Economic activity rose 0.2% in the December 2025 quarter, at the lower end of expectations.

The Reserve Bank had forecast growth of 0.5%.

Economists expected it to be between 0.2% and 0.4%.

The rise followed a 0.9% rise in the September 2025 quarter, Stats NZ said.

That third-quarter figure was revised down from the 1.1% reported in December.

On an annual average basis, GDP was up 0.2% to December 2025, compared with the year ended December 2024.

However, as a percentage change from the same quarter of the previous year, it was up by 1.3%.

“GDP has now risen in three of the last four quarters,” general manager and macroeconomic spokesman Jason Attewell said.

This is the first time since the year ended September 2024 that the economy has recorded annual growth.

The data highlighted that while the economic recovery continued into the fourth quarter of 2025, the economy was “still fragile” with private demand noticeably lacking from the equation, said ASB senior economist Kim Mundy.

Given the “shadow” now being cast by the Iran conflict and oil price shock, the risks to the growth outlook were clearly skewed to the downside, Mundy said.

“This is particularly the case given the weak starting point for private demand.”

Most industries recorded an increase in economic activity in the December 2025 quarter.

The primary sector led the growth with a rise of 0.9% for the quarter.

However, rental, hiring and real estate services were the largest contributors to the overall increase in GDP, up 0.8% in the quarter.

“Spending by overseas visitors to New Zealand increased in the December 2025 quarter, contributing to a 7.8% rise in travel services exports,” Attewell said.

“This flowed through to parts of the economy that service tourism, such as rental car hire, retail trade, and accommodation.”

Construction was the worst-performing sector – down 1.4%.

“The volume of building work put in place, a key input into how Stats NZ measures GDP, fell 3.1% in the December 2025 quarter,” Attewell said.

“This was driven by a decrease in non-residential building activity.”

Abhijit Surya, at Capital Economics, noted that the headline figure “may be overstating the weakness in the recovery, with unallocated taxes and the ‘balancing item’ knocking off about 0.26% points from growth”.

“It’s worth noting that the services sector grew at a healthy pace of 0.7% q/q in the fourth quarter, with momentum little changed from the quarter before,” he said.

“Moreover, that uptick was broad-based, with all but two of the eleven services sub-sectors recording expansion.”

Smoothing through the quarterly volatility and technical issues, the economy had shown moderate growth on average over the second half of 2025, although a little weaker than the RBNZ had been assuming, said ANZ economist Matthew Galt.

Today’s data would only have a small impact on the RBNZ’s thinking, he said.

“For them, the forecast miss isn’t large enough to prompt a major rethink. However, 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.”

Earlier 

GDP was a lagging measure at the best of times, but this would be amplified this time, given the war in the Middle East, said ASB senior economist Kim Mundy. 

“The economic consequences for New Zealand from the war depend on how long it lasts, but so far, the risks to economic growth are firmly skewed to the downside.” 

Nevertheless, the fourth-quarter data remained important as a signal for the current direction of travel, she said. 

“We expect the data to show that the economic recovery continued into the end of 2025, just with a little less vigour than in [the third quarter].” 

On a per-capita basis, GDP looked to have expanded 0.2% quarter on quarter, the second consecutive lift. 

“Growth in per-capita GDP is consistent with things starting to feel a bit easier at a household [and] business level,” Mundy said. 

“But with per-capita GDP still 3% below the peak, there’s still some way to go on this road to recovery.” 

All the bank economists’ forecasts are weaker than the Reserve Bank’s February pick of 0.5% growth. 

Kiwibank and BNZ are expecting 0.3% growth for the quarter. 

“Most industries are set to post gains. But the standout looks likely to be sectors tied to tourism,” said Kiwibank economist Sabrina Delgado. 

“It was another quarter of strong visitor arrivals with plenty of indicators pointing to a lift in transport, arts and rec, and retail trade and accommodation. But it’s not all sunshine, with construction still dragging behind.” 

The agricultural sector has driven economic growth in the past year. 

ANZ’s Matthew Galt took the gloomiest view, picking growth of 0.2% for the quarter. 

But a downside surprise to the RBNZ’s GDP forecast of that size would have only a small impact on its thinking, he said. 

“GDP is lagged data that is prone to revision and covers a period long before oil prices spiked. 

“At the margin, this downside surprise would give the RBNZ a little more latitude to look through the near-term inflationary impact of the oil shock. 

“But the main factor for the monetary policy outlook is how the conflict in the Middle East, and the resulting impacts on medium-term inflation and growth, play out from here.” 

Higher oil prices were not good for either inflation or activity, he said. 

“However, the extent of the impact depends critically on how long the conflict and trade disruption lasts, as well as the balance of how it impacts medium-term inflation versus medium-term growth, which is all still very uncertain.” 

In February’s Monetary Policy Statement, the RBNZ estimated there was considerable spare capacity in the economy, with an output gap of -1.5% in the fourth quarter, Galt said. 

“At face value, a downside surprise to GDP would imply it is now wider than the RBNZ had assumed. That would help contain second-round inflation impacts. 

“However, we wouldn’t want to overplay this given the uncertain outlook, and also recalling that annual inflation at 3.1% isn’t coming from an entirely comfortable starting point.” 

Given all that had happened in the global economy in recent weeks, it would be “a pretty high bar” for the fourth-quarter GDP to move the dial on the Official Cash Rate call, he said. 

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.