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Economic strength reflected in high Q1 GDP

The rise - of 0.8% of GDP for the March quarter - was well above the consensus forecast of 0.4% and covers the period of the second, and most calamitous, Christchurch earthquake.

It also came at a time when many people were musing about the possibility of a double dip recession.

Today’s result – which was delayed, partly because of the Christchurch earthquake and partly (from last week) because the result was so unexpectedly upbeat Statistics New Zealand staff re-checked the numbers – confounds the pessimists.

Today’s figures also revise the December quarter’s GDP figure, which was recorded at the time as 0.2% but is now 0.5%.

That takes annual GDP to 1.5%.

Although historical, today’s result provides an unexpectedly firm base for what is already shaping up to be a strong second half of the year (see tomorrow’s National Business Review for more).

The largest contributor was manufacturing, where output rose 3.6%, with machinery and equipment manufacturing leading the way. This follows a 3.5% rise in the previous quarter

Primary industry activity actually declined, by 0.6%, mostly due to a 5.3 % drop in mining activity. Forestry and logging fell by a margin-of-effort 0.1%, after a 6.1% rise in the December quarter.

Agricultural output rose 1%, primarily due to a rise in milk production.

The main decline in activity was the construction sector, where output fell 4.3%

Service industry output rose 0.5%, with a 1% rise in real estate and business services being the main contributor. Within this sub-group, a rise in accountancy and legal activity is the main driver, probably due to the usual end-of-financial year rise in activity but also because of the tax changes affecting the property sector which took effect form 1 April.

The crucial area of imports of a capital goods rose by 5.4% for the quarter, which is in line with recent trade and current account data and which also confirms that firms are making use of the combination of a high New Zealand dollar and low interest rates to boost their plant and machinery investment.

The government sector output rose 1.2%, mostly due to continued increases in local government activity, which rose 6.6%, although this time these seem mostly linked to the aftermath of the Christchurch earthquake. 

More by Rob Hosking

Comments and questions
4

Sorry but local conditions will be overwhelmed soon with one of the European, USA and China bubbles affecting the world economy by end of this year.

I'll bet you down on that....We have a different base, that though effected by the US etc won't be subject to its quiet demise...it will not fail to benefit from the rest of the worlds continued need for food. That is the future of NZ. Technology is no longer a mystery. We or any nation can produce/get all it wants (except for maybe super bio tech) Food is still a limited resource.

New Zealand is not going to be crushed by the US in the end any less than it has been sheltered by it despite our constant snapping at them. There will be ripples but the waves will settle and our heads will be above water.
One thing that the US did do right (And of course those anti human greenies are ranting with hatred about) is to ensure that the US Over produces food for itself. Assuming the Greenies in the US don't get that crushed they have some hope for a soft landing over the next decades as the world levels out.

Thats right, stay positive !

A disaster of this level is almost certainly economically positive. This is a well noted trend in other developed (NZ?) nations....Just await the economic spring tide in Japan next.