New Zealand’s gross domestic product fell by 0.9% in the June quarter, a reduction well over market expectations, Stats NZ data shows.

Expectations were for a 0.4% decline in gross domestic product (GDP) while Reserve Bank forecasts were for a 0.3% drop.

The quarterly decline was driven by manufacturing, down 3.5% and construction, down 1.8%.

Per capita GDP fell by 1.1% in quarter.

The fall followed a revised 1.2% rise in GDP in the March quarter.

For the June year, Stats NZ said the decline in GDP was 1.1%.

Activity decreased in the June quarter across two out of three high-level industry groups: goods-producing industries fell 2.3%, and primary industries fell 0.7%.

Service industries were flat.

“The 0.9% fall in economic activity in the June 2025 quarter was broad-based with falls in 10 out of 16 industries,” economic growth spokesman Jason Attewell said.

GDP has now fallen in three of the last five quarters.

Wholesale interest rates and the New Zealand dollar fell on the back of the news.

By late morning, key two year swap rates were down 6.5 basis points at 2.75% and the New Zealand dollar was off by 20 pips at US59.45c.

The bigger than expected fall may put pressure on the Reserve Bank to be more aggressive with its cuts in the Official Cash Rate (OCR), which sits at 3.0%.

The bank cut the rate by a quarter of a point on August 20.

The bank’s next opportunity is on October 8.

ANZ strategist David Croy said the GDP number was a “significant undershoot” relative to market expectations.

“It certainly suggests that the Reserve Bank should have cut in July, and I wouldn’t be surprised if the market now starts to toy with the idea of a bigger cut next month,” Croy said.

More to come