The New Zealand economy grew at a slightly slower pace than forecast in the first three months of this year, but still easily outperformed Australia’s GDP growth rate for the same period.
A fall in building activity (due to the slowing of home building, but especially the rebuilding of Christchurch) and a fall in investment, weak exports offset by a rebound in the production of milk and other dairy products saw GDP rose 0.5% (against Australia’s 0.3% rate) in the three months to March.
That was a slight acceleration from the 0.4% rate in the December quarter (when Australian GDP jumped 1.1% from September’s 0.4% contraction), according to the report Thursday from Statistics New Zealand (http://www.stats.govt.nz/browse_for_stats/economic_indicators/GDP/GrossDomesticProduct_MRMar17qtr.aspx).
Growth was a solid 2.5% in the year to Marc, much stronger than the 1.7% rate reported for Australia.
The 0.5% quarter on quarter result was under the 07% estimate from the market and the 2.7% year on year estimate as well.
Economists pointed ut that the outcome was a disappointment given the strong population growth driven by record immigration – which should have boosted the numbers.
“Much lower building activity combined with mixed results for the service sector took the shine off higher dairy production and saw a second quarter of moderate overall GDP growth,” Statistics NZ’s national accounts manager Gary Dunnet said in a statement.
The biggest detractor from growth was a 2.1% contraction in the construction sector – the first decline since June June 2015 – as non-residential building work fell from a peak. But construction activity still rose at an annual rate of 3.8%.
“At an industry level, 11 out of 16 industries increased this quarter, with agriculture and retail trade having the biggest increases, while construction was significantly down,” Statistics ZZ said in the statement
"Agriculture grew 4.3 percent due to higher milk production. This flowed through to higher dairy product manufacturing, which contributed to the overall rise in food, beverage, and tobacco product manufacturing. Dairy exports fell 11 percent in the March 2017 quarter, resulting in a build-up in dairy inventories.
"Construction fell 2.1 percent, with all building sectors showing a fall. Non-residential building construction, declining from a recent peak, was the key driver. This was also reflected with falling investment in both residential and non-residential building construction.
"Overall investment was up despite lower building activity and less investment in transport equipment. Investment in plant, machinery and equipment has been the strongest in almost seven years, reflecting higher domestic production and greater imports of machinery.
"Activity in the service industries was mixed, up 0.4 percent over the March 2017 quarter. The main driver of growth was retail trade and accommodation. In contrast, transport, postal, and warehousing; and rental hiring and real-estate services were down.
"Household spending bounced back this quarter, up 1.3 percent, reflecting strong growth in retail trade. This rise contributed to an annual growth rate of 4.7 percent, the largest increase in household spending in over a decade,’ it said.
The Kiwi consumer inflation rate was an annual 1% in the March quarter, lower than Australia’s 2.1% while the jobless rate was just 4.9%, well under Australia’s 5.5% (seasonally adjusted, or 5.7% on a trend basis).
Record net migration, strong tourism flows, a massive pipeline of building work, and now the recovery in global dairy prices have boosted growth and new job numbers.
Low interest rates and a strongish New Zealand dollar have limited inflationary pressures, while the record inflow of migrants, plus cautious unions and labour market activity have kept wages flat (as they have in Australia).
The record levels of people continuing to arrive in New Zealand to work and visit, with the latest statistics for the year to March revealing a record 129,500 migrant arrivals.
Departures in the same period were 57,600 – leading to a record net gain in migration of 71,900 in the year to March 2017. This figure beats the previous record of 71,300 set in February.
