New Zealand: Economy starts 2018 at a modest pace
Economic growth continued at a steady pace in the first quarter of 2018, according to data released by the Statistical Institute on 21 June. GDP expanded 0.5% over the previous quarter on a seasonally-adjusted basis, down a notch from Q4’s 0.6% expansion and matching market expectations. In annual terms, the economy grew 2.7% in Q1 (Q4: +2.9% year-on-year). When comparing GDP growth to population change, GDP per capita was unchanged in the quarter ending in March 2018, following a 0.1% increase in Q4.
The softer quarter-on-quarter expansion in Q1 came on the back of moderate activity growth in the services sector, which expanded 0.6%, down from the 1.1% rise logged in Q4. Growth was largely driven by an increase in business services and information media and telecommunication services. Meanwhile, growth in wholesale trade and retail trade eased in Q1. Furthermore, agricultural output rebounded to 0.6% growth (Q4: -2.6% quarter-on-quarter) on the back of increased milk production in the key dairy sector, which was supported by more favorable weather conditions in the quarter. Manufacturing activity also recovered in Q1 (Q1: +0.7 qoq; Q4: -0.1% qoq), underpinned by a recovery in transport equipment, machinery and equipment manufacturing output.
Economic momentum should remain broadly stable moving forward, supported by strong global growth, low interest rates, higher commodity prices and population growth. Furthermore, the government’s expansionary fiscal stance should feed through to higher domestic demand in the second half of the year. However, the impact of tighter migration laws and reforms to the housing market could weigh on growth.