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Monthly Economic Indicators September 2018

Monthly Economic Indicators September 2018

Executive Summary

Broad-based GDP growth of 1.0% in the June quarter.

The annual current account deficit widened to 3.3% in the June quarter.

Trading partner growth remains solid, but global growth is easing with continuing trade tensions remaining a threat.

Real GDP grew 1.0% in the June quarter. Growth was broad based with 15 of 16 industries expanding with particular strength in agriculture and hydro-electricity generation. The mining industry contracted in the quarter, owing to an outage at New Zealand’s largest gas field. June quarter’s strength offset the weaker March quarter taking growth in the year ended June to 2.7%, in line with the Treasury’s Budget Economic and Fiscal Update (BEFU) forecast.

Nominal GDP increased 1.5% in the quarter and 5.5% in the year, a little below the BEFU forecast (6.1%). As a consequence, the economy is a little smaller than expected, when measured in today’s dollars, which may flow through to lower tax revenue over the year ahead. That said, tax revenue in the year to date has been higher than forecast. The Crown accounts, due to be released on 9 October, will provide an update, which will inform our Half-Year Economic and Fiscal Update.

The annual current account deficit widened from a revised $8.5 billion (3.0% of GDP) in the March 2018 quarter to $9.5 billion (3.3%) of GDP in the June quarter and subsequent trade data points to a further widening of the deficit. The trade deficit in the year to August widened to $4.8 billion from $4.2 billion at the end of June.

The outlook for September quarter growth remains solid. The Families Package is expected to bolster aggregate consumption in the September quarter. However, weaker consumer sentiment poses a risk to this view and business confidence, which picked up from its August low, remains weak.

While core trading partner growth remains solid, there are signs that global growth is easing. The OECD has downgraded growth projections for 2018 and 2019. Trade tensions between the US and China escalated as both the US and China imposed additional tariffs on imports. While the direct impact on the global economy from these tariffs is thought to be limited, there remain ongoing risks of further escalation, and that the global uncertainty will spill over into the real economy through lower sentiment and reduced investment.

Full publication: Monthly Economic Indicators September 2018 | The Treasury New Zealand


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