Strong construction growth shores up 1Q GDP but services weak
By Rebecca Howard
June 20 (BusinessDesk) - New Zealand’s economy grew in line with expectations in the first quarter, shored up by strong construction activity, but weak services output – which represents two-thirds of the economy - was a drag on growth.
Gross domestic product expanded 0.6 percent in the three months to March 31 after a 0.6 percent rise in the December quarter, and was 2.5 percent higher than the same quarter a year earlier, Stats NZ said.
Economists polled by Bloomberg predicted GDP expanded a quarterly 0.6 percent and was 2.4 percent higher than a year earlier. The Reserve Bank predicted quarterly growth of 0.4 percent.
The New Zealand dollar rose to 65.61 US cents from 65.38 cents immediately before the announcement.
“Construction was the main contributor to GDP growth this quarter, rising 3.7 percent on top of a 2.2 percent increase in the previous quarter,” national accounts senior manager Gary Dunnet said.
However, strong growth in the construction was tempered by subdued results in the service industries, which represents about 66 percent of the economy, he said. The service industries experienced their lowest quarterly growth since the September 2012 quarter, rising 0.2 percent.
Within services, retail, accommodation and restaurants production shrank 0.5 percent. The lower activity in accommodation and restaurants reflected a dip in visitor arrivals to New Zealand in February and March.
Rental, hiring and real estate services, and ownership of owner-occupied dwellings fell 0.2 percent due to fewer property sales in the March quarter.
Within the goods-producing industries, which represent around 19 percent of GDP, the rise in construction was reflected in investment in non-residential building, which lifted 9.9 percent and residential buildings, up 2.7 percent.
Manufacturing activity rose 1.4 percent in the March quarter after falling 0.4 percent in the prior quarter. Increased food, beverage and tobacco manufacturing contributed strongly to the rise this quarter.
The primary industries, which represent 7 percent of GDP, shrank 0.7 percent after a 0.3 percent contraction in the December quarter. The fall in the March quarter was due to unfavourable weather conditions. Agriculture was down 2.3 percent, forestry and logging was down 1.2 percent and fishing eased 0.4 percent.
Mining rose 9.6 percent due to more exploration activity along with an increase in oil and gas extraction.
On an expenditure measure, GDP expanded 0.8 percent on the quarter and 2.9 percent on the year.
Within the expenditure measure, household spending was up 0.5 percent in the March quarter after a 1 percent rise in the prior quarter. Investment in fixed assets was up 2.4 percent in the March quarter after lifting 1.5 percent in the December period.
On a per capita basis, GDP expanded 0.1 percent in the quarter from a 0.2 percent lift in the December quarter. For the year ended March, GDP per capita was up 0.9 percent.
Stats NZ also said the real purchasing power of New Zealanders rose in the March quarter and real gross national disposable income – or RGNDI – was up 0.6 percent.
With a population increase of 0.5 percent, the RGNDI per capita was up 0.1 percent in the March quarter after falling 0.7 percent in the December quarter.
The size of New Zealand’s economy in current prices was $296 billion, Stats NZ said.