Embargoed until 10:45am – 23 June 2006

Economy Grew 0.7 Percent in March Quarter

Economic activity increased 0.7 percent in the March 2006 quarter, Statistics New Zealand said today. This follows a decrease of 0.1 percent in the December 2005 quarter. In the year ended March 2006 the economy grew 2.2 percent, down from the 3.7 percent growth recorded in the year ended March 2005.

Service industries were the most significant contributors to growth, increasing 0.9 percent in the March 2006 quarter. This reflects continued growth in household spending coupled with strong growth in central government activity.

The largest contributors to the increase in service industries this quarter were the finance, insurance and business services group (up 0.7 percent), and personal and community services (up 1.5 percent).

Government administration and defence recorded its eighteenth consecutive quarter of growth (up 3.2 percent), and was up 9.3 percent for the year ended March 2006.

Primary and goods-producing industries also recorded increases this quarter, up 1.3 percent and 0.5 percent, respectively. Within goods-producing industries, construction activity increased 1.7 percent, mainly driven by non-residential building construction. Manufacturing activity increased marginally this quarter (up 0.3 percent), following two consecutive quarterly decreases.

The expenditure-based measure of gross domestic product (GDP) recorded a 0.6 percent rise in the March 2006 quarter. A continued increase in household consumption expenditure (up 0.8 percent) and a build-up in inventories, following a decrease in inventories in the previous quarter, contributed to an increase in domestic demand of 1.2 percent this quarter. The rise in domestic demand was partially offset by a fall in net exports, with export volumes falling 2.6 percent, outweighing a 0.8 percent fall in import volumes.

Business investment in fixed assets fell 1.4 percent in the March 2006 quarter, following a 0.3 percent fall the previous quarter. However, in the year ended March 2006, business investment rose 9.1 percent.

Geoff Bascand
Acting Government Statistician

ENDS