Household Spending Fuels Strong Economic Growth
Buoyant Household Spending Fuels Strong Economic Growth
Economic activity increased 2.3 percent in the March 2004 quarter, according to Statistics New Zealand. This follows increases of 0.7 and 1.5 percent in the December and September 2003 quarters, respectively. For the year ended March 2004, the economy grew 3.6 percent, down from the 4.4 percent increase in the March 2003 year.
In the March 2004 quarter, higher consumer spending, increased investment in residential housing, increased business investment and a lift in exports all contributed to the rise in economic activity. Internal demand has been buoyant over the last 12 months and is now 8.3 percent higher in the March 2004 quarter than in the same quarter of the previous year.
There was strong growth in household expenditure this quarter (up 2.9 percent), following a 1.7 percent increase in the previous quarter. Household spending is now 7.0 percent higher than in the March 2003 quarter. Household spending on durable goods rose 3.6 percent in the March 2004 quarter, with purchases of furniture and appliances, clothing and footwear, and retail recreational goods particularly strong. For the March 2004 year, expenditure on durable goods increased 8.9 percent. Investment in new housing rose 9.8 percent this quarter, following a decline of 0.8 percent in the December 2003 quarter. New housing investment for the March 2004 year was strong (up 17.7 percent).
Business investment in fixed assets increased 4.1 percent this quarter, following a rise of 3.1 percent in the previous quarter. This quarter's increase was largely due to a rise in spending on plant, machinery and equipment (up 5.7 percent) and non-residential buildings (up 6.5 percent).
Much of the increased investment in plant, machinery and equipment was met from imports. On an annual basis, business investment increased 12.6 percent for the March 2004 year.
Both exports and imports were up in the latest quarter. Export volumes rose 3.4 percent, with most categories of merchandise exports contributing to the increase. Import volumes increased 4.2 percent, reflecting the overall rise in domestic spending.
Growth was widespread this quarter, with increased activity in almost all industry groups. The largest contribution to growth came from the goods-producing industries, which rose 5.1 percent and are now 3.4 percent higher on an annual basis. Following a quarter of flat activity, manufacturing recovered this quarter, increasing 3.8 percent. Most of the manufacturing industry groups recorded rises. Construction activity was buoyant (up 9.1 percent for the quarter), reflecting both the continuing high level of household investment in residential dwellings and a lift in business investment in non-residential buildings.
Activity in service industries was up this quarter, the result of increased household spending and the general lift in business activity. Wholesale trade activity rose 1.9 percent and the retail, accommodation and restaurants group recorded an increase of 2.2 percent. The largest contributor to the increase in retail trade activity was motor vehicle retailing and servicing.
Transport and communication services were up 1.4 percent, with telecommunications the main contributor. Finance, insurance and business services rose 1.3 percent, with the most significant increase occurring in the business services industry.
Following a decline last quarter, activity in the primary industries also increased (up 2.1 percent), with forestry and logging the major contributor to the increase. The 5.7 percent increase in forestry and logging value added follows four consecutive quarterly declines. As a result, forestry activity is down 3.6 percent for the year ended March 2004. The increase in fishing activity this quarter (up 11.4 percent) was mostly the result of a particularly good squid season.
The expenditure-based measure of GDP, released concurrently with the production-based measure, recorded a 2.0 percent increase for the March 2004 quarter compared with the December 2003 quarter.
Pink Government Statistician