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NZ economic growth slows in first quarter as construction activity weakens

Thursday 21st June 2018

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New Zealand's economic growth eased slightly in line with expectations in the first quarter as a fall in construction activity was offset by growth in the services industries. The primary industries regained some ground.

Gross domestic product expanded 0.5 percent in the three months to March 31 versus a revised 0.6 percent expansion in the fourth quarter and was 2.7 percent higher on the year, Statistics New Zealand said. The result was in line with economist expectations in a Bloomberg poll however it undershot the central bank’s forecast for 0.7 percent quarterly growth.

The New Zealand dollar recently traded at 68.59 US cents, and was little changed after the release.

One of the main drags on quarterly growth was construction output, which fell 1 percent with all construction sub-industries showing weaker growth. On the year, however, the sector was up 2.4 percent.

Activity in the services industries – which account for about 66 percent of GDP – grew 0.6 percent in the quarter versus a revised 1.1 percent increase in the final quarter of 2017. On the year activity lifted 3.3 percent.

“The services industries continue to show growth, led by business services and telecommunication services,” Stats NZ national accounts senior manager Gary Dunnet said.  

Information media and telecommunications was up 2.3 percent in the biggest quarterly increase since June 2015, Stats NZ said. Also within services, business services expanded 1 percent in the quarter, driven by architectural and engineering services, among others.

Rental, hiring and real estate services were up 0.4 percent, due to higher house sales.

The primary industries, meanwhile, showed signs of recovery after falling sharply in the December quarter.

Overall activity in the primary industries, which also includes forestry and logging and mining, rose 0.6 percent on quarter after falling 2.6 percent in the prior quarter. On the year, activity in the sector was down 1.8 percent. The primary industries represent about 5 percent of GDP.

Agricultural activity lifted 0.4 percent in the March quarter, following a revised 2.8 percent fall in the prior quarter.

Growth in the agricultural industry was driven by increased milk production, brought about by more favourable weather conditions in February and March, Stats NZ said.  

Manufacturing activity, meanwhile, lifted 0.7 percent, led by a 6.8 percent increase in transport equipment, machinery and equipment manufacturing.

On an expenditure measure, GDP expanded 0.3 percent in the March quarter and grew 3.2 percent on the year.

Spending by households – which makes up about 60 percent of the expenditure measure – was flat on quarter. According to Stats NZ, up until this quarter household spending has been growing every quarter since September 2012.

“Household spending on services was held back by reduced spending on second-hand vehicles, petrol and clothing,” said Dunnet. “The discovery of stink bugs in car shipments during the quarter has reduced the volume of cars available for sale.”

On a per capita basis, GDP was unchanged on quarter after lifting 0.1 percent in the December quarter. For the year ended March, GDP per capita grew 0.6 percent.

Stats NZ said the real purchasing power of New Zealand’s income fell in the March quarter on a per capita basis. According to the statistics agency, per capita real gross national disposable income – or RGNDI – was down 0.5 percent following a 0.7 percent expansion in the December quarter. Over the calendar year, RGNDI per capita increased 1.3 percent.

The size of New Zealand’s economy in current prices was $285 billion, Stats NZ said.

(BusinessDesk)

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