COVID-19 Contributes To 1.6 Percent Fall In March Quarter GDP
Gross domestic product (GDP) fell 1.6 percent in the March 2020 quarter, the largest drop in 29 years, as the initial effects of COVID-19 restrictions impacted on economic activity, Stats NZ said today.
This quarter’s GDP results showed a widespread drop in economic activity as travel restrictions took hold and the country moved towards lockdown. COVID-19 effects came on top of the smaller impact from drought in some parts of the country.
“The 1.6 percent fall surpassed quarterly falls during the global financial crisis in the late 2000s,” national accounts senior manager Paul Pascoe said.
“It is the largest quarterly fall since the 2.4 percent decline in the March 1991 quarter.
In the March 2020 quarter, the alert level 4 lockdown saw non-essential businesses close, affecting six days (four weekdays) or about 7 percent of the quarter.
“Industries related to international travel, such as accommodation and transport, began to feel the effects of COVID-19 earlier in the quarter, with activity dropping significantly once the borders closed on 19 March,” Mr Pascoe said.
Service industries contributed the most to the drop in activity, making up almost half of the overall fall in GDP. The hospitality industry (accommodation, restaurants, and bars) was among the most affected industries, falling 7.8 percent, as tourism fell after the border was closed to slow the spread of COVID-19.
The construction industry fell 4.1 percent and the transport, postal, and warehousing industry fell 5.2 percent. These falls reflected the impact of lockdown measures as building sites shut down and non-essential workers were told to stay home. Parts of the transport industry, such as air transport, were also affected by the restrictions on travel.
Household consumption expenditure fell 0.3 percent. Spending fell on long-lasting products (durables) such as motor vehicles. A fall in services, driven by accommodation, international and domestic air passenger services, and recreational services, reflects the drop-off in travel as the pandemic spread. Households were not able to buy non-essential goods and services as such businesses shut down. A strong increase in spending on short life-cycle goods offset these falls, as households prepared for the lockdown by buying supplies, from flour to toilet paper. The different results for consumption of durable and non-durable items showed the changing behaviour of consumers in response to COVID-19.
New Zealand’s 1.6 percent decline in economic activity in the March 2020 quarter compares to a 0.3 percent fall in Australia. In the same period, there was a 2.1 percent decline in Canada, a 0.6 percent decline in Japan, a 2.0 percent decline in the United Kingdom, and a 1.3 percent decline in the United States.
Annual GDP growth for the year ended March 2020 dropped to 1.5 percent, compared with a 3.1 percent growth in the year ended March 2019. Annual growth in GDP has been generally slowing since December 2016 when it was 3.9 percent.
Measuring the economy
The data sources that are available on a timely basis determine the methods used to compile Stats NZ’s estimates of quarterly GDP. The unprecedented nature of the rapid economic shock caused by the COVID-19 lockdown has meant that some data sources and methods have had difficulty measuring COVID-19 related effects.
Stats NZ has reviewed all data sources and methods and, using supplementary data sources, has compared and confronted them. Doing this has helped Stats NZ understand the level of activity in the quarter and apply informed adjustments where they were needed.