The economy in the first quarter entered a recession, falling 0.1 per cent, in line with market expectations.

Data from Stats NZ this morning showed how the economy performed in the first three months of 2023.

And revised data showed GDP contracted by 0.7 per cent in the final quarter of 2022, worse than the 0.6 per cent recorded earlier.

In the minutes following the release, the New Zealand dollar fell to US61.96c from US62.13c.

In wholesale interest rates, the two-year swap rate eased to 5.37 per cent from 5.39.

This morning’s data showed the economy entered recession by the narrowest of possible margins, though the first quarter figure could be revised in future.

And despite the decline being less pronounced than that in late 2022, just over half of industries declined in the March 2023 quarter.

Business services were the biggest downward driver, down 3.5 per cent.

This was partly offset by a 2.7 per cent increase in information media and telecommunications this quarter.

”Management consulting, advertising, scientific, and engineering design services drove the fall in business services,” Stats NZ said.

Two successive quarters of economic contraction are widely considered a technical recession.

 “The December 2022 and March 2023 quarter declines followed growth in the June and September 2022 quarters,” Stats NZ economic and environmental insights general manager Jason Attewell said.

The March 2023 quarter included the initial impacts of Cyclones Hale and Gabrielle and teachers’ strikes.

”The adverse weather events caused by the cyclones contributed to falls in horticulture and transport support services, as well as disrupted education services,” Attewell added.

A 2.4 per cent increase in household consumption expenditure and 2 per cent growth in investment in fixed assets partially offset the falls.

The household expenditure growth was led by increased spending by New Zealanders on international travel.

In contrast, households spent less on goods, particularly grocery food.

Regardless of the actual number, economists ahead of this morning’s data release said New Zealand’s economy was slowing as higher interest rates started to bite.

“The RBNZ’s ongoing battle with inflation has seen an aggressive rise in interest rates. And domestic demand is beginning to respond,” said Kiwibank’s Jarrod Kerr.

But the severe weather events last summer and ensuing rebuild complicated the first quarter, he said.

“We could also be in for some payback from [the fourth quarter] big decline.”

Kiwibank’s base case still involves NZ slipping into a shallow recession later this year.

Economic momentum had clearly slowed, ANZ’s Miles Workman said.

“But [the first quarter] had its fair share of noise, complicating the diagnosis.”