NZ economy grows 0.9% – 'below expectations'

New Zealand's economy grew at a slower-than-expected pace in the June quarter, partly reflecting an upward revision in the first quarter as the nation's massive pipeline of building activity and booming housing market continued to underpin activity.

Gross domestic product grew 0.9 percent in the three months ended June 30, an unchanged pace from a revised March quarter, Statistics New Zealand said. That was slower than the 1.1 percent expansion predicted in a Reuters poll of economists, but ahead of the Reserve Bank's pick of 0.8 percent. The economy grew 3.6 percent from the same period a year earlier, just short of the 3.7 percent pace economists were projecting.

The kiwi dollar slipped to 72.78 US cents from 72.98 cents immediately before the figures were released. New Zealand's economy has been bolstered by the construction sector, which is rebuilding the country's second biggest city Christchurch after the 2010 and 2011 earthquakes and trying to fill the shortfall of housing in the biggest city, Auckland.

Construction grew 5 percent in the quarter, with both residential and commercial activity expanding to meet the level of work required. That spilled over into other sectors with the demand for building products helping drive a 0.8 percent expansion in manufacturing and the housing boom supporting 1.3 percent growth in rental, hiring and real estate services.

"Eleven of the 16 industries were up this quarter, with construction once again providing a boost to production," national senior accounts manager Gary Dunnet said in a statement.

The other arm to New Zealand's growth this year has been record levels of tourism and inbound migration, which helped lift retail trade and accomodation services activity 1.9 percent in the quarter.

On an expenditure measure, GDP rose 1.2 percent in the quarter, driven by a 1.9 percent increase in household spending, the biggest quarterly gain since June 2009. GDP expenditure was up 3.3 percent from the same quarter last year, led by a 10 percent gain in residential building investment.

Gross fixed capital formation rose 3.1 percent in the quarter, and business investment, which excludes residential property, rose 1.7 percent.

On a per-capita basis, GDP rose 0.5 percent in the quarter, matching the period's population growth, and was up 0.7 percent on an annual basis. Real national disposable income per capita, which measures the purchasing power of the nation's disposable income, shrank 0.1 percent as the terms of trade declined in the quarter, and was up 0.5 percent in the year.

On a production measure, primary industries were back in expansionary territory as agriculture, forestry and fishing grew 1.4 percent, offsetting a 2.5 percent contraction in mining. The pick-up in agriculture was due to increases in dairy production and horticulture, with global dairy prices recovering last year's slump and kiwifruit exports at a record.

The annual average GDP growth of 2.8 percent was in line with expectations.

(BusinessDesk)

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