- New Zealand’s economy grew at the slowest pace in nearly five years in the September quarter.
- At 0.3%, the increase was only half the level expected.
New Zealand’s economy slowed sharply in the September quarter, expanding at the weakest pace since late 2013.
According to Statistics New Zealand (StatsNZ), real GDP grew by 0.3% in seasonally adjusted chain volume terms, coming in well market expectations for an increase of 0.6%.
It was the slowest quarterly expansion since the December quarter of 2013, and below the 0.7% increase expected by the Reserve Bank of New Zealand.
The big quarterly miss saw year-on-year growth slow to 2.6%, down from 2.8% in the June quarter. That was below the 2.8% level expected.
Annual economic growth stood at 3% on a production basis, down from an upwardly revised 3.1% pace in the prior quarter but above the 2.8% level expected.
StatsNZ said 11 of 16 industries recorded stronger production levels during the quarter.
“Primary industries grew 2.2%, while growth in service industries slowed to 0.5%. The goods-producing industries fell 1.0%, dragging down overall growth this quarter,” said Susan Hollows, National Accounts Senior Manager.
“Construction activity fell as repair work winds down on roads damaged in the Kaikōura earthquake. However, residential and non-residential construction continued to grow steadily.
“The largest contribution to the downturn in goods-producing industries was manufacturing, with food manufacturing down significantly.”
For services, the largest part of the New Zealand economy, StatNZ said growth was “widespread but moderate”.
Excluding the impact of population growth, GDP per capita was unchanged following an increase of 0.5% in the prior quarter.
On an expenditure basis, real GDP grew by a faster 0.5%, although that too came in below expectation for a larger increase of 0.7%. The Q2 expansion of 1.2% was also revised down to show a lift of 1.1%.
Real gross national disposable income (RGNDI), which measures the real purchasing power of the country’s disposable income, grew by 0.9% from a quarter earlier.
Despite the big miss on the quarterly production measure, Michael Gordon, Senior Economist at Westpac Bank, says some of the factors behind it are unlikely to be permanent.
“Some of the factors behind the 1% surge in June quarter GDP were unlikely to be repeated, or were due to unwind, in the September quarter,” he said.
“Agricultural output and electricity generation were down in seasonally adjusted terms, after a storming June quarter. Transportation and spending on hospitality were also down, which may reflect lower tourist numbers.”
As such, Gordon doesn’t believe the sharp slowdown has any implications for monetary policy settings from the RBNZ — yet.
“Today’s result has mixed implications for the Reserve Bank,” he said.
“While the quarterly result was well below forecast, the upward revisions to history mean that GDP is still running at a higher level than expected.
“It’s not immediately clear what this implies for the economy’s potential output, and the extent of inflationary pressures.
“Our view remains that the Reserve Bank will keep the OCR on hold for an extended period.”
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