NZ economy grows smaller-than-expected 0.5% in 1st quarter
New Zealand's economy grew at a slower pace than expected in the first three months of the year as building activity and investment shrank, offsetting a recovery in milk production which spurred agriculture.
Gross domestic product expanded 0.5 percent in the three months ended March 31, accelerating from a 0.4 percent quarterly pace in the December quarter, and was 2.5 percent higher than the same period a year earlier, Statistics New Zealand said. That was below the 0.7 percent quarterly expansion forecast in a Reuters poll of economists, which also tipped GDP to be 2.7 percent higher than March 2015.
Activity was weighed on by a 2.1 percent contraction in the construction sector, the first decline since June June 2015, as non-residential building work fell from a peak. Earlier construction data had been seen as a potential drag on the economy in the quarter by economists ahead of today's figures. Construction activity rose 3.8 percent from a year earlier.
"Much lower building activity combined with mixed results for the service sector took the shine off higher dairy production and saw a second quarter of moderate overall GDP growth," national accounts senior manager Gary Dunnet said in a statement. "At an industry level, 11 out of 16 industries increased this quarter, with agriculture and retail trade having the biggest increases, while construction was significantly down."
The kiwi dollar traded at 72.51 US cents from 72.59 cents immediately before the data was released. It dropped to 96.46 Australian cents from 95.65 cents and the trade-weighted index fell to 77.79 from 77.89.
New Zealand's economy has been seen as a relative stand-out compared with other developed nations as record net migration, strong tourism flows, a massive pipeline of building work, and a recovery in global dairy prices have spurred enough job creation to meet a swelling population. Still, globally low interest rates and a strong New Zealand dollar have limited inflationary pressures, while a labour market flush with migrants has kept wages largely flat in an economy that has struggled to lift productivity.
Today's figures show agriculture, forestry and fishing expanded at the fastest pace in the quarter, up 2.8 percent. That was led by 4.3 percent growth for agriculture due to the increase in milk production. The sector expanded 0.3 percent from the same period a year earlier.
Retail trade and accommodation, which has been boosted by the country's strong tourism sector and growing population, expanded 1.8 percent in the quarter and was up 5.2 percent from a year earlier.
On an expenditure measure, GDP increased 0.2 percent, accelerating from a revised 0.1 percent pace in December. That was underpinned by a 1.3 percent increase in household spending which helped to offset a 0.4 percent decline in exports of goods and services. Figures yesterday showed the March quarter current account surplus of $244 million was smaller than economists were expecting. GDP expanded 2 percent on an expenditure basis from the same period a year earlier.
Business investment grew 2.3 percent in the quarter, accelerating from a 1.9 percent pace in December, due to a 13 percent jump in plant, machinery and equipment investment. That helped offset contractions across all building and construction investment and an 18 percent decline in transport equipment investment.
Manufacturing production grew 1 percent in the quarter and was 2.1 percent higher than a year earlier, with transport equipment, machinery and equipment manufacaturing the biggest contributor to the sector. Food, beverage and tobacco manufacturing was also higher.
The services sector, which accounts for about 70 percent of the economy, expanded 0.4 percent in the quarter, due to gains in retail trade and health care, helping offset a 2 percent contraction in transport, postal and warehousing activity from reduced rail and air transport services.
On a per capita basis, GDP shrank 0.1 percent in the quarter, following on from a 0.2 percent contraction in December, for a 0.9 percent annual increase. Real gross national disposable income per capita, which measures purchasing power, shrank 0.9 percent in the quarter, following a revised 1.8 percent expansion in December, for an annual increase of 1.8 percent.
StatsNZ said the country's 43-year-high terms of trade was more than offset by a fall in both net investment and transfer income with the rest of the world.