NZ economy grows 0.3% in 4Q, half the expected pace

Thursday 22nd March 2012

The New Zealand economy grew at half the expected pace in the final three months of 2011 as a tepid manufacturing sector slowed the nation’s recovery. The kiwi dollar dropped on the news.

Gross domestic product grew 0.3 percent in the three months ended Dec. 31, slowing from a revised 0.7 percent pace three months earlier, according to Statistics New Zealand. The Reserve Bank and market analysts were picking growth of 0.6 percent in the quarter, though manufacturing was seen as the weak point in the period. In the year the economy expanded 1.8 percent.

“Growth this quarter was driven by good growing conditions for agriculture, more business services, and spending on the Rugby World Cup,” national accounts manager Rachael Milicich said in a statement. “However, weaker manufacturing compared with last quarter dragged the overall result down.”

The New Zealand dollar fell to 81.09 US cents after the figures were released, from 81.48 cents immediately before.

The figures come after respondents to the New Zealand Institute of Economic Research’s quarterly survey cut their growth expectations for a second time as the rebuild in Canterbury suffers from ongoing delays amid persistent seismic activity.

The manufacturing sector shrank 2.5 percent in the three-month period, following expansion of 2.2 percent in the September quarter. Food, beverage and tobacco manufacturing was the biggest drain on the sector, though dairy products manufacturing grew in the period.

An inventory build-up was behind manufacturing activity in the September quarter and those were run down in the December quarter. Total inventories were built up by a further $19 million in the three months ended Dec. 31.

Last week, the BNZ-Business NZ performance of manufacturing index showed the sector last month recorded its highest level of activity in two years, with a production bounce tipped for the first quarter of 2012.

Goods producing industries shrank 1.6 percent in the period, holding back overall expansion as primary industries grew 2.7 percent and service industries expanded 0.7 percent.

Finance, insurance and business services grew 1.3 percent in the December quarter for a fifth successive increase, with finance services the biggest contributor.

Agriculture grew 3.5 percent as good growing conditions bolstered milk production. That cropped up in yesterday’s balance of payments figures, with record dairy exports underpinning a narrower current account deficit of $2.03 billion in the quarter.

Since the end of 2011, dairy prices have been falling on Fonterra Cooperative Group’s online trading platform, and the exporter recently trimmed its forecast payout to farmers as a resiliently high kiwi dollar drags down returns on foreign sales.

The retail, accommodation and restaurants sector grew 2.2 percent in the period as the hospitality industry cashed in on the tail-end of the Rugby World Cup. The sector is enjoying its highest quarterly level since the series began in 1987, when the inaugural Rugby World Cup was held in New Zealand.

The total volume of spending grew 1.6 percent in the quarter, underpinned by a 5.7 percent increase in spending by foreign visitors, many of whom were in New Zealand for the rugby.

Household spending continued to rise in the quarter, growing 0.8 percent for an 11th straight gain. The volume of durable goods rose 4 percent in the period, the biggest gain since March 2007, while non-durable goods consumer advanced 0.3 percent.

Annual household spending was up 2.4 percent in the calendar year 2011, accelerating from growth of 2.1 percent in 2010.

Construction activity increased 1.5 percent in the quarter, with increases in both residential and commercial building work.

BusinessDesk.co.nz

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