Economy grows 0.8 per cent in March quarter

Gross Domestic Product: March 2000 quarter

Economy grows 0.8 per cent in March quarter

Economic activity increased in the March quarter by 0.8 per cent, said Acting Government Statistician Dianne Macaskill when releasing the latest Gross Domestic Product (GDP) figures. This follows a 2.3 per cent rise in the December quarter and a 2.6 per cent lift in September. As a result the economy grew for the year ended March 2000, by 4.4 per cent, after recording no change for the year to March 1999. This was the largest March year growth rate since 1995.

Growth this quarter was strongly influenced by exports, up 2.1 per cent. Internal demand showed little change this quarter, up 0.3 per cent if the purchase of the frigate Te Mana is removed from the December quarter figures. Consumer spending was flat. Although there was a surge in new housing investment, this was largely offset by a decline in business investment (including stocks). Following the pre-Y2K stockpiling by manufacturers and distributors last quarter, levels this quarter have risen but by a much smaller amount, as business investment and exports were increasingly met from stocks rather than new production.

With internal demand flat, growth did not occur across all industries. Agriculture and building activity recorded growth this quarter, mainly on the back of good spring pasture growth and a surge in new housing construction. However, the major contribution to the increased activity came from the service industries, with the largest contribution coming from increased activity in transport and communications. The transport industry was buoyed in part by record numbers of overseas visitors; while telecommunications continue to benefit from growing demand for information technology-based products and services.

Business investment on fixed assets increased 1.6 per cent this quarter, following a 4.5 per cent rise in the December quarter. For the year to March, the increase was 7.8 per cent, up markedly on the growth rates recorded in the previous two years, with investment on machinery and equipment up 15.3 per cent. A 4.0 percent increase in investment on machinery and equipment in the latest quarter has continued the pattern.

Household spending was flat this quarter, down slightly by 0.1 per cent. However following increases in the previous three quarters, spending for the year to March was up 2.8 per cent. Spending on non-durable items fell this quarter, but purchases of durables continued to increase, although at a reduced rate. In the year to March, purchases of durables, particularly used cars, increased 7.7 per cent.

Export volumes increased for the third quarter in a row, up 2.1 per cent. Although meat exports rose, dairy exports were down despite increased production. The other major contribution came from services buoyed by record numbers of overseas visitors, up 8.9 per cent in the March quarter compared with the same quarter a year ago. Import volumes for the March year increased 11.1 per cent, but when the import last quarter of the frigate Te Mana is excluded the rise was 4.3 per cent. Merchandise imports were down across most commodity groups with the major exception being fuel imports. Imports of services were up 6.2 per cent.

The expenditure-based measure of GDP, released concurrently with the production-based measure, recorded a 1.0 per cent increase for the March quarter.

The GDP implicit price deflator recorded a 0.1 per cent increase over the March year. This is a broad measure of the overall price change for final goods and services produced in New Zealand.

Dianne Macaskill

ACTING GOVERNMENT STATISTICIAN

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