NZ economy grows 0.8% in fourth quarter, on tourist spending, heated housing market

Thursday 19th March 2015

The New Zealand economy expanded in the fourth quarter as tourists drove growth in retailing and accommodation, and property sales increased demand for real estate services.

Gross domestic product rose 0.8 percent in the fourth quarter, from a revised 0.9 percent increase three months earlier, according to Statistics New Zealand. The economy grew 3.3 percent in calendar 2014, the fastest pace since 2007, before the global financial crisis.

The pace of growth broadly matched expectations in a $238 billion economy that has benefited from migration fuelled population growth, an improving labour market, lower borrowing and fuel costs, and rising house prices. Tourists also helped drive growth, spending $7.4 billion in 2014, up 13 percent from the previous year. Tourists helped lift retail trade and accommodation by 2.3 percent in the fourth quarter, the highest since the Rugby World Cup boosted third quarter of 2011.

“While some of this growth comes from more spending by New Zealanders, overseas visitors had a bigger impact,” said Gary Dunnet, the government statistician’s national accounts manager. “Spending by Chinese, US and UK visitors all increased in 2014, though Australians spent less.”

Rental, hiring and real estate services grew 1.2 percent in the final three months of 2014, reflecting an increase in house sales. The annual gain was 1.6 percent.

"Q4 growth will continue to be largely led by domestic forces, with strong population growth, low interest rates and healthy household confidence boosting demand," economists at ASB said in a preview of the GDP data. "We expect these areas to remain key drivers of growth over 2015."

Growth is seen abating only slowly, according to the NZ Institute of Economic Research's consensus forecasts published this week. That showed expectations for 3.3 percent growth in the 12 months ending March 31, slowing to a 2.9 percent pace in 2016 and 2.8 percent in 2017. Today’s data confirms the economy is continuing to grow at a sturdy pace, while inflation remains subdued.

Manufacturing grew 1 percent in the fourth quarter, led by a 5.4 percent gain for petroleum, chemical, plastics and rubber. Imports of intermediate goods such as fuels, lubricants and industrial supplies jumped 7.5 percent.

Food, beverage and tobacco manufacturing rose 1.5 percent in the quarter, while exports of meat rose 3.7 percent and dairy exports rose 2.5 percent.

Metal product manufacturing fell 2.5 percent and wood and paper product making fell 5.2 percent.

The expenditure measure of GDP rose 1.1 percent in the fourth quarter, matching the third quarter pace. Spending by overseas visitors accounted for a 6.1 percent gain in exports of goods and services, while household consumption gained 0.6 percent.

The data showed a 0.5 percent decline in real gross national disposable income (RGNDI), a measure of purchasing power, in the fourth quarter, the first drop since the second quarter of 2012. Statistics New Zealand said RGNDI growth had reflected strengthening terms of trade, which fell in the fourth quarter. RGNDI rose 5 percent in the year.

BusinessDesk.co.nz

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