New Zealand: Economic growth in Q1 is not as spectacular as in Q4 2015
June 16, 2016
In the first quarter of the year, GDP grew a seasonally-adjusted 0.7% over the previous quarter, which came in below the 0.9% growth rate tallied in Q4 2015. However, the result in Q1 fared better than the 0.5% increase the markets had expected. Over the same quarter last year, GDP increased 2.8%, which was faster than the 2.3% rise registered in Q4.
Looking at the economy’s main industries, those in the primary sector contracted 0.4% in Q1 over the previous quarter (Q4: -1.1% quarter-on-quarter), which was mainly dragged down by a plunge in the mining sector. Despite low agricultural commodities prices at the beginning of year, agriculture bounced back and expanded in the first quarter. Industries in the secondary sector expanded a whopping 1.5% in Q1 (Q4: +0.4% qoq), which was fueled by substantially faster growth in construction. Electricity and water management rebounded over the previous quarter, whereas the manufacturing sector continued to deteriorate. Finally, services maintained a healthy pace of growth in the first quarter of the year (Q1: +0.8% qoq: Q4: +0.8% qoq), which was supported by faster growth in the transportation sector and in healthcare and social assistance. Services maintain a healthy growth rhythm due to the strong population growth registered in recent years as a result of buoyant inward immigration.
On an expenditure basis, GDP increased 0.5%, which was nearly half the 0.8% growth rate tallied in Q4. The slowdown in Q1 reflected weaker growth in private consumption (Q1: +0.5% qoq; Q4: +1.0%) and a deterioration in exports of goods and services (Q1: -1.0% qoq; Q4: -0.1% qoq). Imports increased 0.2% in Q1 (Q4: +0.8% qoq), which prompted the contribution from net exports to subtract 0.4 percentage points from overall economic growth n Q1. A silver lining was a sharp acceleration in government spending and gross fixed capital formation.
Author: Ricardo Aceves, Senior Economist