New Zealand: Economic growth slows down in Q2 driven by a contraction in agriculture
September 18, 2014
In the second quarter, GDP increased a seasonally-adjusted 0.7% over the previous quarter, which came in below the 1.0% expansion observed in Q1. The print slightly exceeded market expectations of a milder 0.6% expansion. Compared to the same quarter of the previous year, GDP increased 3.9% in Q2 (Q1: +3.8% year-on-year).
Q2’s slowdown was largely driven by the agricultural sector. Services expanded 1.4% in Q2, which came in above the 0.4% growth tallied in Q1 and marked the fastest pace of growth since Q4 2006. In addition, almost all sub-sectors of the services category accelerated compared to Q1. Goods producing industries also expanded, although they did slow down from Q1’s 3.8% quarterly expansion to a 0.7% rise in Q2. While the electricity, gas and water industries picked up in Q2, construction tallied a slowdown and manufacturing swung to a contraction. The agricultural sector contracted 2.8% over the same period in Q2, contrasting Q1’s 0.6% expansion. In addition, mining swung to a 4.6% contraction in Q2 (Q1: +5.5% quarter-on-quarter).
On an expenditure basis, GDP grew 0.5% over the previous period in Q2, which marked a slowdown compared to Q1’s 1.4% expansion. The deceleration mainly reflected the worse performance of the external sector. Total consumption improved from the 0.3% growth tallied in the first quarter to a 1.1% rise in the second. While private consumption rose from Q1’s 0.1% growth to 1.3% in Q2, government consumption decelerated from Q1’s 1.4% expansion to a 0.5% rise in Q2. Fixed investment moderated to 1.5% growth in Q2 (Q1: +2.1% qoq). The external sector deteriorated as exports swung from 2.8% growth in Q1 to a 2.9% contraction in Q2 and imports grew 2.9% (Q1: +1.8% qoq). Consequently, the external sector’s net contribution to overall economic growth dropped from plus 0.2 percentage points in Q1 to minus 2.1 percentage points in Q2.