Economy remains buoyant
Gross Domestic Product: December 1999 quarter
Economic activity increased in the December quarter by 2.2 per cent, said Government Statistician Len Cook when releasing the latest Gross Domestic Product (GDP) figures. After the small dip in growth in the June quarter, the economy recovered strongly in the second half of calendar 1999. Combined with the 2.5 per cent rise in the September quarter, the latest quarter's results show growth for the year to December 1999 reached 3.5 per cent. This is the strongest annual growth rate since the year ended March 1996.
Both domestic and external demand sustained economic activity this quarter. Businesses increased investment in fixed assets and continued to build up stock levels, while households maintained spending across a range of commodities. Government spending jumped 15 per cent but this was largely the result of the purchase of the frigate Te Mana. As a consequence internal demand rose 4.1 per cent in the December quarter, but when the purchase of the frigate is excluded the rise was 1.9 per cent. Both exports and imports recorded steady growth. Export volumes rose 1.8 per cent while import volumes, excluding the frigate, increased 1.0 per cent.
With both internal demand and exports up, growth was broadly based across the economy. Most industries recorded increased activity. The largest rises were recorded in manufacturing, transport and communications, construction, farming and wholesale and retail trade. The recovery in manufacturing, which began in the previous quarter, was even stronger this quarter, and the level of activity has now surpassed the previous peak recorded in the June 1997 quarter. Nevertheless much of the increased production has gone into a lift in stock levels. Excellent growing conditions in the past spring and early summer have resulted in farming recording two quarters of strong growth which has carried through to primary food manufacture and exports.
Business investment on fixed assets rose 4.0 per cent this quarter, following a flat result in the September quarter. For the year to December, investment, in spite of a fall in the June quarter, was up 7.5 per cent.
Household spending rose 1.1 per cent this quarter. With steady growth being recorded over the last four quarters, spending in December was 4.0 per cent higher than the same quarter a year ago. Expenditure was up across the board with lifts in spending for durables, non-durables and services. Spending on durables rose, in spite of a fall in used car purchases, and was most noticeable on furniture and appliances. Purchases of food and beverages were also up with preparations for Y2K and millennium celebrations possibly contributing.
Investment in new housing increased only modestly this quarter, up 1.1 per cent, in contrast to the strong growth throughout the previous year. Recent rises in mortgage rates and declines in housing consents foreshadow possible falls in housing construction.
Export volumes rose much more modestly this quarter, up 1.8 per cent, following a surge in the previous quarter of 7.5 per cent. Exports of goods increased 0.5 per cent but this was largely attributable to exports of dairy products which were up 13.1 per cent, on the back of the good farm season to date. Exports of services lifted 5.9 per cent with record numbers of international visitors attracted by events such as the America's Cup and millennium celebrations. Import volumes increased 7.1 per cent in the December quarter. However, when the import of the frigate Te Mana is excluded, the increase was 1.0 per cent.
The expenditure-based measure of GDP, released concurrently with the production-based measure, also recorded a 2.2 per cent increase for the December quarter.
The GDP implicit price deflator recorded no change over the December year. This is a broad measure of the overall price change for final goods and services produced in New Zealand.