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NZ economy grows less than expected in fourth quarter on weaker farm output

Thursday 15th March 2018

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New Zealand's economy grew at a slower-than-expected pace in the fourth quarter as unfavourable weather weighed on agricultural output, offsetting strong services activity. The kiwi fell a quarter US cent. 

Gross domestic product expanded 0.6 percent in the three months to Dec. 31, versus a 0.6 percent expansion in the third quarter, and was 2.9 percent higher on the year, Statistics New Zealand said. Economists expected GDP expanded 0.8 percent in the quarter and 3.1 percent on the year, according to the median in a Bloomberg poll.

The New Zealand dollar fell to 73.05 US cents as at 10.50am from 73.30 cents immediately before the release.

Following a wet spring, New Zealand experienced its hottest summer on record and the “hot, dry weather appeared to have a negative impact this quarter on agricultural production,” national accounts senior manager Gary Dunnet said in a statement.

Agricultural activity shrank 2.7 percent in the period, having expanded 1 percent in the September quarter. Overall activity in the primary industries, which also includes forestry and logging and mining, contracted 2.4 percent after being unchanged in the prior quarter.

Cattle and sheep farming and milk production were the biggest contributors to the decline, due to the wet spring and subsequent drought conditions in the second half of the quarter, Stats NZ said. “Agriculture’s decline negated gains from other primary industries,” it said. Forestry and logging activity expanded 3.5 percent in the quarter while mining activity increased 1.8 percent.

Activity in the services industries – which account for about 66 percent of GDP – grew 1.1 percent in the quarter versus a 0.6 percent increase in the September quarter.

Within services, business services expanded 2.3 percent in the quarter, driven by computer system design services and advertising and marketing services. Retail, accommodation and restaurants activity grew 1.6 percent  Wholesale trade was up 2.2 percent while rental, hiring and real estate services lifted 0.8 percent in the quarter.

Manufacturing activity, meanwhile, contracted 0.1 percent, weighed on by metal product manufacturing and transport equipment, machinery and equipment manufacturing.

Construction expanded 0.7 percent on quarter as construction services and non-residential building activities grew, with flat residential building activity.

On an expenditure measure, GDP expanded 0.4 percent in the December quarter and grew 3.2 percent on the year.

On a per capita basis, GDP grew 0.1 percent in the quarter from a revised 0.2 percent expansion in the September quarter. For the year ended December, GDP per capita was up 0.7 percent, marking the lowest rate of annual GDP per capita growth since 2011, Stats NZ said.

Still, Stats NZ said the real purchasing power of New Zealand’s income rose in the December quarter with per capita real gross national disposable income – or RGNDI – up 0.9 percent following a 0.3 percent expansion in the September quarter. Over the calendar year, RGNDI per capita increased 1.3 percent and “showed that New Zealand’s real purchasing power increased more than New Zealand’s population over this period,” Stats NZ said.

The size of New Zealand’s economy in current prices was $283 billion, Stats NZ said.


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