New Zealand economic growth slows sharply in the March quarter

New Zealand March quarter GDP has come in well below expectations.

The economy grew by 0.2% in the three months to March, well below the 0.8% expansion recorded in the December quarter of 2014 and analyst expectations for an increase of 0.6%. It was also the slowest quarterly growth seen in two years.

From a year earlier the economy expanded by 2.6%, again below expectations for growth of 3.0%, with the figure marking the slowest pace of growth seen since the December quarter of 2013.

Here’s the media release from Statistics New Zealand.

After a series of strong increases, GDP increased 0.2 percent in the March 2015 quarter, Statistics New Zealand said today. The lower growth reflected a 2.9 percent fall in primary industries (agriculture, forestry, and mining) – the largest fall since September 2010. Despite lower quarterly growth, annual growth was still strong, at 3.2 percent.

“Oil and gas were big factors in the lower GDP growth this quarter,” national accounts manager Gary Dunnet said. “There was less extraction and exploration, as international prices fell.”

Agriculture decreased 2.3 percent in the March 2015 quarter. Lower milk production was behind the decrease, in a quarter that had drought conditions and lower dairy prices. Forestry production and exports of forestry products were also down.

A 2.4 percent increase in retail trade and accommodation helped to offset the decrease in primary industries. Retail trade and accommodation has had continued strong increases and now has its largest annual growth in almost a decade, at 6.1 percent. Possible contributors this quarter include the 2015 Cricket World Cup and more visitors during Chinese New Year than in the past. International tourist spending in New Zealand increased 2.3 percent this quarter, and there was an increase in arts and recreation (including sport, recreation, and gambling services), and international air travel.

It was a mixed picture for the rest of the economy this quarter. On the expenditure measure of GDP, household spending increased 0.7 percent, while investment fell 1.9 percent. An increase in construction investment was offset by large decreases in both machinery and equipment investment.

The size of the economy (in current prices) was $239 billion for the year ended March 2015.

This excellent infographic from Statistics New Zealand shows the huge contraction in primary industry output.

Reflective of the lacklustre pace of growth the New Zealand dollar has plummeted on the news, losing 0.9% against both the US and Australian dollars.

Here’s a five-minute chart of the AUD/NZD exchange rate this morning.

The full GDP release from Statistics New Zealand can be accessed here.

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