Thursday, September 18, 2014

NZ GDP beats forecasts

New Zealand June quarter GDP came in at +0.7% (qoq).  This was slightly stronger than our and market expectations of +0.6%.  Forecasts had moved down a notch following the release of weaker than expected manufacturing data recently.  The Reserve Bank was expecting 0.8%.  Year-on-year growth came in at 3.9% with annual average at 3.5%.

The sectoral breakdown was much as we expected.   Dairy sector activity was weak over the quarter as production “normalized” after prior strong growing conditions.  Forestry activity was also weak reflecting lower demand (and prices) for logs.  Non-food manufacturing was also weak.

On the upside, construction activity came in better than expected at +2.2% qoq.  That might seem low at face value but it followed a mammoth 12.5% increase in the previous quarter.  The sector is now 14.0% higher than year ago levels.  And the service sector (70% of the economy) posted quarterly growth of 1.4%, the strongest growth since 2006.

This result supports our view that there has been some loss of growth momentum recently, largely emanating from the external sector, but that growth would remain relatively strong overall.  We continue to expect annual average growth of 3.7% in calendar 2014 followed by 2.7% in 2015.

For more on the outlook for the New Zealand economy, have a read of our latest New Zealand Insights which you can find here.