NZ economic contraction fastest in 16 years

New Zealand’s economy contracted by 0.9% in the last quarter of 2008, Statistics New Zealand says. This is the fastest pace in 16 years.

The statement says that the main drivers behind the country’s downturn were the decline of its manufacturing and wholesale trade industries. Manufacturing activity declined by 3.8% in December 2008, with nearly all the manufacturing sub-industry recording decreases, the statement says. The wholesale trade industry declined by 4.9%.

Finance, insurance and business services were up by 2.2%, partly offsetting the declines in gross domestic product (GDP).

Annual GDP was up 0.2% for December 2008 and higher than for December 2007 year, despite the four quarters of declining activity. Statistics New Zealand says this occurred because the economy grew at a faster rate in 2007 than it contracted in 2008.

Tony Alexander, the chief economist of the Bank of New Zealand, wrote in his Weekly Overview: “Apart from the Asian Crisis from 1997-98 New Zealand’s economy has grown strongly since 1993.”

He continues: “While we cannot be certain about when the global economy will improve and flow through into our economy, we can be reasonably certain that the business sector left in place to handle stronger growth will be a lot leaner, more focused, and far more efficient than before the crisis struck offshore.”