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Falling Domestic Demand Dampens Growth

21 December 2006

Falling Domestic Demand Dampens Growth

Economic activity increased 0.3 percent in the September 2006 quarter, Statistics New Zealand said today.

In the year ended September 2006, the economy grew 1.4 percent, down from the 2.5 percent growth recorded in the year ended September 2005.

Total domestic spending fell 0.2 percent this quarter, primarily as a result of reduced investment in inventories and a reduction in non-residential building investment. Domestic spending has fallen in three of the last four quarters, resulting in annual growth reaching a five-year low of 0.4 percent.

The continued strength of the services sector was the major contributor to growth, while the manufacturing sector weakened the overall result. The finance, insurance and business services group, together with the transport and storage, and communication industries, contributed strongly to this quarter's 0.9 percent growth in the service industries. Manufacturing production fell 1.0 percent in the September 2006 quarter, as sales growth was sourced from inventories.

The expenditure-based measure of gross domestic product (GDP), released concurrently with the production-based measure, recorded a 0.6 percent increase in the September 2006 quarter. This was driven by a continued improvement in the net trade balance, with exports increasing 3.3 percent, compared with a 1.4 percent increase in imports.

Business investment in fixed assets rose 2.2 percent in the September 2006 quarter, following a 6.0 percent fall the previous quarter. In the year ended September 2006, business investment rose 0.9 percent.

Cathryn Ashley-Jones

Acting Government Statistician


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