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GDP spike ends 2012 but 2013 shapes up as less positive

21 March 2013

GDP spike ends 2012 but 2013 shapes up as less positive

Economic growth, as measured by Gross Domestic Product (GDP), soared 1.5 percent in the final quarter of 2012; almost twice that forecasted by the Reserve Bank. Federated Farmers cautions this is historic and preceded the drought, which the primary industries are now grappling with.

“While the dollar spiked upwards on an expectantly strong fourth quarter it was tempered by the fact it is historic and overshadowed by 2013,” says Bruce Wills, Federated Farmers President.

“That said it was truly encouraging to see the strongest economic growth in three years.

“While the primary industries again led the pack we are pleased to be part of a pack, as opposed to being out there on our own.

“The final quarter of 2012 was truly broad-based with 15 of the 16 industries recorded turning out increases. While manufacturing was the one exception, it actually ended 2012 in a stronger position than when the year began.

“In terms of the primary industries we were up 2.6 percent in the final quarter and 11.7 percent for the year. This reflects some great growing conditions in the first half of the 2012/13 season; a benign winter gave way to an almost ideal spring and even December was good.

“While the first half of the 2012/13 season was great for production it was not for returns thanks to weak commodity prices and that overcooked New Zealand Dollar.

“But things rapidly went down hill almost as soon as 1 January 2013 ticked over.

“The lack of rain combined with long hot days and drying winds has resulted in the current North Island-wide drought with things also dry in parts of the South Island.

“This is not only impacting dairy and meat but also key parts of the horticultural sector. The silver lining must be the ideal conditions for fruit and wine producers.

“Another concern is whether the mix of GDP growth is sustainable because of the pick up in growth coming out of the non-tradable sector. The Reserve Bank can only do so much and is why we need all government policy to support the tradable sector.

“This makes the economic case for water storage which weaker agricultural GDP from quarter one 2013 will only reinforce,” Mr Wills concluded.


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