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Household Spending Fuels Strong Economic Growth

Household Spending Fuels Strong Economic Growth

Economic activity increased 1.5 percent in the September 2003 quarter, following increases of 0.3 and 0.7 percent in the June and March 2003 quarters, respectively, according to Statistics New Zealand. For the year ended September 2003, the economy grew by 3.9 percent. Gross domestic product (GDP) per capita increased 2.1 percent in the September 2003 year, following a 2.7 percent increase in the previous September year.

Growth this quarter was maintained by internal demand, up 3.5 percent. There was a marked lift in household expenditure on consumer durables, up 4.5 percent; and new housing construction, up 4.0 percent, increased for the sixth quarter in a row. There was a further build-up of inventories while business investment in fixed assets also rose, up 2.9 percent.

The external account had a dampening effect on domestic activity. Export volumes fell for the second successive quarter, down 2.0 percent; part of the increase in internal demand was met from imports, which were up 0.8 percent.

The increase in domestic economic activity occurred largely in the goods producing and service industries. Manufacturing activity recovered this quarter, increasing 1.9 percent, following a decline of 2.0 percent in the June 2003 quarter.

Similarly, electricity, gas and water recovered, up 7.0 percent, following the 6.3 percent fall last quarter. Both of these industry groups were affected by last quarter's 'power crisis'.

The increase in business and housing investment was reflected in the continuing strong growth in the construction industry, which was up 4.7 percent for the quarter and is up 16.1 percent for the year ended September 2003.

The lift in household expenditure was also shown in increased activity in most service-based industries, with retail, accommodation and restaurants value added, up 1.4 percent, being a major contributor.

The expenditure-based measure of GDP, released concurrently with the production-based measure, recorded a 1.7 percent increase for the September 2003 quarter when compared with the June 2003 quarter.

Real gross national disposable income (RGNDI), which is a measure of the volume of goods and services New Zealand residents have command over, increased 4.2 percent in the September 2003 year. This exceeds the 3.9 percent growth in GDP. The higher growth in RGNDI resulted from the improvement in the terms of trade, which increased the purchasing power of the disposable income of New Zealand residents.

Brian Pink

Government Statistician

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