Growth to hang on construction sector in 2013 as recovery slows
Economic recovery will increasingly lean on the reconstruction effort in Canterbury and a bubbling Auckland property market next year as figures show growth slowed through the middle of this year.
The local construction sector grew 4.5 percent in the three months ended Sept. 30, helping gross domestic product expand 0.2 percent to $36.28 billion, from a revised 0.3 percent pace in the June quarter, according to Statistics New Zealand. That was short of the 0.4 percent growth economists surveyed by Reuters were picking, though in line with Reserve Bank forecasts.
"From here, we really rely on the Christchurch rebuild to continue, and to be fair the anecdotes are good - things are definitely gearing up," Darren Gibbs, chief economist at Deutsche Bank NZ says. "Construction could account for almost half the growth we get over the next 12 months."
The Canterbury rebuild, which is expected to top $30 billion, is widely seen as the saving grace for an economy that has struggled to recover from its deepest recession in two decades, and has been getting some help from a resurgent property market in Auckland in recent months.
Construction will remain a key driver as the government clamps down on its spending and as the currency hinders exporters' ability to sell their goods internationally at a competitive price, Mr Gibbs says
The New Zealand dollar dropped to 83.33 US cents after the figures were released, from 83.60 cents immediately before the release, and recently traded at 83.35 cents.
The economy grew at an annual pace of 2.5 percent, and was 2 percent higher than the same quarter a year earlier. Revisions to previous quarters showed New Zealand dipped back into recession in the second half of 2010, with two 0.3 percent contractions in each quarter. The revisions arose from changes to Statistics NZ's annual benchmarking and methodologies.
Mr Gibbs says the revisions to GDP were more in line with what economists were thinking earlier this year, and point to an annual growth rate of 2 percent.
Contractions in mining, agriculture, forestry and fishing, and manufacturing pulled down overall GDP by 0.4 of a percentage point.
Agriculture, forestry and fishing shrank 2.1 percent in the quarter, with falling dairy production and weak forestry exports dragging down the primary sector. Mining activity shrank 7.4 percent due to lower oil and gas extraction.
New Zealand's manufacturing sector, the country's biggest industry, shrank 1.1 percent in the quarter - a period in which private sector reports had found the sector to be struggling.
The transport, postal and warehousing sector shrank 1.6 percent in the quarter, driven by declining road and air transport services, while retail, accommodation and restaurants shrank 0.8 percent led by the hospitality sector.
A 0.9 percent expansion in financial and insurance services from increased banking and financing services, and a 0.6 percent increase in health care and social assistance activity from higher public health services helped keep the services sector flat in the quarter.
The expenditure measure of GDP, which measures the final purchases of locally produced goods and services, grew 0.2 percent in the quarter, missing the 0.5 percent expected by economists. GDP expenditure grew at an annual pace of 2.6 percent.
Household consumption was flat in the quarter, while gross fixed capital formation shrank 1.8 percent. Business investment, which excludes residential housing, declined 4.7 percent with falling investment in plant, machinery and equipment.
Inventories were run down by $741 million, led by the manufacturing and agricultural sectors, following on from a $114 million rundown in the June quarter. Inventories have been built up by $1.58 billion on an annual basis.