The New Zealand economy slowed in the March quarter, but not by as much as feared as a still strong construction sector offset the negative impact from the slide in dairy prices.
Figures released by Statistics New Zealand yesterday revealed that GDP rose 0.7% in the three months to March 31, slower than the 0.9% rise in the December quarter, but more than market forecasts for growth of around half a per cent to 0.6% (from the Reserve Bank of NZ, or RBNZ). The 0.7% rate saw slow to an annual rate of 2.4%. The RBNZ forecast last week that growth would accelerate to 3.4% in 2017.
By way of comparison, growth in the Australian economy jumped 1.1% from December to be up 3.1% over the year. But it is clear that theAustralian and nZ economies are growing as fast or faster than most of the world’s other major economies.
The data supports the decision last week by the RBNZ not to cut interest rates again.The Reserve Bank held off cutting interest rates at its meeting this month ahead of more data on the economy, including the March quarter GDP report.
Economists say the better-than-expected growth figures has cut the chances of an imminent cut.
Statistics New Zealand said the rise in the quarter came from gains in the the construction and health industries, which partly offset weakness in the rural sector and manufacturing.
"The main driver behind the GDP growth was construction, which rose 4.9 per cent. This was the strongest quarterly growth for the industry since March 2014,” Statistics NZ national accounts senior manager Gary Dunnet said in a statement.
ASB chief economist Nick Tuffley said the economy had grown slightly faster than what either the market and the Reserve Bank had been expecting.
However the recent lift came as Statistics New Zealand revised down growth in 2015.
"Overall, annual average growth is close to the [Reserve Bank’s] expectation and we continue to expect the [Reserve Bank] to cut the [official cash rate] to 2 per cent" in August, Tuffley said.
Construction grew 4.9% in the quarter, the fastest quarterly rate since March 2014, with all construction industries showing growth.
Economists say this reflected greater investment in construction, as investment in residential building rose 4.2%, non-residential building saw a 4.4% increase and other construction jumped 12%, due to increases in infrastructure such as road building and telecommunications. Rising demand for service industries saw service industries grow 0.8% in the quarter, led by health and retail trade. Healthcare and residential care rose 2.7%, the highest quarterly growth rate since June 2005, reflecting higher demand for services from a growing- aging- population.
Strong tourist arrivals also supported the growth in service industries, reflecting a 4.9% rise in tourist spending, but exports of goods and services fell 1% while imports of goods and services rose 0.2%. Manufacturing saw an 0.4% drop due to a drop in food, beverage and tobacco manufacturing.
