New Zealand: Economic growth decelerates more than expected in Q3
December 20, 2012
In the third quarter, GDP expanded a seasonally adjusted 0.2% over the previous quarter, which marked a slight deceleration over the revised 0.3% expansion recorded in the second quarter (previously reported: +0.6% quarter-on-quarter). The print fell short of market expectations, which had the economy growing 0.4%. Compared to the same period the year before, GDP slowed down from a 2.5% increase in Q2 to a 2.0% expansion in Q3.
The quarterly slowdown reflected a deterioration in the agricultural sector (Q2: +2.6% qoq; Q3: -2.1% qoq) as well as in mining (Q2: +2.6% qoq; Q3: -7.4% qoq). In addition, manufacturing dropped 1.1% over the previous quarter, which contrasted the 1.1% expansion recorded in Q2. On the other hand, construction expanded a healthy 4.5% in Q3, buttressed by residential and non-residential building in the Canterbury area. Moreover, growth in electricity, gas and water production also showed strong growth in Q3.
The expenditure approach showed that GDP also grew 0.2% in Q3, mirroring an expansion of the same magnitude in Q2. The print reflected a deceleration in government spending (Q2: +1.1% qoq; Q3: +0.2% qoq), while both private consumption and fixed investment contracted over the previous quarter (Q3: -0.1% qoq; Q3: -1.8% qoq, respectively).
On the external side of the economy, exports of goods and services increased a hefty 4.0% in Q3 (Q2: -0.9% qoq), while imports bounced back from a 4.2% contraction in Q2 to a 2.6% expansion in Q3. Consequently, the net contribution from the external sector to overall economic growth deteriorated from 1.3 percentage points in Q2 to only 0.3 percentage points in Q3.
In its December Monetary Policy Statement, the Reserve Bank of New Zealand (RBNZ) expects the economy to expand 2.2% this fiscal year (ending March 2013). For fiscal 2013 (ending March 2014), the RBNZ sees economic growth at 2.8%, slightly below its previous 2.9% projection. Meanwhile, for fiscal 2014, the Bank expects the economy to grow 2.9%.
Author: Ricardo Aceves, Senior Economist