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