New Zealand: Growth slows to a near five-year low in Q3
December 19, 2018
According to data released by the Statistical Institute, quarter-on-quarter seasonally-adjusted national accounts for the third quarter were the weakest since late 2013. Headline growth presented a 0.3% month-on-month increase, down from Q2’s 1.0% outturn, undershooting analysts’ expectations. In annual terms, the economy grew by 2.6% in Q3, decelerating from Q2’s 3.2% increase.
The third-quarter slowdown reflected a decrease in output across major industries. Goods-producing industries logged a 1.0% quarter-on-quarter fall in production (Q2: +1.5% quarter-on-quarter seasonally-adjusted), hurt by an across-the-board contraction of subcomponents. In addition, service industries reported a meager 0.5% increase in output (Q2: +1.0% qoq s.a.), mainly amid weaker gains in wholesale and retail trade, and losses in the transport sector. On a more positive note, primary industries bounced back from a quarter prior (Q3: +2.2% qoq s.a., Q2: -0.1% qoq s.a.), on the back of recovering mining activity and despite slower agricultural production.
Growth is expected to remain stable this year, as a tight labor market and moderate price pressures benefit consumer’s bottom line. Low interest rates and ample space for increased fiscal stimulus are also seen supporting near-term growth prospects. Meanwhile, the major downside risk steams from an expected slowdown in China—New Zealand’s most important trading partner—as it could bruise export gains.
Author: Nicolás J. Aguilar, Economist