Internal Demand Maintains Economic Growth

Internal Demand Maintains Economic Growth

Economic activity increased 0.6 percent in the September 2004 quarter, according to Statistics New Zealand. This follows increases of 0.8 and 2.1 percent in the June 2004 and March 2004 quarters, respectively.

Growth this quarter resulted from a rise in internal demand (up 2.4 percent), which was partly offset by a fall in export volumes (down 5.7 percent). In the year ended September 2004 the economy grew 4.6 percent, up from the 3.7 percent growth in the September 2003 year.

A further lift in household consumption expenditure (up 1.7 percent), increased business investment in fixed assets (up 4.2 percent), and a continuing build-up of inventories sustained internal demand this quarter. Household expenditure on durable goods increased 3.7 percent, with particularly strong spending on recreational goods, furniture and major appliances.

Spending on non-durables (up 1.4 percent) and services (up 0.7 percent) also increased. In contrast, investment in new housing decreased 7.1 percent this quarter, down from the record high level in the June 2004 quarter. The main contributors to the increase in business investment this quarter were investment in intangible assets (largely from an increase in oil and natural gas exploration), and spending on infrastructure assets and transport equipment. Internal demand is now 7.7 percent higher than in the September 2003 quarter.

There was a marked drop in merchandise exports (down 8.4 percent) in the September 2004 quarter. While exports of wood and wood products rose, all other categories of merchandise exports recorded falls. In particular, exports of dairy products dropped sharply (down 24.1 percent) as tighter inventory controls at the end of the 2003/04 dairy season resulted in less product available for export in the September 2004 quarter. Exports of services rose 2.7 percent this quarter, partly the result of a further lift in spending by in-bound tourists. ƒn

Import volumes were flat in the September 2004 quarter (down 0.1 percent), as the fall in merchandise goods was mostly offset by a rise in services. However import volumes remain high for the September 2004 year (up 15.0 percent). Imports of services rose 3.7 percent this quarter, with increased spending by New Zealanders travelling abroad (up 6.9 percent) a main contributor. Expenditure on overseas travel by New Zealanders is 26.4 percent higher this September year than in the September 2003 year.

The September 2004 quarter's 0.6 percent lift in gross domestic product resulted largely from increased activity in the service industries (up 0.8 percent). Most service industry groups recorded increases in activity this quarter. Wholesale trade activity rose 1.0 percent and the retail, accommodation and restaurants group rose 2.5 percent, with retail trade activity the main contributor. The increase in retail activity this quarter is the highest recorded in 15 successive quarters of positive growth. Transport and communication services rose 1.0 percent in the September 2004 quarter while activity in the finance, insurance and business services group was virtually unchanged (a downturn in real estate activity partly offset increases in other areas).

Activity in goods-producing industries was virtually unchanged, with manufacturing up 0.1 percent and construction activity down 2.2 percent. For the second consecutive quarter activity in primary industries decreased (down 1.1 percent), although it is up 1.1 percent for the September 2004 year.

The expenditure-based measure of gross domestic product (GDP), released concurrently with the production-based measure, recorded a 0.5 percent increase for the September 2004 quarter compared with the June 2004 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 5.8 percent in the September 2004 year.

Brian Pink

Government Statistician

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