NZ economy grows 0.2 percent in 2Q as architecture, engineering offsets drought; kiwi jumps

Thursday 19th September 2013

New Zealand's economy grew faster than expected in the second three months of the year as expansion in architecture and engineering services offset the impact of the drought which slowed agriculture. The kiwi dollar jumped on the figures.

Gross domestic product grew 0.2 percent to $37.26 billion in the three months ended June 30, slowing from a revised gain of 0.4 percent in the March quarter, according Statistics New Zealand. That was ahead of 0.1 percent growth forecast in a Reuters survey of economists, where the local bank economists were picking a contraction. Annual growth of 2.7 percent was ahead of the 2.4 percent pace predicted.

The New Zealand dollar climbed to 83.67 US cents from 83.24 cents immediately before the numbers were released. The trade-weighted index climbed to 77.65 from 77.26.

Business services grew 2.6 percent in the quarter, underpinned by architecture and engineering. Construction expanded 2.3 percent on the strength of civil engineering activity, growing an annual pace of 14 percent.

Those gains offset a 6.4 percent contraction in agriculture as the effects of the worst drought in seven decades weighed on production and prompted farmers to slaughter stock to deal with dwindling food supply at the time. The drought has sliced 10.4 percent from agriculture activity since the December 2012 quarter.

"Because of the strong increase in slaughter numbers in the 2013 drought, especially for dairy cows, it may take longer to recover from than previous droughts," Statistics NZ said in its report. "Farmers may take longer to restock their herds and build production back from pre-drought levels."

The drought was expected to keep a lid on New Zealand's growth through the first half of the year, though elevated services and manufacturing activity surveys and upbeat confidence gauges imply the economy has picked up in the current quarter.

Manufacturing shrank 0.1 percent in the quarter as the drought weighed on food processing, and exports of meat, dairy and food, beverages and tobacco all declined in the period.

Household consumption expenditure grew 1.5 percent in the quarter, with spending on durable and consumables up.

Business investment, which excludes spending on residential housing, grew 5.7 percent in the quarter, led by other construction and transport equipment. Investment in residential housing shrank 1.6 percent in the period.

Gross fixed capital formation rose 3.8 percent and inventories built up by $248 million in the quarter.

The expenditure measure of GDP grew 0.1 percent in the quarter for an annual gain of 2.7 percent.

Real gross national disposable income grew at a quarterly pace of 1.4 percent in the three months ended June 30, for an annual increase of 2.3 percent.

BusinessDesk.co.nz

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