Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


UPDATE: NZ economic growth keeps rate hike track intact

UPDATE: NZ economic growth keeps rate hike track intact

(Updates, adding economist comment)

By Paul McBeth

March 20 (BusinessDesk) - New Zealand’s pace of growth in the final three months of the year, underpinned by a booming manufacturing sector, won’t derail the Reserve Bank’s path to higher interest rates this year.

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 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.

“Most people continue to think we’ve got at least two more rate hikes ahead of us in April and June,” said Darren Gibbs, chief economist at Deutsche Bank in Auckland. “July is a bit more debatable and depends how the data pans out.”

The Reserve Bank’s forecast track for the 90-day bank bill rate, often seen as a proxy for the OCR, projects the rate rising to 4 percent by the end of 2014 and 5.3 percent by March 2017. Traders have priced in 119 basis points of rate hikes over the coming 12 months, and give a 92 percent chance of an increase at the April meeting, according to the Overnight Index Swap curve.

The kiwi dollar fell to 85.37 US cents from 85.61 cents immediately before the figures were released, and recently traded at 85.38 cents.

Deutsche Bank’s Gibbs said given the GDP number was largely what people were expecting, the steeper forecast track for US interest rates by the Federal Reserve will be weighing more heavily on traders.

Westpac Banking Corp chief economist Dominick Stephens and senior economist Michael Gordon said in a note the central bank will have to gradually raise interest rates this year as the economy gathers momentum on the strength of the Canterbury rebuild, house building activity in Auckland, and 40-year high terms of trade.

“As interest rates rise, we suspect that the housing market will slow, consumer buoyancy will gradually diminish, and eventually, GDP growth will slow. But this is a process that could take years,” they said.

Today’s figures show 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. The BNZ-BusinessNZ performance of manufacturing index has shown activity has been expanding for the 18 months through to February.

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.

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.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Keep Digging: Seabed Ironsands Miner TransTasman Tries Again

The first company to attempt to gain a resource consent to mine ironsands from the ocean floor in New Zealand's Exclusive Economic Zone has lodged a new application containing fresh scientific and other evidence it hopes will persuade regulators after their initial application was turned down in 2014. More>>

Wool Pulled: Duvets Sold As ‘Premium Alpaca’ Mostly Sheep’s Wool

Rotorua business Budge Collection Limited (Budge) and sole director, Sun Dong Kim, were convicted and fined a total of $71,250 in Auckland District Court after each pleading guilty to four charges of misrepresenting how much alpaca fibre was in their duvets. More>>

Reserve Bank: Labour Calls For Monetary Policy To Expand Goals

Labour's comments follow a speech today by RBNZ governor Graeme Wheeler in which Wheeler sought to answer critics who variously say he should stop lowering interest rates, lower them faster, or that inflation-targeting should no longer be the primary goal of the central bank's activities. More>>

ALSO:

BSA Extension And Sunday Morning Ads: Digital Convergence Bill Captures Online Content

Broadcasting Minister Amy Adams has today announced the Government’s plans to update the Broadcasting Act to better reflect today’s converged market... The Government considered four areas as part of its review into content regulation: classification requirements, advertising restrictions, election programming and contestable funding. More>>

ALSO:

March 2017: Commerce Commission Delays Decision On Fairfax-NZME

The Commerce Commission has delayed its decision on the proposed merger between NZME and Fairfax Media's New Zealand assets, saying the deal is complex and it needs more time to assess the impact on both news content and the advertising market. More>>

ALSO:

Plan Plan: Permanent Independent Hearings Panel Proposed For Planning

The Productivity Commission recommends creating a permanent independent hearings panel like the one that cut through local politics to settle Auckland’s Unitary Plan, for the whole country. More>>

ALSO:

Statistics: NZ Jobless Rate Falls To 5.1% Under New Methodology

New Zealand's unemployment rate fell more than expected in the second quarter as Statistics New Zealand adopted a new way of measuring the labour market to bring the country in line with international practices, and while a growing economy continued to support jobs growth. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news