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

 

Trade Plans: Prime Minister's Speech To International Business Forum

"The work to improve public services, build infrastructure, and solve social problems is possible only because we have enjoyed sustained, solid economic growth. A big reason for that is the Government’s consistent agenda of economic reform, and our determination to open up more opportunities for trade with the world." More>>

ALSO:

Media: TVNZ Flags Job Cuts To Arrest Profit Decline

Chief executive Kevin Kenrick said the changes were aimed at creating "a sustainable future video content business for TVNZ in an ever-changing media market." More>>

ALSO:

Reserve Bank: Wheeler Keeps OCR At 1.75%

Reserve Bank governor Graeme Wheeler kept the official cash rate unchanged at 1.75 percent, as expected, and reiterated his view that the benchmark rate doesn't need shifting for the foreseeable future. More>>

ALSO:

Retail: Pumpkin Patch Brand, IP Sold To Catch Group

The receivers of failed children's clothing retailer Pumpkin Patch have confirmed that the company's brand and intellectual property have been sold to Australian online retailer Catch Group. More>>

ALSO:

Oil: 2017 Block Offer Petroleum Tender Launched

New Zealand is well-placed to take advantage of the economic benefits of oil and gas exploration, Energy and Resources Minister Judith Collins announced today at the launch of the 2017 Block Offer petroleum tender. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news