New Zealand: Economic growth slows in third quarter
December 31, 2010
In the third quarter, GDP rose 1.4% over the same period the previous year, coming in below the revised 1.8% increase (previously reported: +1.9% year-on-year) observed in the second quarter and undershooting market expectations, which had seen GDP maintaining the previous quarter's pace. The slower growth over the second quarter was the result of a deterioration in the external sector. Exports of goods and services posted an anaemic expansion in the third quarter, growing only 0.5% (Q2: +2.4% year-on-year), whereas imports accelerated, growing 11.2% (Q2: +9.1% yoy), which represented the fastest pace since the fourth quarter of 2007. As a result, the net contribution from the external sector to overall growth fell from minus 2.1 percentage points in the second quarter to minus 3.7 percentage points in the third quarter. However, an improvement in domestic demand partially offset the deterioration in the external sector. Gross fixed investment rebounded from a flat reading in the second quarter to a 4.2% expansion in the third, fuelled by strong residential building (Q2: +12.9% yoy, Q3: +7.9% yoy) and a positive contribution from the restocking of inventories. Private consumption grew 2.0% year-on-year in the third quarter, which was a notch below the 2.4% expansion tallied in the second quarter. Finally, government consumption grew 1.9% in the third quarter (Q2: +3.1% yoy). At the sector level, the third quarter reading was driven by a contraction in agriculture (Q2: +0.7% yoy; Q3: -0.2% yoy) and a deterioration in industry (Q2: +1.3% yoy; Q3: +0.2% yoy). Only the services sector improved over the second quarter (Q2: +1.3% yoy; Q3: +1.7% yoy). A quarter-on-quarter comparison confirms the weak expansion suggested by the annual fugues. The economy contracted 0.2% in the third quarter in seasonally adjusted terms, which contrasted the 0.1% increase observed in the previous quarter. Meanwhile, the Reserve Bank of New Zealand expects the economy to expand 1.7% in the fiscal year 2010 (ending March 2011) and 2.7% in fiscal 2011.
Author: Ricardo Aceves, Senior Economist