Good news from New Zealand as the economy grew for a 4th straight quarter in the three months to March, thanks mostly to the strength of the economic recovery in Asia and Australia
Naturally, the solid growth of 0.6% in the March quarter (down though from the 0.9% rate in the December period), set off the usual speculation about future interest rate rises.
The growth figures matched market forecasts, but also followed the pattern set in other economies, such as Japan, Australia, Europe and the US of the very strong growth seen in the December quarter, giving way to a more sedate rate of expansion in the March period.
The March figure left growth 1.9% above the March, 2009 quarter and compares to the 3.1% contraction in GDP between March 2008 and March 2009.
Following the NZ Reserve Bank rate rise earlier this month, the growth figures now have commentators forecasting another increase in the Official Cash Rate at the July 29 central bank meeting.
But that will depend more on what happens overseas, especially in Europe and in Asia.
By then we will have inflation numbers for Australia, second quarter growth figures for China (plus other import stats) and more of a sense on whether the global economy continues to run rough and slow.
RBNZ Governor Alan Bollard said after the June 10 rate rise that the country’s economic growth was becoming more broad-based, buoyed by exports, a stronger labor market and higher investment.
The central bank believes the 2010 expansion will be the strongest in five years.
And the March quarter figures support that contention.
Exports increased 1.4% in the quarter, led by logs and machinery ships, but services fell as visiting tourists spent less in the country.
Statistics New Zealand said that by industry, the largest movements in the March 2010 quarter were:
Manufacturing activity, up 1.6 percent, led by machinery and equipment, and metal products
Wholesale trade, up 1.4 percent, following a 2.7 percent increase in the December 2009 quarter
Forestry and logging, up 5.3 percent, related to overseas demand for New Zealand logs
Communication services, down 2.0 percent, due to fewer phone call minutes.
"The economy has grown in all four quarters to the end of March 2010," Acting National Accounts Manager Jason Attewell said in the statement.
"However, economic activity is still below the level seen before the recession, particularly for manufacturing and construction."
The expenditure measure of GDP also rose 0.6% in the March 2010 quarter.
(The production measure of GDP shows the volume of goods and services produced in the economy, while the expenditure measure shows how those goods and services were used.)
"Household consumption expenditure, which measures the volume of goods and services purchased by New Zealand households, was up 0.2 percent this quarter," Statistics NZ said.
"An increase in the volume of durable goods purchased by households (furniture and major appliances, used cars, and clothing) was partly offset by lower volumes of non-durable goods (food and petrol), and services this quarter.
"Central government expenditure was up 1.9 percent in the March 2010 quarter.
"During the March 2010 quarter the government accepted delivery of the $93 million offshore patrol vessel HMNZS Otago.
"Without the purchase of this ship, central government expenditure would have been up 0.8 percent."
A report on Wednesday showed that New Zealand’s current account deficit improved dramatically in the March quarter to its best level since the September quarter of 1989 because of rising export returns and as big bank tax payments reduced profits earned by foreign companies.
Statistics NZ said: "Rising exports and a fall in the investment income deficit helped reduce New Zealand’s seasonally adjusted current account balance by $NZ1.6 billion in the March 2010 quarter.
"The deficit is now $NZ1.3 billion."
At March 31, New Zealand’s short-term overseas debt was 40.4 % of total overseas debt, the lowest level since the series began in June 2000.
The current account deficit for the year ended March 2010 was $NZ4.5 billion (2.4% of GDP), down from $NZ14.6 billion (7.9% of GDP) a year ago.
Imports fell $NZ8.3 billion over this time, while income from foreign investment in New Zealand fell $NZ5.8 billion.
At March 2010, New Zealand’s net international debtor position was $166.7 billion (88.9% of GDP), compared with $168.3 billion (90.6% of GDP) at December 31 2009.
