New Zealand dipped into recession after the economy contracted by 0.1 per cent in the first three months of the year, according to Stats NZ.

That represented a second consecutive quarter of economic decline following a contraction of 0.7 per cent in GDP in the last three months of 2022.

A recession is popularly considered to have occurred when a country experiences two consecutive quarterly drops in GDP.

Stats NZ revised up the scale of economic decline for the December quarter, having previously calculated the economy contracted by 0.6 per cent in the last three months of last year.

'The December 2022 and March 2023 quarter declines follow growth in the June and September 2022 quarters,” economic and environmental insights manager Jason Attewell says.

Half the sectors tracked by Stats NZ saw declines in economic activity in the first three months of the year, led down by business services including advertising and management consulting.

Cyclones Hale and Gabrielle, and strikes by teachers all dragged on economic activity.

'The adverse weather events caused by the cyclones contributed to falls in horticulture and transport support services,” says Attewell.

High inflation, included a sharp rise in food prices, drove an increase in household consumption spending.

The construction, telecoms and finance sectors experienced lifts in economic activity.

Westpac economist Michael Gordon says the 0.1 per cent fall in GDP was the average of the forecasts made by economists.

However, it was lower than the 0.3 per cent GDP expansion forecast by the Reserve Bank, which indicated that unless there were any surprises, the central bank would be content to hold its official cash rate (OCR) steady for the next three months.

'They will feel like they have done enough for now,” Gordon says.

Kiwibank economist Mary Jo Vergara says the OCR, and home loan rates, were around their peak, but did not expect them to come down before the end of the year.

Even if the country had escaped recession, ASB chief economist Nick Tuffley says a surge in migration meant there would still have been a 'per-capita” recession with a decline in real GDP on a per capita basis.

ANZ economist Sharon Zollner had been forecasting 0.2 per cent GDP growth for the March quarter.

But she says GDP figures for areas hit hard by areas hit hard by Cyclone Gabrielle, like Hawke's Bay, Bay of Plenty and Gisborne, would not be published until March next year.

ANZ believed those regions saw a drop in economic activity in the March quarter.

The Reserve Bank Te Pūtea Matua forecast 0.3 per cent GDP growth for the March quarter in its May Monetary Policy Statement, and for the economy to contract modestly after.

'Annual GDP growth is projected to be flat at 0.0 per centin the year to the December 2023 quarter,” the Reserve Bank says at the time.

But it also noted factors that would make households feel like they were living through tough economic times.

'Higher interest rates, lower house prices and the higher cost of living contributed to a decline in domestic demand,” it says.

Westpac had been expecting GDP to fall by 0.4 per cent in the March quarter, but says low unemployment meant it wouldn't even describe two consecutive drops in GDP as a recession.

Before the announcement Bank of New Zealand had been expecting to see a 0.2 per cent contraction in the first quarter, while Kiwibank expected economic growth to have flatlined.

- Rob Stock/Stuff.