New Zealand: Economy accelerates in Q3 as agriculture bounces back
December 19, 2013
In the third quarter, GDP increased a seasonally-adjusted 1.4% over the previous quarter, which was well above the revised 0.3% expansion observed in the second quarter (previously reported: +0.2% quarter-on-quarter). The expansion in Q3 exceeded the 1.1% increase the market had expected and marked the fastest pace since Q4 2009. Compared to the same quarter the previous year, GDP increased 3.5% in Q3 (Q2: +2.3% year-on-year).
According to Statistics New Zealand, the quarterly expansion showed that, "dairy farming has really bounced back from the drought this year." Accordingly, agriculture surged 13.8% in Q3, which contrasts the 4.5% contraction registered in Q2. In addition, the manufacturing sector swung from a 0.4% contraction in Q2 to a 1.5% expansion in Q3. Conversely, growth in services decelerated from a 1.0% increase in Q2 to a 0.4% expansion in Q3.
On an expenditure basis, GDP grew 1.1%, which was above the 0.2% expansion in Q2. The strong print mainly reflects an improvement in government spending, which grew 2.2% in Q3 (Q2: +0.1% qoq), and a positive contribution from restocking of inventories. Private consumption increased 0.4% in Q3, which was below Q2's 1.1% expansion. Fixed investment continued to show healthy growth, increasing 3.1% over the previous quarter (Q2: +4.7% qoq). On the external front, exports declined 0.7% in Q3 (Q2: -3.8% qoq) and growth in imports accelerated (Q2: +2.1% qoq; Q3: +4.5% qoq). The external sector's net contribution to overall economic growth improved slightly from minus 2.1 percentage points in Q2 minus 2.0 percentage points in Q3.
The economy continues to gain momentum, thus the Reserve Bank of New Zealand revised its growth forecasts. The Bank now expects the economy to grow 2.8% in 2013, up from its previous estimate of 2.5%. For 2014, the Bank expects the economy to accelerate to 3.0%, which is also up from its previous projection of 2.8%.
FocusEconomics Consensus Forecast panelists expect the economy to grow 2.7% in 2013, which is unchanged from last month's forecast. For 2014, the panel sees the economy expanding 2.9%, which is also unchanged from last month's forecast.
Author: Ricardo Aceves, Senior Economist