New Zealand: GDP expands in fourth quarter
March 24, 2011
In the fourth quarter, GDP expanded a seasonally adjusted 0.2% over the previous quarter, according to estimates based on the production approach (expenditure approach: +0.4% quarter-on-quarter). The reading contrasted the 0.2% contraction observed in the third quarter, and slightly overshot market expectations, which had seen GDP growing a more moderate 0.1%. On a year-on-year basis, GDP grew 0.8% in the fourth quarter, slower than the 1.5% expansion registered in the third quarter. The main driver behind the quarterly improvement was a rebound in both manufacturing and construction. Manufacturing expanded 2.5% over the previous quarter, which contrasted a 1.1% contraction in the third quarter while construction grew 1.6% qoq, contrasting the 2.9% drop observed in the third quarter. In contrast, wholesale trade posted a sharp contraction compared to the previous quarter (Q3: +2.5% qoq; Q4: -2.7% qoq). The expenditure approach shows that the fourth quarter improvement was primarily the result of strong domestic demand. Government consumption bounced back from a 0.8% quarter-on-quarter contraction in the third quarter to a 1.2% expansion in the fourth, while private consumption decelerated from a 0.4% expansion in the third quarter to a 0.2% increase in the final three-month period. Gross fixed investment gained momentum and expanded 4.8% (Q3: -1.0% qoq), buttressed by strong investment in transport and equipment as well as in non-residential building. Residential investment remained mired in recession (Q3: -7.5% qoq; Q4: -7.2% qoq). Meanwhile, the net contribution from the external sector to overall economic growth stepped down from minus 1.4 percentage points in the third quarter to minus 1.6 percentage points in the fourth. After the devastating earthquake that hit the country on 22 February, the Reserve Bank of New Zealand cut its GDP growth projections for the fiscal year 2011 (ending March 2012) and now expects the economy will expand 0.9%, down from its previous estimate of 1.7%.
Author: Ricardo Aceves, Senior Economist