December 2020 quarter GDP drops 1.0 percent after record September rebound

Gross domestic product (GDP) fell by 1.0 percent in the December 2020 quarter, following a revised 13.9 percent increase in the September 2020 quarter, Stats NZ said today.

"The dip in activity in the December quarter follows record growth in the September 2020 quarter," national accounts senior manager Paul Pascoe said.

"The September quarter reflected a bounce back after a slump in the June quarter, due to the COVID-19 national lockdown when many businesses were shut for weeks."

"Activity in the December quarter shows a mixed picture - some industries are down, but others have held up or risen, despite the ongoing impact of COVID."

At the industry level 7 out of 16 industries declined. The two largest contributors to the drop were construction, and retail trade and accommodation. Both industries saw strong September 2020 quarter results.

"Falls in construction services, commercial building, and infrastructure were partially offset by continued growth in residential building activity. Construction activity remains at historically high levels, despite this quarter's fall," Mr Pascoe said.

On the other hand, parts of the retail trade and accommodation industry continue to be affected by the absence of international tourism.

"Businesses ranging from hotels and motels, to restaurants, cafes and bars faced much lower activity in calendar year 2020 than in 2019, with far fewer international tourists in the country because of border restrictions," Mr Pascoe said.

The two largest positive contributors in the quarter were transport, postal and warehousing, and business services. However, both industries are still operating below pre-COVID levels and are weaker over the calendar year 2020 compared to 2019. Transport services, in particular, have been impacted by the lack of international travel.

The December 2020 quarter results capture the beginning of what is traditionally the international tourism season, which has tended to peak during the summer months.

Annual GDP down 2.9 percent in 2020

GDP declined 2.9 percent over the year to December 2020, the largest annual fall ever in GDP for New Zealand. This is despite fewer restrictions on domestic travel and business activity in the December 2020 quarter compared to previous quarters. The decline in annual GDP is largely due to the effects of the alert level 4 national lockdown earlier in 2020.

Globally, there have been a variety of experiences and responses to the pandemic, and these need to be taken into consideration when comparing the recent GDP results for different countries.

"Activity in New Zealand in the December 2020 quarter was down almost 1 percent compared with the same quarter in 2019, pre-COVID," Mr Pascoe said.

"This dip is similar to Australia, but much less of a fall than seen in the European Union or the United Kingdom."

Differences in GDP growth rates also reflect structural differences in each country's economy. This includes the relative importance of industries that have been impacted by COVID-19 restrictions.