New Zealand: Economy shifts into higher gear in Q2
Economic growth picked up markedly in the second quarter, according to data released by the Statistical Institute on 20 September. GDP rose 1.0% on a seasonally-adjusted quarter-on-quarter basis, doubling Q1’s 0.5% increase and marking the fastest expansion in two years. Notably, the second-quarter print beat market expectations of a 0.8% rise. When comparing GDP growth to population change, GDP per capita was up 0.5% quarter-on-quarter, following a flat reading in Q1. In annual terms, the economy grew 2.8% in Q2, slightly above the 2.6% year-on-year climb recorded in Q1.
The second-quarter expansion reflected broad-based growth across the major industries, with only mining output recording a notable decline. The services sector was the largest contributor to growth in the second quarter, expanding 1.0%, well above the 0.6% rise logged in Q1. All 11 services industries posted gains in Q2. In particular, growth in the retail trade and accommodation, wholesale and transport industries accelerated markedly, reflecting higher household spending in the quarter. Furthermore, the goods-producing sector returned to growth in Q2, with output increasing 0.9% on a quarterly basis (Q1: -0.1% quarter-on-quarter) on the back of a rebound in activity in the construction and utilities industries. Meanwhile, growth in the primary sector moderated to 0.2% (Q1: +0.6% qoq) as a 20% drop in mining output—due to the unplanned outage at the country’s largest gas-producing field—more than offset a strong showing in agriculture, which was buoyed by a jump in milk production.
Robust economic momentum is expected to continue this year and next. Growth should be supported by healthy consumer spending—underpinned by the tight labor market and the gradual pick-up in wage growth—and the government’s expansionary fiscal stance. Higher commodity prices also bode well for the external sector. Nonetheless, the heavy reliance of exports on Chinese demand is a downside risk to the outlook, with a slowdown in activity in China likely to impact export flows.