New Zealand's economy contracted in the three months to June, with GDP falling 0.9 percent on the quarter after growth of 0.8 percent in the three months to March. Growth also remained weak in year-over-year terms, with GDP down 0.6 percent on the year after a previous decline of 0.7 percent.

The quarter-over-quarter decline in headline GDP largely reflects weakness in investment, down 1.1 percent on the quarter, as well as a 1.2 percent drop in exports. Central government spending also fell, offset by an increase in local government spending. Growth in household spending also slowed from 1.4 percent to 0.4 percent. Weaker growth was broad-based on a sectoral basis.

At their most recent policy meeting last month, officials at the Reserve Bank of New Zealand cut the main policy rate by 25 basis points to 3.00 percent. Officials have lowered policy rates by a cumulative 250 basis points over their previous eight meetings after an extended period of restrictive policy settings. Although they advised that they expect domestic growth will be supported by previous policy easing, they cautioned that global uncertainty and weaker house prices may slow the pace of economic recovery.

The economy is expected to contract by 0.4 percent in Q2 from Q1 after gaining by 0.8 percent on quarter in Q1. On year, forecasts look for 0.0 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.