New Zealand's economy contracted modestly in the three months to June for the fifth time in the last seven quarters. Conditions remain impacted by ongoing tight monetary policy put in place by the Reserve Bank of New Zealand, with today's data covering the period prior to officials' decision to cut policy rates by 25 basis points at their most recent meeting last month. Officials noted then that economic growth remains below trend and that the economy is contracting faster than they had anticipated.

GDP fell 0.2 percent on the quarter in the three months to June after increasing 0.1 percent in the three months to March, with year-over-year growth weakening from an increase of 0.3 percent to a decline of 0.5 percent. The small quarter-over-quarter decline in headline GDP largely reflects slightly weaker growth in private consumption spending and a slowdown in investment spending, offset by a positive contribution to growth by net exports. On a sectoral basis, however, conditions were weak across most major sectors.

Consensus for second-quarter GDP is quarter-over-quarter contraction of 0.4 percent in what would be a shift lower from 0.2 percent growth in the first 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.