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Economic Activity Flat in March Quarter

The level of economic activity was unchanged in the March 2001 quarter, with GDP recording zero per cent growth, according to information released today by Statistics New Zealand. This follows a 0.4 per cent increase in the December 2000 quarter and a 0.9 per cent increase in the September 2000 quarter. For the year ended March 2001, the economy grew 2.5 per cent, down on the 4.6 per cent growth recorded in the year ended March 2000.

Internal demand was marginally down this quarter, falling by 0.1 per cent. A decline in business and housing investment more than offset increases in both household and government spending. While most of the decline in business investment was in plant, machinery and equipment (down 22.3 per cent), both residential and non-residential building investment also declined. Residential building investment is now 33 per cent lower than in the March 2000 quarter. This fall in investment in fixed assets was partly offset by an increase in inventories (up $570 million). The increases in household expenditure this quarter occurred in most categories, with the largest being used car purchases. A notable exception was overseas spending by New Zealand households, which was down 2.8 per cent for the quarter.

Export volumes were largely propped up by services exports, reflecting the continued high number of overseas tourists visiting New Zealand. Merchandise exports were down 0.4 per cent for the quarter, although up 5.0 per cent for the year. By contrast, imports fell 0.7 per cent for the quarter, but were flat for the year. The fall for this quarter was due to falls in imports of both goods and services. Consistent with the fall-off in investment, there was a notable fall in imports of plant and equipment.

The flat activity in the economy this quarter reflects a balance between growth in the service industries and contraction in the primary and goods producing industries. All service industries except transport recorded growth this quarter. In contrast, activity in primary industries fell 1.1 per cent and goods producing industries fell 2.6 per cent.

There were decreases in activity in fishing, forestry, and mining and quarrying. The downturn in both fishing and forestry was reflected in falling export volumes, while mining and quarrying activity decreased as a result of a fall in oil and gas extraction. Countering these falls slightly was an increase in agricultural production of 0.5 per cent. Annually, value added in the primary group of industries is 2.9 per cent higher than it was for the year ended March 2000, largely a result of an annual increase of 4.5 per cent in agriculture.

In line with falling meat exports, primary food manufacturing fell 2.6 per cent. The other manufacturing industries experienced mixed fortunes this quarter, with five industries recording falls in activity, and four recording increases. Overall, manufacturing, excluding primary food manufacturing, fell by 1.6 per cent. Building and construction activity fell 6.8 per cent this quarter, following a 4.4 per cent drop in the December 2000 quarter, reflecting a drop-off in business investment and housing construction. Activity in this industry has fallen to a level last
experienced in the September 1994 quarter.

The expenditure-based measure of gross domestic product (GDE), released concurrently with the production-based measure, recorded a 0.2 per cent increase for the March 2001 quarter.

The GDP implicit price deflator recorded a 3.6 per cent increase over the year ended March 2001, reflecting the significant depreciation of the New Zealand dollar over this period. This is the largest annual increase recorded since the year ended September 1990. The GDP implicit price deflator is a broad measure of the overall price change for final goods and services produced in New Zealand.


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