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Economic growth for the June quarter was more sluggish than anticipated due to a drop in manufacturing output.
GDP rose 0.2% in the three months to 30 June, lower than the consensus market forecasts of a 0.8% rise. The annual rise in GDP was 0.7% - the first annual rise in GDP since September 2008, says Statistics New Zealand.
Manufacturing output fell 4% in the quarter, the largest drop since the series began. The main component of this was 6.9% in food beverage and tobacco manufacturing.
Exports increased 1.3% over the quarter, mostly due to rises in the volumes of metal products, machinery and equipment being shipped overseas.
However – and this is a clear pointer to the loss of confidence in the economic recovery – inventories were run down by $530 million over the quarter. This rundown – primarily in manufacturing and distribution areas – follows two quarters of build up.
A further less-than-encouraging sign lies in the area of investment – gross fixed capital formation, to use the jargon.
The overall figure is positive – 6.2% - led by residential building and also mining exploration. Investment in non-residential building also rose, by 9.1%. There has however been a 1.5% drop in investment in plant and machinery.
On the upside, construction activity rose 6.4%, higher than most economists were anticipating. This area is also likely to see further pick ups in activity in the Canterbury earthquake clean up.
Mining activity continued its rise, up 5% after a 3.5% rise in the March quarter, due to a rise in exploration activity. Forestry and logging also saw a rise, albeit much more modestly, of 1%, but this is the fifth consecutive quarter of growth and the longest run of increases the industry has experienced.
On the government side there are further telling trends. Overall expenditure increased 0.3% in the quarter mostly due to rises in what Statistics New Zealand, bound by internationally set categories, has to call “public order and safety services.”. These – police and prisons to you and I – rose 4.9%.
An indication the government’s fiscal stringency rhetoric is being backed up by at least some action is the fall in central government administration, by 0.6%.
For the year, overall, central government spending rose 2%.