New Zealand’s economy shrunk 0.9% in the June quarter as manufacturing activity collapsed during the start of winter and as US President Donald Trump launched his trade war.
Figures released by Stats NZ on Thursday showed gross domestic product (GDP) fell almost a full percentage point in the three months ended June, with declines in most industries.
“The 0.9% fall in economic activity in the June 2025 quarter is broad-based with falls in 10 out of 16 industries. GDP has now fallen in three of the last five quarters,” said Jason Attewell, Stats NZ’s spokesperson for economic growth.
The weak June data completely erases the 0.9% gain made in the first three months of the year and will likely prompt a fresh downgrade of calendar-year economic growth forecasts.
Economists at the Reserve Bank had forecast the economy would contract just 0.3% during the June quarter, while retail banks were predicting closer to 0.5%.
Manufacturing saw the hardest fall. It dropped 3.5% in the quarter, led by transport equipment, machinery, and equipment manufacturing which fell 6.2%.
Food, beverage, and tobacco manufacturing fell 2.2% and was reflected in decreased export volumes of products such as meat. Construction was down 1.8% in the quarter, reversing a 1.2% increase in the three months ended March.
“Construction activity fell across a range of measures in June 2025 quarter, not just GDP. The value of building work put in place, a key input to GDP, fell 2.2%, and filled jobs in the construction industry fell 1.3%,” Attewell said.
In a note prior to the release, BNZ economists said the manufacturing sector was struggling with rising input costs such as energy, weak consumer demand, and strong competition from offshore producers.
Matthew Galt, an economist at ANZ, said global uncertainty from Trump’s tariff policies, which were first announced in April, seemed to have played a role in the weak quarter.
“That saw firms defer their investment and employment decisions. There have also been headwinds at the household level from high food price inflation, a softening labour market, and a housing market that continues to go sideways,” he wrote before the data release.
Economic activity was down 1.1% on an annual basis and GDP per capita had fallen 2.1%. Overall, the New Zealand economy had contracted 1.4% or roughly $1 billion since the election in 2023.
This compares unfavourably to most other countries. New Zealand’s economy has shrunk 0.6% relative to the same quarter last year, while Australia has grown 1.8%, Canada 1.2%, the European Union 1.6%, and the United Kingdom 1.2%.
However, New Zealand’s real purchasing power rose in the June quarter. This is a measure of how many goods and services residents are able to purchase or consume. Kiwis’ ability to buy goods and services rose 0.9% thanks to lower import prices and higher overseas investment income.
Some economists in the data release lockup noted there was significant noise in the data and didn’t expect it to change the RBNZ’s overall view of the economy.