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GDP Declines 0.1 Percent

Gross Domestic Product: December 2005 quarter

24 March 2006

GDP Declines 0.1 Percent

Economic activity decreased 0.1 percent in the December 2005 quarter, Statistics New Zealand said today.

This follows increases of 0.1 percent and 1.2 percent in the September 2005 and June 2005 quarters, respectively. In the year ended December 2005 the economy grew 2.2 percent, down from the 4.3 percent growth recorded in the year ended December 2004.

Key drivers of the decline this quarter were wholesale trade (down 2.0 percent), and transport and communication services (down 1.5 percent). This is the first quarter in over three years that these industries have recorded a quarterly decline, with significant factors being a decline in motor vehicle wholesaling, and lower volumes of domestic and international air transport. Most manufacturing industries recorded decreases this quarter, with overall manufacturing production continuing to decline (down 0.9 percent).

Government administration and defence remained strong this quarter (up 3.7 percent), following 16 consecutive quarters of growth. Construction activity increased 3.2 percent, rebounding from a 4.2 percent decrease in the September 2005 quarter.

The expenditure-based measure of gross domestic product (GDP), released concurrently with the production-based measure, recorded a flat result for the December 2005 quarter.

Internal demand decreased 1.9 percent in the December 2005 quarter, the first recorded fall in internal demand since March 2003. This resulted from a run-down in inventories, partially offset by continued growth in general government expenditure (up 2.6 percent), and household consumption expenditure (up 0.3 percent). Business investment in fixed assets was down 0.2 percent in the December 2005 quarter.

The run-down in inventories this quarter is consistent with flat activity in goods-producing industries, together with rising merchandise export volumes. There was an improvement in the net trade balance this quarter, with growth in export volumes (up 1.6 percent) exceeding that of import volumes (down 4.1 percent).

Brian Pink Government Statistician

ENDS

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