New Zealand recession deepened in Q1 - survey

WELLINGTON, May 21 - New Zealand's economic recession has likely deepened in the first quarter and will last into 2010, the National Bank of NZ said on Thursday.

The private bank's regional trends survey, seen as a pointer to official gross domestic product (GDP) data due at the end of next month, showed economic activity eased 1.2 percent in the three months through March.

The result reflects weakness in a wide range of indicators, from business and consumer confidence to employment and the housing market, and suggested that GDP data, due on June 26, would be another large negative number.

"The latest out-turn represented the fifth consecutive decline in the nationwide index and the largest quarterly fall since 1986, when the goods and services tax was introduced," National Bank economist Steve Edwards said in a statement.

The bank's own initial forecast for first-quarter GDP is a 1.5 percent contraction.

The economy has been in recession since the start of 2008, and the slowdown is the worst in more than 30 years. It contracted 0.9 percent in the fourth quarter to be 1.9 percent smaller than a year earlier.

Local property prices have fallen sharply, consumer spending has been reined in and unemployment has risen to a six-year high.

That has been exacerbated by the worsening global economy, with most of New Zealand's main trading partners in recession, denting commodity prices and demand.

The Reserve Bank of New Zealand has cut interest rates by a total of 575 basis points to a record low of 2.5 percent since July 2008, and is expected to announce a further cut of 25 basis points in its June 11 monetary policy statement.

Only one of the country's 14 regions surveyed showed a rise in activity, with activity in the capital Wellington rising 0.5 percent on the previous quarter. The Bay of Plenty and Otago had the largest falls, down 3.7 percent and 3 percent respectively.

Auckland, New Zealand's largest city and commercial centre, recorded a 0.4 percent fall in activity.

On an annual basis the survey pointed to a fall of 1.4 percent in the March quarter.

The bank uses 21 indicators, including building permits, retail sales, vehicle registrations, and consumer and business confidence, to determine an overall measure of economic growth.