Double dip recession averted, GDP up 0.2%

The New Zealand economy has confounded the pessimists with a rise in GDP of 0.2%.

The figures for the December quarter, released by Statistics New Zealand this morning, show a double dip recession has been avoided after GDP shrunk by 0.2% the previous quarter.

The consensus market forecast for today’s result was for a big fat 0.0% change in GDP. The figures cover the period of the first Christchurch earthquake but before the much worse 22 February event.

The increase also comes in a quarter when the country’s largest industry, agriculture, actually showed a small fall in output, of 0.5%, primarily due to a spring dry spell which was did not end until mid-December.

Helping push GDP into positive territory was a 2.5% rise in manufacturing output, along with a 2% rise in the fishing, forestry and mining categories.

Within that latter group, mining output actually fell – partly due to the Pike River tragedy – but forestry and logging rose 6.6%, the eighth consecutive quarterly increase and the largest since September 1999.

Also pushing GDP upwards was the largest quarterly build up of inventories by businesses since the series began in 1986, with a $719 million increase. This follows a sizable build up, of $315 million, in the previous quarter.

What the economists call “gross fixed capital formation” or investment in fixed assets, rose 4.8% across the quarter, dominated largely by transport equipment. This means investment over the year was 2.4%, the first annual increase since September 2008. The main drivers were increases in intangibles (up 16.8%) and transport equipment (up 23.4%).

Improvement in both inventories and investment is an indication of greater confidence by firms in their particular prospects.

The next GDP figures – due at the end of June, will cover the current quarter and will be affected by the disastrous second Christchurch earthquake.

Statistics New Zealand, in today’s release, said it will be impossible to isolate many of the effects from the earthquake and their effect on GDP.

However, specific economic indicators such as retail and wholesale trade, manufacturing, education and business services will be affected by it in coming releases by the department.