Economy grows 0.6% in third-quarter as construction ticks up

New Zealand's economy expanded in the third quarter, albeit at a slower pace, as ongoing weak activity in the primary sector offset a strong recovery in construction and growth in the services industries was softer.

Gross domestic product expanded 0.6 percent in the three months to Sept. 30 versus a revised 1 percent expansion in the June quarter and was 2.7 percent higher on the year, Statistics New Zealand said. Economists had expected GDP to expand 0.6 percent in the quarter and 2.4 percent on the year, according to the median in a Bloomberg poll.

The New Zealand dollar rose to 70.12 US cents from 69.75 cents immediately before the release. While the 0.6 percent quarter-on-quarter growth was in line with forecasts it was actually better than expected given the revision to June.

"Construction activity recovered this quarter, unwinding the previous two quarterly falls," said national accounts senior manager Gary Dunnet in a statement.

Construction activity grew 3.6 percent versus the June quarter when it shrank 0.7 percent, marking the largest quarterly growth since March 2016. It was up 1.9 percent on the year. Residential and non-residential building activities both grew, which was also reflected in an increase in construction trade services.

Expenditure on road and rail infrastructure were key drivers of investment in infrastructure which saw its strongest increase since 2007, Stats NZ said.

Agriculture, forestry and fishing activity contracted 1 percent as wet weather over the quarter dampened production at the start of the milking season. Overall, agricultural activity was flat for the quarter, with decreased milk production partly offset by increased activity in cattle and sheep farming.

Mining, meanwhile, grew a quarterly 3.2 percent after shrinking 3.8 percent in the June quarter. The growth was largely due to higher oil exploration and mining support services, as well as more oil and gas extraction.

Activity in the services industries - which account for about 66 percent of GDP - rose 0.6 percent in the quarter versus a 1 percent increase in June.

Within services, health care and residential care expanded 2.1 percent, the largest increase since March 2016. Both public and private healthcare were up. Retail trade and accommodation slipped 0.4 percent after rising 2.8 percent in the June quarter when it was boosted by several major sporting events.

Business services grew 0.9 percent in the quarter, with advertising, market research and management services as well as legal and accounting services contributing strongly.

Manufacturing activity, meanwhile, expanded 0.7 percent, unchanged from a 0.7 percent lift in the June quarter. Within that sector, transport equipment, machinery and equipment manufacturing had the largest rise, lifting 6.4 percent.

In the other direction, electricity, gas, water and waste services shrank 1.6 percent as the warm winter saw lower demand for and generation of electricity, Stats NZ said.

On an expenditure measure, GDP expanded 0.9 percent on quarter and 3 percent on the year. Spending by households was up 0.9 percent on the quarter, led by spending on durable goods as households spent more on audiovisual equipment, clothing, furniture and used motor vehicles.

On a per capita basis, GDP grew 0.2 percent in the quarter from a revised 0.5 percent expansion in the June quarter. For the year ended September, GDP per capita was up 0.8 percent.

Stats NZ also said the real purchasing power of New Zealand's income rose in the September quarter with real gross national disposable income - or RGNDI - up 0.7 percent in the September quarter. RGNDI per capita was up 0.3 percent in the September quarter following a revised 1.1 percent lift in the June quarter.

The size of New Zealand's economy in current prices was $278 billion, Stats NZ said.

(BusinessDesk)