New Zealand: Moderate growth recorded in the fourth quarter
March 14, 2018
Economic growth continued to tick along at a fair pace in the fourth quarter, according to data released by the Statistical Institute on 14 March. GDP expanded 0.6% on a seasonally-adjusted quarter-on-quarter basis, matching Q3’s figure but undershooting analysts’ expectations of 0.7% growth. Growth was powered by an increase in population; on a GDP per capita basis, output was up a mere 0.1% qoq. The fourth quarter outturn brought annual GDP growth for 2017 to 2.9%, down markedly from 2016’s 4.0%, amid a more sluggish housing market and a slowdown in earthquake-linked reconstruction in the Canterbury region.
The expansion in the fourth quarter was driven by a sturdy service sector (Q4: +1.1% quarter-on-quarter; Q3: 0.6% qoq), powered by strong growth in business services. The wholesale trade and retail sub-sectors also posted robust readings. In contrast, agricultural output shrank 2.7% qoq (Q3: +1.0% qoq)—likely negatively impacted by scorching summer temperatures—with a knock-on impact on food processing. The key dairy sector suffered on the back of lower milk production, with dairy exports down significantly over Q3. Manufacturing activity declined 0.1% (Q3: +0.7% qoq) on lower production of metal, transport and machinery.
Looking ahead, the economy should expand at a robust pace, supported by loose monetary policy, strong global economic activity and population growth. The government’s more expansionary fiscal stance will likely begin boosting domestic demand in the second half of the year. However, the impact could be offset by tighter migration laws and reforms designed to boost housing affordability, and higher government spending could lead to some crowding out of private investment in the longer term.
New Zealand GDP Forecast
FocusEconomics Consensus Forecast panelists expect the economy to grow 2.9% in 2018 and 2.6% in 2019.
Author: Oliver Reynolds, Economist