New Zealand: Growth stabilizes in Q2
September 15, 2016
GDP grew a seasonally-adjusted 0.9% over the previous quarter in Q2, which matched the result tallied in Q1. The reading in Q2 fared worse than the 1.1% increase the markets had expected. GDP increased 3.6% in Q2 over the same quarter last year, which was faster than the 3.0% rise registered in Q1 and the strongest result since Q1 2015.
Looking at the economy’s main industries, those in the primary sector rebounded to a 0.5% increase over the previous quarter in Q2 (Q1: -0.2% quarter-on-quarter), mainly boosted by a fast expansion in agricultural commodities while the mining sector contracted at a softer pace in the April-to-June period. The secondary sector expanded at the fastest pace in over two years in Q2 (Q1: +1.6% qoq: Q2: +1.9% qoq), fueled by a rebound in manufacturing output and strong construction growth. Better dynamics in the primary and secondary sectors were offset by a deceleration in the services sector (Q1: +0.9% qoq: Q2: +0.7% qoq). Declines in transportation, postal, and warehousing, information media and telecommunications as well as in public administration and safety were behind the slowdown.
On an expenditure basis, GDP increased 1.2% over the same period last year in Q2, which was well above the 0.7% increase observed in Q1. The acceleration in Q2 reflected that private consumption expanded at the fastest pace since Q2 2009 (Q1: +0.5% qoq; Q2: +1.9% qoq), while government spending recorded healthy growth (Q1: +0.6% qoq; Q2: +1.0% qoq). Fixed investment also fared better than in the previous quarter (Q1: +2.6% qoq; Q2: +3.1% qoq). On the external front, export growth accelerated to a 4.0% expansion (Q1: -0.4% qoq), while imports grew 2.6% (Q1: +0.7% qoq). The contribution of the external sector swung from minus 0.4 percentage points in Q1 to plus 0.3 percentage points.
Healthy dynamics in the housing market and the tourism sector, coupled with a growing population, are propelling growth in the country. Moreover, the increase in prices for dairy products is boding well for growth. The economy appears to not have been affected thus far by the strong NZD. This situation, along with low inflation figures, could force the Central Bank to lower rates before the end of the year.