New Zealand: Economy decelerates in second quarter
September 22, 2011
In the second quarter, GDP grew a seasonally adjusted 0.1% over the previous quarter, which marked a deceleration compared to the revised 0.9% expansion recorded in the first quarter (initially reported: +0.8% quarter-on-quarter). The second quarter reading undershot market expectations that had GDP growing 0.5%. On a year-on-year basis, GDP increased 1.5% in the second quarter, which was below the 1.7% expansion observed in the first quarter. The notable second quarter deceleration reflected a deterioration in manufacturing, which swung from a 3.6% expansion in the first quarter to a 0.1% contraction in the second quarter. In addition, construction fell 4.3% in the second quarter, which virtually matched a 4.4% contraction in the first quarter. The finance, insurance and business services, in contrast, accelerated from a 0.6% expansion in the first quarter to 1.5% in the second. In addition, agriculture picked up from a 1.5% increase in Q1 to a 4.3% expansion in Q2, benefitting from elevated global commodity prices. The expenditure approach shows that the second quarter deceleration was primarily the result of a deterioration in gross fixed capital formation, dragged down by a sharp contraction in residential buildings (Q1: -2.4% qoq; Q2: -7.2% qoq) and a fall in government consumption (Q1: +0.5% qoq; Q2: -0.1% qoq). Meanwhile, the net contribution from the external sector to overall economic growth swung from a 1.3 percentage-point contribution in the first quarter to a 0.8 percentage-point detraction in the second quarter. As outlined in its September Monetary Policy statement, the Reserve Bank of New Zealand anticipates economic growth of 1.5% this fiscal year (ending March 2012). For the fiscal year 2012 (ending March 2013), the Bank expects economic growth to pick up to 2.8%.
Author: Ricardo Aceves, Senior Economist