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NZ GDP September Q. 2005: Economic Growth Subdued

Gross Domestic Product: September 2005 quarter
Economic Growth Subdued

Economic activity increased 0.2 percent in the September 2005 quarter, Statistics New Zealand said today.

This follows increases of 1.2 and 0.7 percent in the June and March 2005 quarters, respectively. Growth this quarter resulted from a rise in internal demand (up 1.1 percent), which was partly offset by a fall in export volumes (down 1.5 percent). In the year ended September 2005, the economy grew 2.7 percent, down from the 4.3 percent growth in the September 2004 year.

Internal demand was sustained by further increases in household spending and business investment this quarter. Household spending remained buoyant, increasing 1.0 percent, following a 1.0 percent rise in the June quarter. Most items of household expenditure increased this quarter. Spending on durable goods rose 2.8 percent, with spending on recreational goods and furniture and major appliances the main contributors.

Spending on non-durables and services were up 1.4 and 1.2 percent, respectively. Expenditure overseas by New Zealand residents decreased 2.5 percent this quarter. Annually, overseas spending by New Zealanders was up 17.2 percent for the September 2005 year, and was a key contributor to the 5.3 percent increase in annual household expenditure.

Residential building investment fell 5.6 percent in the September 2005 quarter, the second consecutive quarterly fall. For the September 2005 year, new housing investment fell 4.3 percent. This follows strong growth in the 2004 and 2003 September years, when growth of 8.6 percent and 20.1 percent, respectively, was recorded.

Business investment in fixed assets rose 2.2 percent in the September 2005 quarter, the fifth consecutive quarterly increase, and was up 6.9 percent for the September 2005 year. There were increases in investment in plant, machinery and equipment (up 6.4 percent) and infrastructure (up 4.3 percent) this quarter, while investment in non-residential buildings decreased (down 7.5 percent).

Partly offsetting this quarter's increase in internal demand were lower export volumes, with merchandise exports decreasing 2.9 percent. The fall in exports was largely the result of a marked drop in dairy exports (down 12.0 percent this quarter and 9.5 percent for the September 2005 year), reflecting unfavourable weather conditions during spring 2004. Exports of services grew 2.3 percent this quarter, largely due to the 7.8 percent increase in spending by overseas tourists. However, for the September 2005 year overseas tourism spending was down 3.3 percent.

@ The rise in internal demand was partly met by imports, which rose 2.4 percent this quarter and 10.1 percent for the September 2005 year. Imports of services were down 3.7 percent for the latest quarter, strongly influenced by the decreased spending of New Zealanders travelling abroad (down 4.3 percent).

Economic growth in the September 2005 quarter was largely due to increased activity in the service industries (up 0.7 percent). All service industries recorded increased activity this quarter, and for the September 2005 year activity in this group was up 4.1 percent. Annual activity in the distribution industries was strong. Wholesale trade, although only increasing 0.6 percent this quarter, was up 4.6 percent for the September 2005 year. Retail trade was buoyant this quarter, increasing 1.6 percent, following a 1.3 percent increase in the June 2005 quarter. For the September 2005 year, retail activity was up 5.8 percent, reflecting high household expenditure.

In contrast to the growth in the service industries, activity in goods-producing industries decreased 1.3 percent this quarter, with construction activity (down 4.6 percent) and activity in the electricity, gas and water supply group (down 3.8 percent) contributing. Activity in primary industries fell 0.3 percent in the September 2005 quarter.

The expenditure-based measure of gross domestic product (GDP), released concurrently with the production-based measure, was unchanged for the September 2005 quarter compared with the June 2005 quarter.

Real gross national disposable income (RGNDI), which is a measure of the volume of goods and services New Zealand residents have command over, increased 2.4 percent in the September 2005 year.

Brian Pink

Government Statistician


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