Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Data Flash (New Zealand) GDP - Q2 2001

Data Flash (New Zealand) GDP - Q2 2001

Key Points

GDP (production measure) rose 2.0% qoq in Q2, following a revised 0.3% qoq increase in the Q1 (previously recorded as flat). The expenditure-based measure recorded an increase of 1.8% qoq.

The median market expectation had been a 1.4% qoq increase in production measure.

GDP in Q2 was 3.4% higher than a year earlier while the annual average increase over the year to Q2 2001 was 2.3%.

Production sector breakdown: Activity was strong virtually across the board, with particularly strong growth being recorded in the following sectors: manufacturing (4.6% qoq), construction (7.2%), wholesale trade (3.3%) and transport (3.1%). Retail trade rose 1.7% qoq.

Expenditure breakdown: A strong rebound in investment spending made the strongest contribution to growth. Plant and machinery investment rose 28.4% qoq, reversing a 23.7% qoq decline in Q1. Non-residential construction rose 13.3%. Total business investment rose 18.6% qoq, making a 2.5pp contribution to growth in Q2. Solid growth was also recorded in private consumption and net exports, both contributing 0.8pps to growth. Following an unanticipated build up in Q1, a decline in stocks made a -2.6pp contribution to growth in Q2. The GDP deflator rose by 0.9% qoq/4.7% yoy. The GNE deflator - which best reflects the prices of goods and services purchased in New Zealand - rose 0.5% qoq/ 3.2% yoy.

Market reaction: The NZD moved up a couple of spreads. Debt markets were little affected with the data seen as of historical interest only in light of recent events in the US.

Commentary

Today's very strong outcome confirms our long-held belief that the Q1 GDP data dramatically understated the underlying growth momentum in the New Zealand economy. Averaging across the first half of 2001 suggests a growth pulse of over 1% qoq.

That said, even before recent events in the US we expected a modest slowdown in growth in H2 2001, as the contribution from the agriculture sector slowed somewhat. Based on indicators to hand, we currently estimate GDP growth of around 0.8% qoq in Q3.

Looking ahead, in light of the recent deterioration in the US growth outlook - reinforced, but not caused solely by the tragic events of 11 September - and its implications for growth across the globe, the outlook for the New Zealand economy in 2002 is more sombre.

However, we still expect the local economy to grow by around 2% during 2002. This is below our estimate of the trend rate of growth (which we assess as being around 2.5% qoq). Nonetheless, in our view this would still represent a very good performance in light of the magnitude of the forecast slowdown over the next six months in the US, Europe and much of Asia.

Low interest rates (with one further cut expected), a very stimulatory New Zealand dollar, and already solid domestic economic momentum are the cause of our optimism. In addition, the renewed net inflow of migrants which, if anything, is likely to be accelerated by recent events, should underpin a gradual upswing in residential construction, even if consumer confidence moderates somewhat.

Our central view is the RBNZ will leave its OCR at 5.25% when it announces the result of its review of monetary policy settings on 3 October. However, in light of very substantial downward revisions to consensus forecasts of trading partner growth, we do not rule out the possibility of a further - probably 25bps - easing move. Both the Fed and the RBA are expected to cut their respective official rates by 50bps next week.

The robust Q2 GDP result means that all the key measures of capacity utilisation that we follow are now pointing to an economy that is operating above the level consistent with a stable path for core inflation. While the RBNZ will no doubt be anxious to avoid a sharp slowdown in growth, as evidenced by the Bank's uncharacteristic willingness to join the global easing bandwagon on 19 September, a period of slightly below potential growth - of the sort that we now forecast - is likely to be welcomed (at least internally). This needs to be kept in mind when contemplating the likely extent of further easing that the RBNZ will be prepared to accommodate.

Darren Gibbs, Senior Economist, New Zealand


This, along with an extensive range of other publications, is available on our web site http://research.gm.db.com

Please do not respond to this mailbox. If you need to update your contact information or request new research, contact your Deutsche Bank Sales Contact.


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Commerce Commission: Latest Broadband Report Confirms Improved Performance Of Premium Fibre Plans

The latest report from the Commerce Commission’s Measuring Broadband New Zealand programme shows that the performance of Fibre Max plans has improved substantially. This follows a collaboration between the Commission, its independent testing partner, ... More>>

Air New Zealand: Capital Raise Deferred

Air New Zealand has decided to defer its planned capital raise to later in 2021 allowing more time to assess the impacts of recent developments on the airline’s path to recovery. 'We’ve seen some clearing of COVID-19 clouds recently, with ... More>>

Commerce Commission: Cartel Conduct Now Punishable By Up To 7 Years’ Jail Time

Cartel conduct can now be punished with a term of imprisonment of up to 7 years, after the Commerce (Criminalisation of Cartels) Amendment Act 2019 came into effect today. Cartel conduct includes price fixing, market allocation and bid rigging (see ... More>>

Stats NZ: Auckland Population May Hit 2 Million In Early 2030s

Auckland’s population may rise from about 1.7 million currently to 2 million by early next decade, Stats NZ said today. “Auckland will likely have the highest average annual growth of New Zealand’s 16 regions over the next 30 years, from ... More>>


Stats NZ: March Card Spending Rebounds Despite COVID

There was a lift in retail card spending in March following a fall in the lockdown-disrupted February month, Stats NZ said today. Seasonally adjusted retail card spending rose by $53 million (0.9 percent), compared with February 2021. Visit our website to read ... More>>

PwC: Outcome Of Review Into Air New Zealand Gas Turbines Business

Air New Zealand has received the report into its Gas Turbines business from independent external advisers PwC. Air New Zealand Chairman Dame Therese Walsh says the report identified a range of effective controls in the Gas Turbines revenue contracting ... More>>

LPG Association: Renewable LPG Achieves Emissions Budgets With No Need To Ban New LPG Connections

Renewable LPG can supply New Zealand’s LPG needs and achieve the emissions reductions proposed by the Climate Commission without the need to ban new connections, a new study shows. The investigation, by leading consultancy Worley, was prepared for the ... More>>