New Zealand: Growth jumps on buoyant consumer spending in Q3
December 20, 2019
The economy climbed 0.7% in quarter-on-quarter seasonally-adjusted terms in the third quarter, well above Q2’s revised 0.1% uptick (previously reported: +0.5% quarter-on-quarter seasonally-adjusted). Meanwhile, on a year-on-year basis, the economy rose 2.3% in Q3 from Q2’s 2.1%, which had marked the lowest reading in over five years.
The much stronger quarter-on quarter expansion in Q3 came on the back of a surge in domestic demand. Household spending expanded 0.8% in Q3, from 0.4% in the previous quarter, likely benefiting from declining interest rates stemming from the Central Bank’s easing stance. Moreover, and probably for the same reason, the performance of fixed investment improved from a 0.3% contraction in Q2 to a flat reading in Q3. Moreover, the increase in public spending almost doubled compared to Q2 (Q3: +1.3% qoq s.a.; Q2: +0.7% qoq s.a.).
Meanwhile, the external sector delivered a weak performance. Exports of goods and services fell 2.8%, following the 1.0% drop in Q2, amid external global headwinds. On the other hand, imports of goods and services jumped 2.3% following Q2’s flat reading boosted by stronger domestic demand.
Growth is projected to remain stable next year. Loose monetary conditions and a more supportive fiscal stance should buoy domestic demand. However, the external sector will lose strength, as export growth will soften and a firmer domestic economy will likely boost import growth. Moreover, weakness in China and Australia—major trade partners—and continued trade tensions cloud the outlook.