New Zealand GDP

New Zealand

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.

The Reserve Bank of New Zealand expects the economy to grow 3.7% in FY 2015, which spans March of this year to February of next year. In FY 2016, the Bank expects the economy to grow 4.1%. FocusEconomics Consensus Forecast panelists expect the economy to grow 3.4% in calendar year 2014, which is unchanged from last month’s forecast. For 2015, the panel sees the economy expanding 2.9%.


Author: Teresa Kersting, Economist

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New Zealand GDP Q2 2014

Note: Quarter-on-quarter changes of seasonally adjusted GDP in %.
Source: Statistics New Zealand and FocusEconomics Consensus Forecast.


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