Market Update: Business.Scoop » Economy Grew By 0.2 Percent In Last Three Months Of 2025 – Full Analysis

Article – RNZ

The figures had been expected to show growth, but economists say it’s already out of date and irrelevant.Gyles Beckford, Business Editor

• Economy grows 0.2 pct in December quarter, 1.3 pct on year ago
• Data at the low end of expectations
• Previous quarter revised to 0.9 pct growth from 1.1 pct
• Primary sector and tourism industries lead growth
• Manufacturing flat, construction sector contracts
• Data not likely to change Reserve Bank holding cash rate at 2.25 pct next month.

The economy posted tepid growth at the end of last year as the rural sector and tourism growth offset soft manufacturing and weak construction before the Middle East conflict threatened to stymie recovery.

Stats NZ data showed gross domestic product (GDP), the broad measure of economic growth, rose 0.2 percent in the three months ended December, to be 1.3 percent higher than a year ago. On an annual average basis, the economy grew 0.2 percent over the year.

Expectations were for quarterly growth in a range of 0.2 to 0.5 percent, although the growth of the previous quarter was revised lower to 0.9 percent from 1.1 percent.

Stats NZ spokesperson Jason Attewell said it was the first time the economy had posted annual growth in more than two years.

“GDP has now risen in three of the last four quarters.”

Turned the economic corner

The strongest sectors were primary industries, which grew 0.9 percent, and service industries, which make up about 70 percent of the economy and grew 0.7 percent.

Attewell said strong spending by overseas visitors in the quarter boosted a broad range of businesses.

“This flowed through to parts of the economy that service tourism, such as rental car hire, retail trade [and] accommodation.”

Exports of goods and services were up 0.1 percent, with higher meat and forestry exports offsetting lower dairy sales.

There were positive contributions from real estate and financial services, retail, recreation, and energy and water industries.

The main drag on growth was from construction, which was down 1.4 percent on the previous quarter because of a fall in non-residential building.

Individual shares of the economy – per capita GDP – were unchanged for the quarter, to be 0.4 percent lower than a year ago.

The country’s purchasing power (disposable income) was also flat for the quarter, but 1.5 percent ahead of a year ago.

Derailed recovery ?

The GDP reading has already been discounted by economists as historical information overtaken by the Middle East conflict.

The latest monthly partial monthly read on inflation and a further slip in consumer confidence driven by a surge in fuel prices are seen as pointers for future activity.

Forecasts before the hostilities were for a gradual pick-up in growth this year to more than 2.5 percent, rising towards 3 percent in 2027.

The Reserve Bank last month held the official cash rate (OCR) at 2.25 percent and signalled rates would be held at an “accommodative level” to support the economy.

Economists have highlighted the uncertainty caused by the US/Israel-Iran war and its ability to derail economic activity through higher inflation, disruption to supply chains, and dampening of household and business demand and activity.

New Zealand’s quarterly growth rate was the same as or close to those in the US, UK, EU, and Japan, but lagged Australia’s 0.8 percent.

Economists said the numbers showed the weak and slow nature of the economic rebound, even before the conflict.

“The data highlights that while the economic recovery continued into Q4 2025, the economy was still fragile, with private demand noticeably lacking from the equation,” ASB senior economist Kim Mundy said.

ANZ senior economist Matthew Galt said the softer than expected numbers suggested there was more slack in the economy than might have previously been thought which would bring some cheer to the Reserve Bank.

“At the margin, weaker-than-expected GDP gives them a little more latitude to look through the near-term inflationary impact of the oil shock and focus on the potential medium-term implications.”

ASB’s Mundy said the key economic question was how long the Middle East conflict would last, with all the risks to the downside.

“If demand remains weak, tourism numbers drop off and fuel costs remain high, the RBNZ is going to increasingly find itself in an increasingly uncomfortable spot.”

She said the RBNZ was still expected to start raising the official cash rate by the end of the year, but the rises might come earlier if the outlook for inflation deteriorates.

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