17 Dec 2015

GDP grows 0.9 percent in September quarter

7:32 pm on 17 December 2015

The New Zealand economy accelerated in the September quarter, driven by stronger activity in the services and manufacturing sectors.

Official figures show gross domestic product - a broad measure of the health of the economy - grew 0.9 percent in the three months to September.

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That follows slower growth of 0.2 percent and 0.3 percent in the March and June quarters respectively.

On an annual basis, weaker activity in the first half of the year meant annual growth slipped from 3.2 percent in the June year to 2.9 percent in the September year.

When comparing activity in the June quarter with the same period a year ago, the pace of growth eased to 2.3 percent.

The size of the economy stood at $244 billion.

Services drive growth

The services sector - the biggest part of the economy - rose 0.9 percent in the quarter, led by business services, retail trade and accommodation, and transport services.

Statistics New Zealand says stronger domestic demand and a surge in tourists fuelled stronger activity.

Manufacturing grew 2.8 percent, due to food production, offsetting a drop in heavy and civil construction. Agricultural production remained flat.

Net exports boosts expenditure

On the spending side, expenditure rose 1.2 percent in the September quarter and 3.4 percent for the year, its strongest showing since 2001.

Net exports (exports less imports) led the charge in the quarter, while household spending increased 0.6 percent strongly as people spent more on services, and big ticket items like cars and furniture.

Business investment also picked up, particularly on transport equipment, and plant and machinery.

Economist at First NZ Capital Chris Green said the figures were to an extent pay back from a lacklustre first half of the year.

"It has a robust nature to it. One would suspect that we are seeing the benefits from a combination of a weaker currency, I certainly think think that's part of the story for the strength of tourism. We also obviously have a central bank that is cutting rates and we are seeing reasonably strong construction activity."

But while the economic pie continues to grow, Mr Green and other economists say surging immigration means the spoils are being shared among more people.

When that is factored in, economist at the Council of Trade Unions, Bill Rosenberg, said per capita growth was very mediocre.

"Particularly when you compare it with the early to mid 2000s, when we last had a strongly growing economy. The per capita growth rate over the last year of 1.1 percent is about half what it was between 2000 and 2007."

Mr Rosenberg said it was also hard to be positive when slowing annual growth meant unemployment was set to keep rising from its current level of 6.1 percent .

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