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Gross Domestic Product: December 2004 quarter

Gross Domestic Product: December 2004 quarter — 24 March 2005 Economic Growth Slows

The pace of economic activity slowed in the December 2004 quarter, Statistics New Zealand said today.

The economy grew 0.4 percent, down on the increases of 0.6 and 0.9 percent in the September and June 2004 quarters, respectively. However, economic activity remained at high levels and for the year ended December 2004 the economy grew 4.8 percent, up from 3.4 percent growth in the December 2003 year. Both internal and external demand contributed to the modest growth in the December 2004 quarter. Internal demand was up 0.3 percent, due to further increases in household and government spending.

Household spending on services and durable goods increased, with continued strong spending on furniture and household appliances. General government spending increased 5.4 percent in the December 2004 quarter and was up 8.3 percent on the same quarter in 2003. However, government spending in the last few quarters has been strongly influenced by the purchase of a number of light armoured vehicles (LAVs) by the

New Zealand Defence Force. Partly offsetting these expenditure increases were decreases in business investment and new housing construction. New housing investment was down 3.9 percent in the December 2004 quarter, following a 7.0 percent fall in the previous quarter. There was a 0.8 percent decrease in business investment in fixed assets, with investment in plant, machinery and equipment decreasing 2.7 percent in the December quarter.

Despite the fall in the December 2004 quarter, business investment for the December 2004 year remained strong (up 16.0 percent). The external account provided a small, positive lift to the economy, with the growth in exports (up 4.9 percent) exceeding that of imports (up 3.5 percent). A rebound in export volumes occurred in merchandise trade, with exports of dairy products (up 29.2 percent), other food and beverages (up 17.3 percent), and machinery and transport equipment (up 9.9 percent) making significant contributions to this quarter's lift.

Merchandise imports rose 4.3 percent in the December 2004 quarter and were up 16.5 percent for the December 2004 year. The major contribution to this quarter's rise was transport equipment (up 30.0 percent), which was influenced by the import of the LAVs and other motor vehicles.

As in the September 2004 quarter, the lift in economic activity was largely due to an increase in the service industries (up 1.3 percent). All service industry groups recorded increased activity in the December 2004 quarter, and for the December 2004 year activity in this group was strong (up 5.0 percent). Activity in primary industries was up 0.9 percent in the December 2004 quarter after two quarterly decreases, and was up 1.4 percent for the December 2004 year.

In contrast, activity in goods-producing industries was down 1.1 percent this quarter after a flat September quarter, but was up 5.1 percent for the December 2004 year. Manufacturing activity has shown little change over the last two quarters; a small 0.2 percent increase this quarter followed a 0.3 percent increase in the previous quarter.

Construction activity fell 2.2 percent this quarter. Residential building activity fell for the second consecutive quarter (down 4.8 percent), but was up 6.4 percent for the December 2004 year. Although non-residential building construction also fell in the December 2004 quarter (down 3.9 percent), it was up 11.5 percent on the same quarter in 2003.

The expenditure-based measure of gross domestic product (GDP), released concurrently with the production-based measure, recorded a 0.6 percent increase for the December 2004 quarter compared with the September 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 5.1 percent in the December 2004 year.

Brian Pink

Government Statistician

ENDS

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