, reflecting their assessment that the previous tightening will help return inflation to their target range of 1.0 percent to 3.0 percent. They also noted, however, that GDP growth will likely remain subdued in coming quarters.

GDP fell 0.3 percent on the quarter in the three months to September after advancing 0.5 percent in the three months to June, while year-over-year growth weakened sharply from an increase of 1.5 percent to a decline of 0.6 percent. The quarter-over-quarter decline in headline GDP growth in the three months to September was largely driven by weaker household spending, down 0.6 percent on the quarter after no change previously. Officials noted this decline was partly due to a sharp fall in vehicle sales after changes to government fees and rebates. Government spending and exports also weakened on the quarter, partly offset by a rebound in private investment, up 5.6 percent on the quarter after a previous decline of 5.0 percent. On a sectoral basis, growth was weaker in the manufacturing and services sector but stronger in the primary sector.

Consensus for third-quarter GDP is slowing quarter-to-quarter expansion of 0.2 percent versus 0.9 percent expansion in the second quarter. The year-over-year rate is seen at plus 0.2 percent versus plus 1.8 percent previously.

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.