The fall in manufacturing was driven by petroleum, chemical, plastic, and rubber manufacturing, and food and beverage manufacturing.
“The transport, postal, and warehousing industry also fell, and this was primarily due to a decline in freight logistics, with fewer goods being exported in the quarter,” Ratnayake said.
Despite the overall fall in GDP, 8 of the 11 service industries grew this quarter. The strongest rises were seen in healthcare and social assistance; and rental, hiring, and real estate services.
GDP fell by 0.6 per cent relative to the year-earlier period, its first annual decline since the Delta lockdowns of 2021.
However, it rose 1.3 per cent over the year ended September 2023, compared with the year ended September 2022 (the difference being in the two methods of comparing annual growth).
Market reacts
In the wholesale interest rate market, the two-year swap rate dropped to 4.90 per cent in reaction to the data, from 4.985 per cent just before the release.
The 10-year swap rate fell to 4.49 per cent from 4.51 per cent.
Rates had already been heading lower due to a more dovish-than-expected release from the US Federal Reserve, which pencilled in 75 basis points of possible rate cuts next year.
The NZ dollar, which had been sharply stronger just before the release, dropped to US61.74c from US62.01c.
Industry performance
Output from the transport, postal, and warehousing sector was down 4.5 per cent in the three months ending September 30.
Goods-producing industries overall were down 2.9 per cent quarter-on-quarter.
But the information media and telecommunications sector was up 1.5 per cent and the healthcare and social assistance industries were up 2.3 per cent.
Rental, hiring, and real estate services were up 1.0 per cent compared to the June quarter.
Hopes for growth dashed
Economists had expected the latest Stats NZ data to show the economy still growing - just.
But they warned that for many people, conditions would feel recessionary, even if the economy grew.
“The potential for recent GDP estimates to jump around quite a bit is a good reason to be cautious in trying to interpret the data,” said ASB economist Nathaniel Keall.
“Nonetheless, this is a sizeable miss over the last two quarters relative to both RBNZ and consensus expectations, suggesting there is far less activity taking place than we would have thought.
“The risk is that the economy continues to decelerate from here as the tightening already in the pipeline continues to work through the economy via a higher effective mortgage rate and net migration normalises.”
Kiwibank was picking 0.2 per cent GDP growth for the quarter.
Chief economist Jarrod Kerr noted that, regardless of whether we technically land in recession or not, the next few months will be very subdued.
ANZ’s Miles Workman had struck a similar tone. ANZ had picked 0.3 per cent growth for the quarter - in line with the RBNZ’s latest forecast.
Workman said it was a very different story if we looked at per capita GDP.
“Growth in the population of 0.6 per cent [quarter-on-quarter] means our expectation for headline GDP growth of 0.3 per cent implies a per capita contraction is on the cards,” he said before the Stats NZ data release.
“Looking forward, while the economy may avoid another technical recession at the headline level, the per capita cut of these data probably won’t be so lucky.”
He said subtract surging migration from the picture and the underlying state of the economy would be very soft indeed.
-Additional reporting by Jamie Gray, John Weekes.
