New Zealand’s Residential Construction Decline Indicates Recession

New Zealand's residential construction slumped to a four-year low last quarter, in a further sign the economy may have tipped into another recession. Spending in constant prices-a measure of volume-fell to NZ$5.2 billion ($3 billion) in the three months through June, Statistics New Zealand said in Wellington. That's the lowest level since the same period in 2020 when the nation was in a lockdown during the pandemic. Economists broadly anticipate that the economy contracted in the second quarter as higher interest rates curbed spending and investment. The Reserve Bank, which entered an easing cycle last month, expects activity also contracted in the third quarter-setting the economy up for its third recession in less than two years.

The report showed residential construction decreased for a seventh consecutive quarter, sliding 0.7 per cent from the first three months of the year. Total building, which includes non-residential activity, declined by 0.2 per cent. The statistics bureau is set to release second-quarter gross domestic product data on Sept. 19. Other recent reports have indicated that exports and retail sales have fallen, adding to expectations of a contraction.

Construction activity has been buffeted by the rising costs of both materials and finance, pushing buyers and developers to the sidelines. Home-building approvals in the 12 months through July were down 22 per cent on the year-earlier period. Sentiment in the industry remains weak. Fletcher Building, the country's largest supplier of wallboard, timber and other construction materials, last month said volumes in its materials and distribution business were under pressure and are expected to drop at least a further 10 per cent in the year through June 2025.