It jumped 2.5% over the quarter for its biggest lift since December 2021.<\/p>\n
\u201cThe fact that central government spending and an increase in inventory levels made the biggest positive contributions to growth highlights the economy\u2019s static nature,\u201d he said.<\/p>\n
\u201cTight fiscal conditions mean that faster government spending cannot sustain growth in coming quarters, and increased manufacturing stock levels suggest that firms are producing in anticipation of better demand conditions that have yet to materialise.\u201d<\/p>\n
Most industries recorded an increase in economic activity in the December 2025 quarter.<\/p>\n
The primary sector continued to experience strong growth with a rise of 0.9% for the quarter.<\/p>\n
However, rental, hiring and real estate services were the largest contributors to the overall increase in GDP, up 0.8% in the quarter.<\/p>\n
\u201cSpending by overseas visitors to New Zealand increased in the December 2025 quarter, contributing to a 7.8% rise in travel services exports,\u201d said Stats NZ general manager and macroeconomic spokesman Jason Attewell.<\/p>\n
\u201cThis flowed through to parts of the economy that service tourism, such as rental car hire, retail trade and accommodation.\u201d<\/p>\n
Construction was the worst-performing sector \u2013 down 1.4%.<\/p>\n
\u201cThe volume of building work put in place, a key input into how Stats NZ measures GDP, fell 3.1% in the December 2025 quarter,\u201d Attewell said.<\/p>\n
\u201cThis was driven by a decrease in non-residential building activity.\u201d<\/p>\n
The weak construction sector continued to drag on the economy and further falls in non-residential building were likely this year, reflecting a reduced pipeline of consents, said Infometrics\u2019 Kiernan.<\/p>\n
\u201cAlthough residential construction in December recorded an annual increase for the first time since 2022, the stagnant housing market raises questions of how sustained any increase in activity might be,\u201d he said.<\/p>\n
But with a lacklustre performance from the construction sector widely expected, Kiernan suggested a seasonally adjusted 0.1% drop in private consumption spending over the quarter was the primary culprit for the softness.<\/p>\n
Infometrics chief forecaster Gareth Kiernan. Photo \/ RNZ, Rebekah Parsons-King<\/p>\n
It was the first decline in household spending volumes since September 2024, he said.<\/p>\n
The weakness in spending was broad-based, with falls in non-durables, services, New Zealand resident spending overseas, food, housing and household utilities, transport, communications, and restaurants and hotels.<\/p>\n
\u201cHouseholds remain incredibly reluctant to spend, with lower mortgage rates being outweighed by concerns about cost-of-living pressures and the relatively weak labour market,\u201d he said.<\/p>\n
The business sector also contributed to slower growth, as private sector investment spending fell by 3.2% from September, its largest quarterly decline in over two years.<\/p>\n
The Middle East conflict, and its significant effect on fuel prices, were likely to further undermine already fragile economic activity levels, Kiernan said.<\/p>\n
\u201cSome effects are likely to show through in March quarter data, but if the conflict continues, the full effects will be more evident in the June quarter.\u201d<\/p>\n
The 0.2% rise for the fourth quarter followed a 0.9% rise in the September 2025 quarter, Stats NZ said.<\/p>\n
That third-quarter figure was revised down from the 1.1% reported in December.<\/p>\n
On an annual average basis, GDP was up 0.2% to December 2025, compared with the year ended December 2024.<\/p>\n
However, as a percentage change from the same quarter of the previous year, it was up by 1.3%.<\/p>\n
Some economists were more upbeat, noting there were technical issues that may see this result revised up.<\/p>\n
The headline figure \u201cmay be overstating the weakness in the recovery, with unallocated taxes and the \u2018balancing item\u2019 knocking off about 0.26% points from growth\u201d, said Abhijit Surya, at Capital Economics.<\/p>\n
\u201cIt\u2019s worth noting that the services sector grew at a healthy pace of 0.7% quarter-on-quarter in the fourth quarter, with momentum little changed from the quarter before,\u201d he said.<\/p>\n
\u201cMoreover, that uptick was broad-based, with all but two of the 11 services sub-sectors recording expansion.\u201d<\/p>\n
The GDP data would only have a small impact on the RBNZ\u2019s thinking, said ANZ economist Matthew Galt.<\/p>\n
\u201cFor them, the forecast miss isn\u2019t large enough to prompt a major rethink,\u201d he said.<\/p>\n
\u201cHowever, 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.\u201d<\/p>\n
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n