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New Zealand GDP Q2 2019

New Zealand: Growth edges down in Q2

The economy grew 0.5% in quarter-on-quarter seasonally-adjusted terms in the second quarter, slightly below Q1’s 0.6% expansion. Meanwhile, on a year-on-year basis, the economy rose 2.1% in Q2 (first quarter: +2.5% year-on-year), thus marking the lowest reading in over five years.

The softer quarter-on quarter expansion in Q2 came on the back of a notable downturn in fixed investment and much softer government spending growth. Fixed investment contracted 1.0%, contrasting the 2.7% rise in Q1, dragged down by a sizable fall in investment in non-residential building. Moreover, the increase in public spending almost halved compared to Q1 (Q2: +0.6% quarter-on-quarter seasonally-adjusted; Q1: +1.1% qoq s.a.). Meanwhile, private consumption expanded at a faster pace than in the previous quarter (Q2: +0.5% qoq s.a.; Q1: +0.4% qoq s.a.), supported by a fall in the unemployment rate and low interest rates.

Meanwhile, on the external front, both exports and imports declined. Exports of goods and services fell 1.8%, swinging from the 2.7% expansion in Q1, amid external global headwinds. Similarly, imports of goods and services contracted 0.3% following Q1’s 0.6% increase.

Looking ahead, growth is expected to moderate this year due to waning domestic demand and then to stabilize next year. Accommodative interest rates and some fiscal stimulus should buttress the economy, although risks remain tilted to the downside amid an intensification of global trade tensions and weaker-than-expected performances in China and Australia.

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