New Zealand's economy rebounded in the three months to December after two quarters of contraction, with GDP increasing 0.7 percent on the quarter after a previous fall of 1.1 percent in both the three months to September and the three months to June. Growth remained weak but improved in year-over-year terms, with GDP down 1.1 percent on the year after a previous decline of 1.6 percent.

The quarter-over-quarter increase in headline GDP largely reflects strong growth in government consumption, up 1.9 percent on the quarter, and a positive contribution of 0.5 percentage points from net exports. Private consumption expenditure also rose modestly on the quarter, but business investment was offset by weak residential investment. On a sectoral basis, solid growth in manufacturing, services and agriculture outweighed ongoing weakness in mining and construction.

Officials at the Reserve Bank of New Zealand cut the official cash rate by 50 basis points from 4.25 percent to 3.75 percent at their most recent policy meeting last month. Officials have now lowered policy rates by a cumulative 175 basis points over their last four meetings after an extended period of restrictive policy settings. In the statement accompanying that decision, officials reiterated their confidence that economic growth will recover this year in response to the recent reductions in policy rates and advised that they expect to loosen policy further if conditions continue to evolve as projected.

The economy is expected to bounce back by 0.4 percent in Q4 from Q3 after declining by 1.0 percent on quarter in Q3. On year, forecasts look for a 1.4 percent decrease in Q4.

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.