NZ economy grows faster-than-expected 0.9% in third quarter on manufacturing, tourist spending

Thursday 17th December 2015

New Zealand's economy grew at a faster pace than expected in the third quarter as a rebound in food manufacturing and increased tourism spending stoked activity.

Gross domestic product grew 0.9 percent in the three months ended Sept. 30, from a revised of 0.3 percent in the June quarter, according to Statistics New Zealand. That was ahead of the 0.8 percent growth predicted in a Reuters poll of economists, and the Reserve Bank's forecast for expansion of 0.6 percent. GDP grew 2.3 percent from the same quarter a year earlier, meeting expectations.

Production was led by a 2.8 percent expansion in manufacturing, driven by gains in meat manufacturing, and as increased tourist numbers spurred demand in the services sector, which grew 0.9 percent in the quarter. Retail trade and accommodation grew 1.6 percent, while transport, postal, and warehousing expanded 2.6 percent.

"The services industries were fuelled by greater domestic demand and spending by international visitors," national accounts manager Gary Dunnet said in a statement. "Nine of the 11 service industries reported increases this quarter."

The acceleration in economic growth comes after a moribund middle of the year when production stalled in the face of sinking global dairy prices. That spurred the Reserve Bank to embark on an easing cycle in June, cutting the official cash rate four times to reach 2.5 percent in last week's review.

On an expenditure measure, GDP grew 1.2 percent in the quarter, its fastest pace in more than 14 years as investment in air transport drove up capital investment 2.7 percent, residential building grew 0.9 percent and household spending expanded 0.6 percent. Business investment, which excludes residential housing, grew 2.6 percent in the quarter.

Expenditure expanded 3.5 percent on an annual basis, as residential construction grew 6.2 percent, and exports climbed 9.5 percent in a period where the kiwi dollar depreciated against most of its trading partners. That included a 0.5 percentage point upward revision to the June quarter to 0.7 percent after the agency changed its benchmarks.

Construction has been a major contributor to the economy in recent years as Christchurch gets rebuilt after the 2010 and 2011 earthquakes, and efforts are made to address the housing shortage in Auckland. On a production measure, construction shrank 2.9 percent in the quarter heavy and civil engineering work was scaled back. The sector contracted 0.1 percent from a year earlier.

Agriculture, forestry and fishing was flat in the quarter, with dairy production and manufacturing down in the period.

BusinessDesk.co.nz

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