Gross domestic product rose by a seasonally adjusted 0.9% for the third successive quarter in June. Statistics NZ said the rise equated to 3.6% compared to the June quarter last year and to a 2.8% annual rise.
Finance Minister Bill English described the 3.6% as an annual growth rate, said it put New Zealand’s growth rate among the top 3 developed economies and showed the Government’s management of the economy was delivering more jobs & opportunities for New Zealanders.
Infometrics’ chief forecaster, Gareth Kiernan, said 0.9% was below market expectations of a 1.1% lift, and a disappointing result compared to our expectation of 1.5% growth: “Robust domestic demand, particularly around construction-related areas, was the main driver of the increase in activity, along with an improving export performance, but this strength was somewhat masked by a big run-down in stocks over the quarter.”
Mr English said: “Despite the tough period the dairy industry has been through, we are in the unusual position of enjoying solid growth, rising employment & real wages at the same time as very low inflation.
“New Zealand’s annual growth rate of 3.6% is more than double the OECD rate of 1.6% and compares with 3.3% in Australia, 2.2% in the UK, 1.2% in the US and 0.8% in Japan.
“The result means the New Zealand economy is now worth more than $250 billion for the first time.
“Growth in the June quarter was led by construction, which grew by 5.1% over the quarter. Residential construction was up 10% over the last year – reinforcing the fact that New Zealand is in the middle of a significant building boom.
Exports of goods increased 7.6% for the quarter, the highest increase in 18 years.
“While this result is solid and the outlook is relatively positive, there are many risks around and we cannot afford to take our current economic performance for granted. That is why the Government is continuing to focus on building a stronger, more resilient economy.”
Mr Kiernan said household spending surged 1.9% in the June quarter and the retail sector recorded its strongest quarterly growth since 2007: “Spending on durables jumped by 3.6% from March, with spending on furniture & audio-visual equipment particularly buoyant. Spending on services also increased by 1.7%, with household contents & services (including real estate services), along with restaurants & hotels, doing particularly well.
“Both residential & non-residential investment climbed to new highs, and are now 17% & 9.6% above their previous quarterly records reached in 2004 & 2005 respectively. Linked to this growth, non-metallic mineral product manufacturing, which includes glass, cement & concrete, surged 11% over the quarter to an alltime high (seasonally adjusted), while furniture manufacturing activity rebounded 18% to its highest level since 2008.
“Goods export volumes grew by 7.6% over the quarter, the biggest quarterly increase since 1998. The strength was relatively broadbased, and included increases in dairy volumes (up 13%), coal, crude petroleum & ores, minerals & gases exports (66%), meat products (8.5%), and chemicals, rubber, plastic & other non-metallic product exports (10%).
“The rebound in dairy & meat exports from their March-quarter falls resulted in a significant run-down of stocks – a factor that prevented the overall quarterly economic growth number from being as strong as expected. The decline in stock levels knocked about 1.1 percentage points off quarterly growth, implying that a continuation of good domestic & international demand conditions in coming quarters will result in stronger economic growth figures.
“Very strong prospects for construction will be backed up by improving conditions for the dairy sector and the likelihood of further growth in services exports. The biggest risks that could undermine this healthy growth outlook are capacity constraints in the construction sector, the flow-on effects of tighter lending restrictions for housing, some fragility in global demand conditions and the negative effects of the high $NZ on our export competitiveness. Even with these risks, though, we continue to expect growth to accelerate towards 4%/year between now & early 2018.”
Attribution: Ministerial & Infometrics releases.