NZ economy grows 0.9% in fourth quarter as manufacturing nears eight-year high
By Paul McBeth
March 20 (BusinessDesk) - New Zealand’s economy expanded in line with expectations in the final three months of 2013 as manufacturing activity neared an eight-year high, affirming the Reserve Bank’s view that accelerating growth will require higher interest rates to stave off inflation.
Gross domestic product grew 0.9 percent to a seasonally adjusted $38.3 billion in the three months ended Dec. 31, from a revised pace of 1.2 percent in the September quarter, according to Statistics New Zealand.
That was in line with market expectations and slightly ahead of the Reserve Bank’s forecast of 0.8 percent growth in the quarter. Annual growth was 2.7 percent, and GDP was 3.1 percent higher than the same quarter a year earlier.
The kiwi dollar fell to 85.37 US cents from 85.61 cents immediately before the figures were released.
Manufacturing grew 2.1 percent to $5.15 billion in the quarter, its highest level since March 2006, and accelerating from 1.6 percent expansion in the September quarter. Dairy production fell in the quarter as inventories were run down $18 million in the period, though other food, beverage and tobacco manufacturing made up for the shortfall. Transport equipment, machinery and equipment manufacturing grew 6.2 percent in the period.
The pace of growth underpins signs the local economy is gathering momentum, which Reserve Bank governor Graeme Wheeler says is creating inflationary pressures that require a monetary policy response. He kicked off a tightening cycle this month, lifting the official cash rate a quarter-point to 2.75 percent and anticipates raising the OCR another 2 percentage points over the next two years.
Today’s figures show wholesale trade grew 3.2 percent to a seasonally adjusted $2.13 billion with machinery and equipment wholesaling the major contributor to the gain.
New Zealand’s primary industries grew 0.3 percent led by a 9.5 percent expansion in mining driven by exploration activity, while agriculture shrank 1.6 percent, forestry contracted 0.6 percent and fishing declined 0.7 percent.
Business services shrank 2.1 percent in the quarter, driven by slowing architectural and engineering, which has been at elevated levels in recent quarters to help prepare the $40 billion rebuild of Christchurch.
Other sectors to shrink in the quarter were information, media and telecommunications services, down 0.6 percent, and arts, recreation and other services, which fell 0.9 percent. All service industries grew 0.3 percent in the quarter.
Construction activity grew 0.4 percent in the quarter as investment in infrastructure made up for largely flat spending on residential housing and a decline in non-residential work. Investment in residential housing increased 0.1 percent to $1.75 billion in the quarter, while non-residential building fell 4.6 percent $853 million. Investment in other construction grew 8.8 percent to $1.08 billion.
Business investment, which strips out spending on residential property, grew 0.9 percent to $8.33 billion. Gross fixed capital formation rose 0.4 percent to $9.79 billion.
The expenditure measure of GDP grew 0.6 percent, lagging the 0.8 percent growth forecast in a Reuters survey of economists. The annual measure of GDP expenditure grew 2.5 percent. Household spending underpinned the quarterly gain, up 1.3 percent, led by expenditure on durable goods. Central government expenditure shrank 0.6 percent in the quarter.
Real gross national disposable income rose a seasonally adjusted 3.3 percent in the quarter.