New Zealand: Economic growth accelerates in Q2 amid lower restrictions
GDP expanded 2.8% in seasonally-adjusted quarter-on-quarter terms in Q2, as growth in external demand surged amid easing Covid-19 restrictions. The result was significantly above market expectations of a 1.3% rise and followed Q1’s 1.4% increase. Meanwhile, on an annual basis, GDP jumped 17.4% in Q2, following Q1’s 2.9% rise.
The quarterly acceleration came on the back of a marked improvement in foreign demand. Exports surged 17.0% in Q2 (Q1: -9.1% s.a. qoq), supported by the country’s travel bubble with Australia, while imports expanded 0.2% in the quarter after jumping 6.5% in Q1.
Meanwhile, domestic demand weakened considerably following Q1’s strong rebound. Private consumption contracted 1.4% (Q1: +5.6% s.a. qoq), amid lower spending on services. Moreover, fixed investment fell 2.0% in Q2 (Q1: +6.0% s.a. qoq), weighed down by declining expenditure on plant, machinery and equipment. Moreover, government spending growth lost pace (Q2: +0.4% s.a. qoq; Q1: +2.3% s.a. qoq).
Moving forward, the economy has likely lost steam in the third quarter, after the reimposition of a nationwide lockdown in August amid concerns over the Delta variant. Nevertheless, Lee Sue Ann, economist at United Overseas Bank, remains fairly positive on the outlook for this year, commenting:
“We expect to see a material decline in Q3 2021’s GDP. But we have revised our GDP forecast to 5.3% in 2021, an upgrade from 4.9% previously, in response to stronger-than-expected Q2 2021 GDP growth. Our forecast for 2022 has been trimmed to 3.2%, from our earlier projection of 3.3%, as border restrictions will likely stay in place next year, and amid a slow vaccine rollout.”