Recovery Firms with Strong Quarter
Economic activity increased in the September quarter by 2.3 per cent, said Government Statistician Len Cook when releasing the latest Gross Domestic Product (GDP) figures. The latest increase returns the economy to the pattern of steady growth evident since mid 1998, which was interrupted by the small 0.3 per cent fall in the June quarter.
For the year to September, the economy grew by 1.9 per cent, close to the annual rate which prevailed before the Asian crisis and the first of two consecutive droughts. Just as the fall last quarter occurred across most industries, the increase this quarter is equally widespread, with most industries recording strong growth. As a result, GDP is now 4 per cent higher than in the September quarter 1998.
A marked jump in export volumes, which were up 7.3 per cent, has mainly driven the recovery. This was in contrast to the June quarter when export volumes fell. After two seasons of drought, livestock available for slaughter in the June quarter was low, but a favourable winter and good spring growth has enabled farmers to begin rebuilding herds as well as capitalise on improved export demand this quarter. Similarly dairy production has picked up with the new season and the Asian market for log exports has recovered.
Internal demand also increased with a marked lift in consumer spending and new housing investment, and a further rise in stock levels, most noticeably by wholesalers. Business investment on fixed assets, however, remained flat.
With both internal and external demand up, increased activity was recorded in most industries with the surge in exports being consistent with growth in agriculture, primary food manufacture and the forestry industries. Increased exporting, business activity and household spending was also reflected in the noticeable growth in wholesale and retail trade, construction, transport and communications, and financial and business services.
Business investment on fixed assets was flat this quarter, down 0.1 per cent, following a fall of 0.9 per cent the previous quarter. However, the lifts in investment in the December and March quarters has meant investment for the year to September being up 7.8 per cent following flat growth for the previous September year.
Household spending rose 1.7 per cent this quarter. With steady growth being recorded over the last four quarters, spending in September was 3.3 per cent higher than the same quarter a year ago. There were strong lifts in spending this quarter on both durables and non-durables with purchases of durables being strongest for cars and clothing and footwear. Increased spending on food and beverages stood out among non-durables this quarter while spending on services was flat.
Investment in new housing, which has been picking up at a faster rate each quarter since interest rates fell a year ago to the lowest levels in two decades, climbed a further 10.6 per cent this quarter. New housing construction is now 24.6 per cent higher than the low point recorded last September quarter.
For the year to September total exports were up 5.2 per cent. The surge in export volumes, up 7.3 per cent for the quarter, has occurred in merchandise trade with exports of dairy products, forest products, meat and seafoods all rising noticeably. Compared with exports, the rise in import volumes this quarter was much more modest, up by 2.1 per cent.
The expenditure-based measure of GDP, released concurrently with the production-based measure, recorded a 2.4 per cent increase for the September quarter.
The GDP implicit price deflator rose 0.7 per cent over the September year. This is a broad measure of the overall price change for final goods and services produced in New Zealand.