New Zealand: Economy expands more than expected in Q2
September 20, 2012
In the second quarter, GDP expanded 0.6% over the previous quarter in seasonally adjusted terms, which overshot market expectations that had the economic growth slowing down to 0.4%. The print came in below the revised 1.0% increase recorded in the first quarter (previously reported: +1.1% quarter-on-quarter). Compared to the same period last year, GDP accelerated from a 2.3% increase in the first quarter to a 2.6% expansion in the second, which represents the fastest pace recorded since December 2007. The healthy print was driven by a pick-up in the agricultural sector (Q1: +2.4% qoq; Q2: +4.7% qoq), which reflected a strong expansion in milk production. In addition, the second quarter expansion was buttressed by faster growth in construction activity (Q1: +0.1% qoq; Q2: +3.3% qoq), partly reflecting reconstruction efforts in Canterbury. Moreover, growth in transport rose from a flat reading in the first quarter to a 2.7% expansion in the second. The expenditure approach shows that GDP increased a seasonally adjusted 0.3% over the previous quarter (Q1: +0.4% qoq), mainly reflecting healthy growth in total consumption, boosted by a 0.2% increase in private consumption (Q1: +0.1% qoq) and government spending, which expanded 0.8%. In addition, fixed investment expanded 3.1% in Q2 (Q1: +2.0% qoq). Meanwhile, exports of goods and services contracted 1.2% in the second quarter, while imports dropped an even sharper 3.0%. Consequently, the external's net contribution to overall growth improved from a 2.2 percentage-point detraction in the first quarter to a 0.7 percentage-point contribution in the second quarter. In its September Monetary Policy statement, the Reserve Bank of New Zealand (RBNZ) revised its growth forecast and now expects the economy to expand 2.4% this fiscal year (ending March 2013), which is up from its previous 2.0% projection. For fiscal 2013 (ending March 2014), the RBNZ sees economic growth at 2.9%, slightly below its previous 3.0% projection.
Author: Ricardo Aceves, Senior Economist