
England produced a rousing second-half performance at Twickenham but it was not enough to overhaul Tri-Nations champions New Zealand.
"There were lots of good stuff," said coach Martin Johnson. "We looked rusty a few times in the first half. The good thing for us is we go again next week [against Australia]."
The All Blacks, who have not lost to England since 2003, stormed into a 14-0 after 20 minutes with tries from Hosea Gear and Kieran Read and they led 17-3 at the interval. England hit back in the second half and engineered a debut test try for Dylan Hartley.
New Zealand finished the match firmly on the back foot with Jerome Kaino in the sin bin, but they succeeded in holding England at bay with Dan Carter booting 16 points.
The tourists looked to move the ball wide at every opportunity and after Carter, who averages 19 points a game, missed a penalty, the home side conceded two tries in four minutes.
Inevitably the first was created by Sonny Bill Williams. The debutant drew two men in midfield before offloading to Kaino, who charged deep into the England half before finding Gear. Ashton did his best to bundle the wing into touch but the try was awarded after review and Carter converted.
Carter carved England open straight from the restart and Ashton had to retreat to collect Gear's chip and concede a five-metre scrum. England halted Gear's run on the crash ball but Read drove over the line to help open a 14-0 lead.
The All Blacks recovered possession and when England captain Lewis Moody was spotted hitting a ruck from the side, Carter slotted the penalty to extend the All Blacks' lead.
After taking a hammering for 35 minutes, England finished the first half promisingly but Toby Flood missed a penalty and then Ben Foden was held up over the line. England's dominance of New Zealand's scrum grew in the second half and Flood slotted a second penalty but Carter responded immediately after Steve Thompson was penalised in the ruck.
Hartley came on for Thompson and the dynamic Rotorua-born hooker made an immediate impact, touching down just before the hour.
England had a real momentum but kept shooting themselves in the foot, allowing Carter to strike two penalties either side of one from Flood that kept the visitors two scores clear.
The home side spent the last 15 minutes camped in New Zealand territory and Kaino was sin-binned as the pressure began to tell. Nick Easter charged forward and England spread play wide left to Shontayne Hape, who dived for the line but spilled the ball under pressure from Isaia Toeava.
England B Foden; C Ashton, M Tindall, S Hape, M Cueto; T Flood, B Youngs; A Sheridan, S Thompson, D Cole; C Lawes, T Palmer; T Croft, L Moody, N Easter Subs D Hartley for Thompson, 50 mins; D Wilson for Sheridan, 57 mins; D Attwood for Palmer, 63 mins, H Fourie for Moody, 66 mins; D Armitage for Cueto, 67 mins; D Care for Youngs, 71 mins Scorers Hartley try; Flood 3 pens, con Sin bin Kaino, 71-81 mins
New Zealand M Muliaina; J Rokocoko, SB Williams, M Nonu, H Gear; D Carter, A Mathewson; T Woodcock, K Mealamu, O Franks, B Thorn, S Whitelock, J Kaino, R McCaw, K Read Subs A Ellis for Mathewson, 51 mins; I Toeava for Rokocoko, 57 mins; A Boric for Whitelock, 68 mins; J Afoa for Franks, 75 mins Scorers Gear, Read, try each; Carter 4 pens, 2 cons