New Zealand: Economy maintains momentum in the first quarter
July 14, 2011
In the first quarter, GDP expanded a seasonally adjusted 0.8% over the previous quarter, according to figures based on the production approach (expenditure approach: +0.6% quarter-on-quarter). The reading represented an acceleration compared to the revised 0.5% expansion tallied in the fourth quarter (initially reported: +0.2% qoq) and overshot market expectations, which had seen GDP growing a more moderate 0.3%. On a year-on-year basis, GDP expanded 1.4% in the first quarter, faster than the 1.1% increase observed in the final quarter of 2010. The release of first quarter GDP data were originally scheduled for 23 June, but were delayed several times in the wake of information shortages following the February earthquake. The remarkable first quarter result showed that the disruption from the earthquake to economic activity was less severe than expected. The acceleration indicated that manufacturing maintained strong momentum to expand 3.6% over the previous quarter, which virtually matched the 3.4% increase observed in the fourth quarter. In addition, wholesale trade accelerated from a 0.8% increase in the fourth quarter to a 1.5% expansion in the first. Agriculture expanded 1.0% over the previous quarter (Q4: -0.6% qoq), which benefited from the elevated global commodity prices. The expenditure approach shows that the first quarter improvement was primarily the result of stronger-than-expected expansions in private consumption (Q4: +0.3% qoq; Q1: +0.4% qoq) and government consumption (Q4: +1.4% qoq; Q1: +1.2% qoq). On the other hand, gross fixed investment declined 1.3% in Q1 (Q4: +5.9% qoq), dragged by a contraction in residential investment. Meanwhile, the net contribution from the external sector to overall economic growth swung from a 1.6 percentage-point detraction in the fourth quarter to a 1.1 percentage point contribution. The Reserve Bank of New Zealand revised its GDP growth projections for the fiscal year 2011 (ending March 2012) and now expects the economy will expand 1.2%, up from its previous estimate of 0.9%. For fiscal 2012 (ending March 2013), the Bank expects the economy to pick up to 2.5%.
Author: Ricardo Aceves, Senior Economist